Barclays PLC (NYSE:BCS) Q3 2023 Earnings Call Transcript

Barclays PLC (NYSE:BCS) Q3 2023 Earnings Call Transcript October 24, 2023

Operator: Welcome to Barclays Q3 2023 Results Analyst and Investor Conference Call. I will now hand over to C.S. Venkatakrishnan, Group Chief Executive, before I hand over to Anna Cross, the Groups Finance Director.

C.S. Venkatakrishnan: Good morning. Thank you for joining Anna and me on today’s third quarter results call. Against a background of mixed market activity and a competitive environment for UK retail deposits, the Group generated income of 6.3 billion pounds in the quarter, down modestly year on year, excluding last year’s impact from the over issuance of securities. Our profit before tax was 1.9 billion pounds with earnings per share of 8.3 pence. We maintained a strong capital position with our CET One ratio at 14%, up around 20 basis points on the second quarter and at the top of our target range. In this context, we delivered a third quarter return on tangible equity of 11%, taking us to 12.5% for the year to date and we continue to target above 10% for the full year.

We are managing credit well, with year to date loan loss rate of 43 basis points versus our through the cycle guidance of 50 to 60 basis points costs reduced by 4% in Q Three year on year, excluding over issuance costs last year and in Q Four. We will continue to drive further efficiencies and greater productivity for the bank. We expect this to continue to contribute to delivering enhanced returns for shareholders. We will update you on these and other actions alongside our full year results in February. Now, turning to the business highlights. We continue to grow our US cards business with End net Receivables up 11% year on year at $30 billion, and we announced a new partnership with Microsoft and Mastercard to issue Xbox’s first ever co branded card in the US.

The integration of our UK wealth business and our private bank is also progressing well. We grew clients assets and liabilities to nearly 180,000,000,000 pounds and invested assets to around 105,000,000,000 pounds, with this business making nearly 900 million pounds of income in the year to date and generating attractive returns in investment banking. We led some prominent transactions in this quarter, including the Arm ICO in the US. However, in the mixed market environment we’ve had pockets of underperformance relative to US peers. In part, this has reflected our business composition. We performed well in equity capital markets, which is a smaller business for us relative to others. We were also selective on leveraged finance deals as a risk management matter, which has affected our debt capital markets performance.

We continue to be cautious about the market backdrop, but are confident in the potential of our business. And as an example, we are acting as sole financial advisor to Capri in their $8.5 billion acquisition by Tapestry, announced in the third quarter and expected to close in 2024. In market, this was our second highest Q Three income print in a decade, with income of 4% quarter on quarter better than the US. Peer average. However, income was down 13% against a record Q Three last year on a comparable basis in which we supported clients through extreme volatility and guilt in our home UK market this quarter, we did not benefit to the same extent as our US peers did from the volatility in US rates. As we have said previously, investment in our combined fixed income and equity financing business delivers stability to our overall markets.

Over the past four years, our ranking in equity prime brokerage has moved up from 7th rank to joint fifth, complementing our existing strength of fixed income financing, where we rank jointly first globally for the first half of 2023. Turning now to Barclays UK, we delivered a roti in the business above 20% for the quarter. Both income and expenses were broadly stable, generating a cost income ratio of 56%, and we intend to improve this over time as we continue to transform the business digitally. There has been an impact on our deposits and margins from retail customers seeking a higher return on their savings, which Anna will cover in more detail. However, at the group level, deposits were up 7 billion pounds quarter on quarter, demonstrating the strength of our diversified deposit and funding base.

Our performance over the past three years compared to the previous five, shows that we have reset and stabilized group returns, providing a solid foundation on which to build even further. Anna and I look forward to providing an investor update in February alongside our full year results, where we will talk more about our plan to deliver further value to our shareholders. This will include setting out our capital allocation priorities as well as revised financial targets for costs, returns and shareholder distributions. We have just completed the 750,000,000 pound buyback announced at the half year, taking total shareholder distributions to around 1.2 billion pounds so far this year, including dividends and buybacks. This is up over 30% on the first half of last year and reflects our commitment to returning capital to shareholders.

Thank you for listening and I will pass it on to Anna.

Anna Cross: Thank you Venkatakrishnan, and good morning everyone. Turning now to slide six. Return on tangible equity for the third quarter was 11%, which takes us to 12.5% for the year to date. The cost income ratio was 63% in Q Three and 61% for the nine months, in line with our low 60s guidance for the full year. We continue to see limited signs of credit stress, as the loan loss rate for the quarter was 42 basis points and 43 for the nine months and we have maintained strong capital and liquidity positions. As you just heard from Venkatakrishnan, we will update you with revised financial targets at an investor update alongside our full year results. As part of this update, we are evaluating actions to reduce structural costs which may result in material additional charges in Q Four impacting this year’s statutory performance, excluding any such charges.

We continue to target a Roti above 10% for the full year, focusing now on Q Three. Starting on slide seven. There was no impact from the over issuance of securities this quarter, but given the largely offsetting impact to income and costs in Q Three last year, I will again use the adjusted numbers for the prior period. Group profit before tax was around 50 million lower at 1.9 billion, with income down 2% and costs down 4% year on year. Within total costs, operating costs were stable and there were no litigation and conduct charges this quarter, compared to 164,000,000 in Q Three last year. Impairment charges were up 52 million to 433,000,000, with the charge and business mix as we expected, largely driven by growth in US cards. Key NAV increased 25 Pence to 316 Pence, reflecting our profits and positive cash flow hedge reserve movements broadly offsetting last quarter’s downward move.

As usual, I will now cover the three key drivers of our returns, namely income costs and credit risk management. Starting on slide eight, group income was down 2% at 6.3 billion. The 8% stronger sterling US dollar rate in Q Three year on year reduced our reported income, around 40% of which is in dollars. CIB income fell 6%, with lower activity in the investment bank partially offset by corporate income growth year on year. Consumer cards and payments income was up 9%, driven by growth in US cards receivables and the UK wealth business transfer from Barclays UK in Q two, excluding the transfer, CCNP income was up 5% and Barclays UK income was up 1%. Net interest income across the bank grew by 179,000,000 or 6% year on year, driving a 13 basis point increase in group NIM to 3.98%.

Barclays UK contributed around half of Group Nii this quarter, with approximately 20% from CIB and 30% from CCNP, mostly US cards, and the private bank Buk Nii was 17 million higher year on year with NIM of 304 basis points below where we anticipated at Q Two, which I will come back to when I cover Barclays UK. CCNP Nii increased by 64 million, mainly from US cards balance growth partially offset by private client deposit migration to our higher yielding products. This generated NIM of circa 8.9% in Q Three, which was up from circa 8.3% at Q Two and included a small one off increase in private bank, so we would expect NIM to step back a little in Q Four. CIB Nii increased 94 million year on year, which included an improvement of nine basis points to 3.65% in NIM, driven by the benefit of rate rises in transaction banking.

Moving on to costs on slide ten, we are delivering our operating cost guidance with costs in Q Two and Q Three of around 4 billion below the Q One high point. The cost income ratio improved year on year to 63%, consistent with Q Two. Barclays UK cost income ratio was 56%, with total costs flat year on year. As we progressed our digital transformation and rationalization of the physical footprint and headcount consumer cards and payments operating costs increased by 9%, broadly in line with income. As we invested to grow US cards and our private bank CIB operating costs were stable year on year below the Q One level as guided as we said, we are evaluating actions to reduce structural costs across the group, and we’ll give more detail at our investor update.

Moving on to credit on slide eleven, we are seeing the benefit of our long standing, prudent approach to provisioning, both in terms of credit decisions we have taken in the past, reflected in our balance sheet provision and coverage ratios, as well as the credit protection we have in the CIB. The impairment allowance increased by 0.3 billion to 6.4 billion. This was primarily driven by our US. Cards portfolio. In line with our expectations, we updated the macroeconomic variables from Q Two, resulting in a modest impact on expected credit losses. We maintained robust coverage ratios of 1.4% for the group and 8.6% for our card portfolios in aggregate, which I’ll cover in more detail on the next slide. Starting with UK cards, we continue to see conservative customer behavior across our UK portfolios and credit performance remains benign.

Customers are being disciplined about building unsecured balances with UK card repayment rates high across the credit spectrum. Although we have grown balances modestly over the past year, interest earning lending balances have decreased impacting NIM but benefiting credit performance. We do expect IELS to grow in 2024 as our more recent customer acquisition activity begins to mature. 30 days arrears rates remain stable and low relative to historic levels. The nature of our us. Cards proposition is different. As a reminder, we are the partner card issuer for around 20 client rewards programs, including some of the biggest brands in the US. Given our historic skew to travel and airlines, this is a high credit quality portfolio. Our risk mix has improved since the end of 2019, with 88% of the book above a 660 FICO, compared to 86% at the end of 2019, including the addition of the Gap portfolio in 2022.

On the chart you can see that 30 day arrears rates are now in line with our pre pandemic experience at 2.7% as we expected. Our impairment coverage also increased to 9.7%, with stage two now at 35%, reflecting our expectation of higher unemployment from September’s low level of 3.8% to a peak of 4.4% by Q three 2024. This would of course result in increased arrears, which are reflected in our balance sheet provisioning. Moving on to the impairment charge on slide 13. The impairment charge of 433,000,000 was up around 50 million year on year, giving a loan loss rate of 42 basis points. Most of the Q Three charge was driven by growth in US. Card balances. Continued seasoning of the Gap book in line with expectations and the increase in arrears that I mentioned.

Our guidance of 50 to 60 basis points through the cycle is higher than the year to date experience. We are mindful that Q Four usually sees a higher charge, in part reflecting seasonality and our expectations of US cards growth over the holiday season. This generally leads to higher balances and some build an impairment under IFRS nine, where increased utilization, even by customers who are making timely payments, can trigger stage two migration. The Barclays UK charge was 59 million with a loan loss rate of ten basis points, and this has been below 30 now for nearly three years. Even though our customers are experiencing affordability pressures, this is not translating into credit stress as they manage their finances proactively. The CIB had a small release and we are seeing no real observed credit deterioration, with our synthetic credit protection also working well.

Moving now to the business performance, starting with Bartheon’s UK on slide 14, profits were stable year on year, with roti of 21% for the quarter. Excluding the UK, wealth transfer income was up 1%. Costs were broadly stable as our transformation plan progressed, resulting in a cost to income ratio of 56% for the quarter. Loan growth remained muted, reflecting customer caution in the current macroeconomic environment and our prudent risk positioning. The reduction in business banking assets was driven primarily by repayment of government backed loan schemes of 2.7 billion. Mortgage balances were stable in the quarter at 166,000,000,000, with Remortgaging still contributing most of the activity. Now looking at Buk NIM, which was 304 basis points.

As a reminder, Buk Nii is around 25% of group income and one basis point of NIM equates to around 20 million of Nii annualized, or less than 0.1% of group income at Q Two. We said that we expected NIM to step down in Q Three and then to stabilize into Q Four. Most of the moving parts played out as expected in Q Three, with structural hedge tailwinds continuing and mortgage margin pressure somewhat easing. The impact of base rates was also in line given pass through rates have increased. However, the step down in NIM in Q Three was larger than expected, with deposit balance and mix trends more pronounced. Average balances quarter on quarter actually contributed a larger deposit effect than period end balances we have shown on the slide. When combined with pricing effects, this reduced NIM by a net 21 basis points compared to a net six basis points in Q Two.

You can see that we grew deposits during the pandemic by 53 billion to 258,000,000,000 by the end of 2022. As customers built up cash with us in their current and Instant access accounts. We anticipated that these balances would fall as customers manage their finances proactively, paying down debt and locking in higher yields on their residual savings. Our current account moves appear in line with the latest bank of England industry data, but intense competitive pricing meant we did not capture as much of the flow into higher rate products. We emphasized at Q Two how sensitive guidance is to the level and mix of deposits, and this remains the case we now guide to a range of 305 to 310 basis points for the full year to help frame this. If we see similar trends in Q Four as we did in Q Three, both in terms of mix and volume, full year NIM would be towards the top end of this range.

Turning now to structural hedge income, two thirds of which accrues to Barclays UK. Slide 16 illustrates the importance of the hedge to the level and visibility of our future net interest income. The hedge is designed to reduce volatility in nii, so in an environment where rates are peaking and eventually start to fall, it will help to stabilize NIM. It also provides a high degree of certainty to future nii. The chart shows that 95% of 2023 gross hedge income is already locked in, and the next two years portions of locked in nii have increased by three to 400 million per year since H one. As we rolled a further quarter of hedge maturities, notional hedge balances reduced by 4 billion in Q Three to 252,000,000,000. Given the trends we are seeing in retail deposits, we expect the notional balance to continue to reduce more or less in line with lower hedgeable deposits.

Swap rates currently at around 4.5% means reinvestment rates remain well above maturing yields of around one to one and a half percent for the next two years, and with 50 to 60 billion of hedges maturing annually over this period, we expect the reinvestment effect to outweigh notional hedge declines. Turning now to consumer cards and payments on slide 17, growth in our US cards balances and the UK wealth transfer drove a 9% increase in CC and P income, partially offset by FX. We grew US cards balances by 11% year on year to $30 billion. In the private bank. Total invested assets were 105,000,000,000, up 27%, excluding UK wealth, as clients moved deposits to money market funds and other investments. With US payments income was modestly down year and year as customers adjusted their spending to lower value essential items which have lower margins, offsetting the 9% increase in payments.

Processed roti was 9.6%, reflecting both higher income and operating costs year on year as we grow these businesses moving on to the CIB. CIB income fell 6% year on year in sterling terms, in part reflecting the stronger sterling US dollar rate. The more stable elements of our CIB income performed as we expected in markets. The relative stability from our combined fixed income and equity financing businesses was visible again compared to the downward move in intermediation and corporate delivered strong year on year income growth reflecting higher rates in transaction banking and the nonrepeat of leveraged finance marks this time last year in corporate lending. As you heard from ######, markets was down 13% in dollars versus a record third quarter in 2022.

FIC fell 19% in dollars as we benefited less from US rates volatility compared to guilt volatility in the UK. This time last year, fixed income financing income reduced due to a normalization of inflation linked benefits, as we have mentioned previously, and we are smaller and securitized products, which was an area of strength for some of our peers. Equities was up 3% in dollars as derivatives and cash performance was partially offset by equity financing as client balances continued to grow, albeit as spreads tightened. Banking fees were down 24% year on year, with a better performance in ECM not sufficient to offset weaker DCM. And advisory, given the relative scale of those businesses for us, combined with stable costs and a small impairment release, roti was 9.2%, which, even in a mixed quarter like this one, does not reflect the potential of our franchise.

CIB RWAs were relatively stable with the increase to 219,000,000,000 on Q Two, largely driven by FX. Turning now to capital funding and liquidity. Starting on slide 19, 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 these metrics in more detail, starting with capital and slide 20, our CET One ratio increased around 20 basis points to 14% attributable profit generated 37 basis points, totaling 128 basis points over the last three quarters. As we indicated previously, our MDA hurdle increased to 11.8% from the increase in the UK countercyclical buffer, and we continue to operate with ample headroom whilst Basel 3.1 remains at proposal stage.

We continue to guide to the day one RWA impact to be at the lower end of the five to 10% range. This reflects what we see from all the proposals across the jurisdictions we operate in, including the US. As a reminder, the PRA’s rules remain the most relevant. On a group consolidated basis, our total deposit position remains stable as we have a diverse deposit franchise across consumer UK and international corporate customers. Within that, the decline in the UK deposits that we discussed earlier was more than offset this quarter by inflows from global corporates, and this places us in a strong position to manage seasonal fluctuations that we often see around yearend from balances held for financial sector clients. Our LCR of 159% represents a surplus of 116,000,000,000 above our minimum regulatory requirements.

We continue to be comfortable with our liquidity position, and we have demonstrated its robustness throughout the market disruption earlier this year. So, concluding with our outlook, we are evaluating actions to reduce structural costs to help drive future returns, which may result in material additional charges in Q four impacting this year’s statutory performance. Excluding any such structural cost actions, we continue to target roti above 10% in 2023 and a cost income ratio in the low 60s. Our loan loss rate guidance remains 50 to 60 basis points. This is higher than the year to date experience, allowing for some potential seasonality in US cards in Q Four. As of now, we are not seeing anything that concerns us and we would view the guidance as a through the cycle range.

Our CET One ratio was at the top end of our target range, and strong capital generation in the year to date supports our commitment to return capital to shareholders. We will provide more details at an investor update at our full year results in February, including our capital allocation priorities and revised financial targets. Thank you for listening. We will now take your questions and as usual, please limit yourself to two per person so we get around to everybody.

See also 19 Jobs AI Will Create and 30 Countries That Export The Most Weapons in the World.

Q&A Session

Operator: [Operator Insertions] Our first question today comes from [indiscernible ]from Morgan Stanley. Please go ahead. Your line is now open.

Q – Unidentified Analyst: Hi, good morning. A couple of questions please. On first one on UK NIM, your guidance I think I understood the top end of the guidance, the 310, assumes a similar sort of deposit trend as in Q Three, I guess. Your guidance implicitly says that things could get worse in Q Four in terms of mix and volumes. Can you maybe sort of explain what happened during Q Three? And why have you given yourself some room for deteriorating trends? I think most of the guidance from your peers and maybe even yourselves was that once the rate sort of hikes were over, you would see much more stable deposits. So interested to see why you’ve left yourself some room for deterioration. And second question is on the restructuring charge in Q Four.

Obviously your 10% Rot guidance is now x this restructuring charge. Question is, how much is that going to interfere with the payout and with buybacks that you may announce at the end of the year? Because I would have thought, given the provisions are going much better than expected, you would have had plenty of room to cover potential restructuring without going into your Rot guidance. But that doesn’t seem to be the case. So maybe how should we think about year end distribution? Obviously capital going better, but more restructuring costs. Maybe sizing that restructuring costs will be helpful. Thank you.

Anna Cross: Thank you. Good morning and thanks for starting off the questioning. I’ll take the first one and then I’ll pass to Venkatakrishnan for the second half of that. So let me just talk through UK NIM in the third quarter and just to level set and reiterate what I said on the call. A basis point of NIM is 20 million annualized, less than 0.1% of groups income. What we said at Q Two was that we expected NIM to step down in the third quarter and somewhat stabilized into the fourth. There were a few moving parts within that and much of it has played out as we expected. So we’ve seen a lessening of the impact of mortgage churn, we’ve seen a continued tailwind from the structural hedges. Actually, deposit pricing played out roughly as we expected.

And you can see that that’s negative in the quarter for the first time, as we indicated it might be. What’s really different is the movement in deposits. And what I said on the call earlier was that actually the movement in average deposits is a bit more significant than the quarter end might indicate. And whilst we saw very similar trends to the overall bank of England movement in current accounts through the quarter, we captured less of that into fixed term deposits than we might have expected to. And that related purely to the intensity of competition that we saw during the quarter and very intense at particular points. And it’s really that that’s made the difference. So I would say it’s depositor behavior that has somewhat intensified in response to pricing.

So previously we said that we expected that to be more stable in Q Four and that’s simply because in Q Four you typically see a deposit stabilization pre Christmas. We now no longer anticipate that just because of these competitive dynamics and that’s really what’s causing us to change that outlook. We’re not saying that it will be better or worse in the fourth quarter. I think what we are saying is that this customer deposit behavior has been relatively difficult to predict and that’s why we’re giving you a range indicating to you that if we saw something similar, that would be towards the top of that range. So that’s the reason for the changing guidance. ######.

C.S. Venkatakrishnan: Yeah. Thanks I’m sure you sort of caught this through the presentation, but just to add on the NIM point, for 1 minute overall group deposits, as #### said, buk NIM is part of our overall NIM. Our overall deposits grew about 7 billion quarter on quarter and our Nii is up about 6% year on year at 3.2 billion and NIM itself at 3.98%. At the group level, again 13 bips higher. So think about in the larger context and also coming back to the restructuring charge, two things I would say. One is you should think of this structural cost action as in part of the investor update which we will provide in February. So what this is, is we have to announce it now because as we work through it, we will likely take a charge in Q Four.

That’s why we announce it now. But you should think of it as not something related to a quarter or the last two quarters, but part of the larger structural improvement of efficiency and productivity for the bank. As for your specific question, what I would say is a few things. Number one is that we very deliberately start this quarter at a strong capital position of 14% and we’ve got a capital generation of about 130 basis points of CET One ratio year to date. This underpins our ability to return capital to shareholders. As far as our desire, you know, we completed a 750,000,000 buyback in the first half. And so total distributions so far this year are 1.2 billion, which is about 30% higher versus the first half of last year. And this really reflects our commitment to return capital to shareholders.

We spoke about the efficiencies we are driving across the group equally. You should know that we are comfortable to operate in the full range of 13% to 14% and we have been there in the past. Obviously, any capital action ultimately is approved by the board and approved by regulators. But from our point of view and we’ll come back with the details in February from our point of view, good initial starting position, good capital generation across the bank. Understand the importance and the priority to our shareholders of returning capital, willingness to operate through the range.

Q – Unidentified Analyst: Thank you very much.

C.S. Venkatakrishnan: Next question, please.

Operator: The next question comes from Jason Napier from UBS. Please. Go ahead. Your line is now open.

Jason Napier: Good morning. Thank you for taking my questions. Two for me. The first is coming back to the issue of the flagged restructuring charges. as you mentioned, capital really strong and in fact, the Q Three beat alone is a billion pounds relative to consensus. And so I guess anything that you could say to provide a rough sense of how much you’re looking at spending here. I appreciate this is not the venue at which you wanted to give it, but today conversations with the investors are that there seem to be risks on the payout front, with no sense of how much cost savings we might be talking about or where in the group you might be looking to be more efficient. Clearly, we think it’s the right thing to be doing, but the billion beat on CT One is 7% of annual group costs.

You could do a lot with that. So anything you can do to be helpful on what the payback would be for the charges that are already in mind and which are triggering these provisions, that’d be the first and then secondly linked to that at your conference in New York last September. Last month, before, you said you were happy with the mix of business for the group. And so I wonder whether you’d give us a sense as to when you talk about updating investors on capital allocation priorities, whether you’re really just talking about what grows faster in future or whether we should have in mind a sense that the present mix of capital allocation is up for debate. Thank you.

C.S. Venkatakrishnan: Yeah. Good questions. Thank you. Let me begin on both of them and then I’ll let #### add on on any details. So on the capital versus the spending, look, this is not the right place to be giving think you. Know, as I said in the answer to the previous question from ######, we started a good point on capital. We’ve been accretive on capital and view the spending and the restructuring in the larger term context. I’ll let #### add to that in a minute. And on the second thing, what I would say mean I view the investor update in a simple way. It’s obviously complex to analyze and execute, but I view the question in a simple way. It is what do you think is the target return that this bank can generate for its shareholders?

So what’s the rote ambition? How is it comprised at the group level and in the individual businesses? How much can it improve in the individual businesses and therefore, what is it that you wish to fund in that improvement? I also said in New York, it’s very, very clear that the market values different businesses differently and we obviously have to take that into account in the way in which we think about our capital. So, you know, you sort of put it all together and you get the picture of where we think we want to go. But obviously more details on that later. And then ultimately, once you do that, then to be targeted about saying what of that growth and return you wish to you target returning to investors? Because I do absolutely take the point that we announce the buybacks on a half yearly basis and we don’t have a target out there for that.

And that would be something that I think our investors would find desirable. ####?

Anna Cross: Thanks. We’re still going through the process of evaluating those actions, as we said. So we haven’t come to a finalized list yet. We have called them material. Let me help you a little. You’ll note that from our RA we have called out the year to date restructuring charge is around 120,000,000. So we’ve shown that to you and told you that it’s largely in the UK. In any typical year we run at between two or 300 million. So by calling this out, we’re indicating to you that it will be higher than that. But I can’t comment on specific levels simply because we haven’t finished the work. But as ###### said, as we take those decisions, we’re extremely focused on future returns and we understand and are committed to shareholder returns.

So that’s very much in our mind. The other point around sort of the strength of the capital position. We’ve been operating with good cost and capital discipline all year. That’s clearly the foundation of where we step out from in February and we’ll tell you more then.

Jason Napier: Thanks very much.

C.S. Venkatakrishnan: Okay, thank you. Can we have the next question please?

Operator: The next question comes from [indescribable ]from bank of America, Merrill Lynch. Please go ahead. Please go ahead your line is now open.

Q – Unidentified Analyst: Hi, good morning. Thank you very much. I just wanted to sorry, come back on the Buk NIM and really the trends that you were seeing on deposits through the third quarter and then what you’re seeing so far in October. So, you mentioned that the averaging effect was actually worse than the endpoint position, suggesting that actually things got better in September, perhaps. So I was wondering if that’s continued in October. So really how we should think about sort of the trajectory of those deposit flows through the quarter and then into Q Four. And then, just to clarify that when you say if Q Three trends continue, then expect to be at the top of the guided range, is that essentially taking the margin bridge on slide 15 and excluding the five basis points impact from pricing is how to think about that. Thank you.

Anna Cross: Thanks, Why don’t I take those? So what we really mean by the averaging point is that the outflows were probably a bit more evenly spread through the quarter than they were in the second quarter, where we saw somewhat of an increase in intensity towards the second half. I don’t think it was lessened in September at all. There were certainly quite a few headline rates out there that were extremely competitive in terms of October. I just call out the fact that we haven’t yet seen the first month’s end, so we’re still midway through the first month. There’s nothing in what we can see so far that’s really sort of beyond our expectations. All right. With our own forecast, that’s all I can really say at this point in time.

But I would just sort of highlight that what we’re seeing is the impact of the pricing in terms of the sort of range of guidance. What we’re really saying, rather than any particular point on the bridge, is that depending on where those deposit flows go, you could end up with a very different exit rate. So that’s what we’re really calling out to you. And clearly, if we saw trends similar to what we saw I e. The deposit trends continue similar to what we saw in Q Three, we would be towards the top end of that range. And that would give you a particular jumping off point for 2024. What I would highlight, though, is that the structural hedge continues to protect the NIM overall. And what you have seen over the last quarter is that we’ve been able to lock in another large chunk, both of 2023 income, but another three to 400 million of 24 and 25 income just because of the way that hedge is rolling month on month.

Thank you.

Q – Unidentified Analyst: Yeah, that’s very helpful. Thank you. Just a quick follow up, if I could then. So given that you talked about the hedge into the coming years and you were expecting this deposit stabilization in Q Four, do you have a view going into next year in terms of deposit trajectory, given what you’re seeing in terms of competition in the market? What this year has taught us is that customer deposit behavior is quite difficult to call. So what I’m not going to do is give you a 2024 NIM outlook. What I can tell you is that there are three factors that we’re looking at. One is positive, one is neutral, and one is more negative. So the positive impact is clearly the impact of the structural hedge. And remember that two thirds of that goes into buk.

The more neutral impact is that we do expect and we are seeing that the impacts, quarter on quarter of mortgage churn are starting to dissipate called that out for some time. What is more difficult to call is the impact of this ongoing deposit behavior, both the reduction in deposits because customers are using them in order to manage the broader economic environment, but also then seeking higher rates, difficult to call out when that would stabilize #####. But all I can say is that there are other factors in the mix, most importantly, the structural hedge. SPEAKER A Okay, thank you very much for that. Okay, thank you. Next question, please. Our next question comes from ##### #### from Autonomous. Please. Go ahead, #####. Your line is now open.

Good morning. Thanks for taking my questions. Two please. One on NIM and one on #####. So appreciate everything you’ve said about the difficulty in predicting deposit behavior and the fact that the UK NIM is not the be all, end all for your group revenue dynamic. But obviously we’ve had some pretty dramatic shifts in your NIM guidance over a few quarters. And there’s a huge range of possible four Q exit levels implied by the range you’re now giving us. So a very simple question. Please help us own views on what might happen. What’s the average cost of your deposit balances in the UK and what proportion? And then on Roti in terms of the risk to the 10% Roti target, inclusive of restructuring charges, if I just kind of run the numbers on your equity for the year to date and Wave are out of four.

Q to get to, say, a 9% Roti, including restructuring charges that would imply sort of a negative bottom line number for the fourth quarter. You’ve obviously delivered pretty strong Roti year to date. The fact that you’re flagging potentially not being able to hit the greater than 10% Roti inclusive of restructuring charges implies fourth quarter could be a net loss. Is that the right way for us to be thinking about this? And within that, when you’re flagging the 120,000,000 of restructuring charges year to date, is it the case that when we get to the fourth quarter, the catch up to the normal 200 to 300 is going to be excluded from your Roti calculation as well? How are you thinking about that? Is two to 300 in the Roti calculation and then the exceptional charge on top of that excluded?

Or is the whole amount potentially going to be excluded when you calculate your rotate end of the year to assess delivery on that target. Thank you. Okay, thank you very much, #####. Why don’t I take those two and I’m sure ###### will add it if he wants to. So you’re right, there has been some considerable movement on the UK NIM, particularly over the last quarter. As I said, clearly that’s driven by customer deposit behaviour. I would highlight for you that as we look at UK NIM, we are actually looking at quite a narrow measure. So in comparison to our peers, remember, they would be including all of the corporate income and asset base within there. And so really you should be looking, as you make comparisons to the rest of the UK, you should be looking across both the UK and the corporate NIM position.

We don’t disclose the average rate paid on our deposits, although what we have given you this time to be more helpful is a split of our deposit balances and indeed how that has trended over time. And it’s showing very clearly that movement into term, as you would expect, and as many have commented from bank of England data on your second question. So to be clear, what we are not doing is giving any kind of PBT forecast for the fourth quarter here. It wouldn’t be appropriate for us to do so. Not least, we haven’t concluded our assessment of the structural actions that we may take. Merely what we’re calling out is a few things. Firstly, we’re clearly going into the fourth quarter with good Roti momentum. We’ve delivered 12.5% year to date, somewhat ahead of consensus.

However, the fourth quarter does have some seasonal impacts in it. So typically we see lower CIB income, typically we see higher impairment in US cards in particular, simply because of the seasonality in spending. We also see impacts from the bank levy. And we’ve just given you an indication that we see a continuation of deposit trends in the UK. So not saying anything more than that in that typically you expect Roti to be lower in the fourth quarter than in the preceding three. And to the extent that we take decisions in that fourth quarter, that may impact the Roti now, as we do so, we are very focused on future returns for the business. So our overall objective here is to improve the returns of the business through time. Clearly, efficiency and effectiveness is a key part of that.

So we’re just calling out our intention to continue that cost focus for the business. Yeah, and I cannot emphasize that last point that #### I cannot emphasize too much that last point which #### made, which is that think about this in terms of the investor update in February and the longer term plan for productivity and efficiency in this bank. If I could just follow up on the roti point first, please. I mean, the year to date you’ve done 4.4 billion profit. Your average tangible is probably going to be something like 47 billion for the year. So you’re pretty much all the way there to delivering a 10% royalty on the nine months to date. But to get to a point where you’re flagging to us that you might not do greater than ten for the full year unless I’m missing something there, the maths implies potentially very material restructuring charges.

Am I missing something there? It does seem in the context of a debate where I had some investors asking whether you might be announcing a surprise buy, this is obviously kind of top of mind for your investor base. How are you going to be balancing these things? Are we looking at potentially greater than a bit of restructuring or cost to achieve or whatever? We’re going to be titling it in the fourth quarter. That’s by the maths even, except the point about seasonality et. So, I understand the maths of what you’re putting in front of me. I’m going to say the same thing that we have not yet concluded on those plans. To the extent that we do, we will update the market further at full year, both in terms around the costs, but also the ongoing impact that we would expect them to have, just as investors do.

Distributions are top of our mind too, as ###### pointed out. So as we take these decisions, we will be extremely mindful. And as you said previously, we go into the fourth quarter very deliberately at the top end of our capital range. And on the deposit cost point. If I could on that as well, please. If I frame it slightly differently, how do you expect investors to be able to take a view on what might happen with the buk NIM unless we’re armed with some basic information about what you’re currently paying on deposits relative to the types of offers that are out there in the market. You’ll flag competitive offers as a key driver for the fact you’re re guiding them lower and seeing deposit attrition, but we don’t know how much better those rates are relative to what you’re currently paying or had been paying earlier in the.

So it’s very difficult for us to take a view on what’s going to without. So, all I would say is that we price competitively, but not uncommercially. If you look at our savings, pricing is very clearly indicated both on our website and indeed in any branch. You will see that we are competitively positioned across our term deposits, across our Isas, across our instant access, for example, rainy day saver. So we don’t genuinely believe that there’s something mispriced in our savings franchise. We’re happy with it. From quarter to quarter, you will see other competitors operating in a different way. Okay, thanks.

Operator: Okay, next question, please. The next question comes from [Indiscernible]from BNP Paribas. Please. Go ahead, guy. Your line is now open. Hi. Morning, everyone. A couple of questions on deposits.

Q – Unidentified Analyst: Firstly, the UK and then outside the UK. So first I’m trying to understand the comment that pricing played out as expected. Are you talking for Barclays or for the industry? As I would think about pricing and then movements and deposits for individual institutions as very much linked, had you priced up more in line with some peers than the balance move, wouldn’t have been such a headwind. So perhaps you could clarify that point. I’m just trying to think about in the context of how you might want to react more to protect balances in the future in a competitive marketplace and then outside the UK, clearly that was much stronger. Could you just give a bit more color around what you’re seeing, what the strategy is there and sort of are you having to pay up or is this very much profitable deposit growth that you’re seeing outside the UK?

Thank you. Okay, thanks guy. I’ll take both of those. So what I meant by the pricing was, as we expected, clearly we knew at Q Two, when we reported to you the price changes we were going to make, and therefore that deposit bucket, the one that’s called bank rate, is broadly as we expected it to be. Now, what subsequently happened to both the level and mix of deposits is much more driven by the external competitive environment. And that’s what we are calling out very similarly to what I just said to #####. We are happy with the overall level of our savings pricing. Our strategy is to encourage our customers to develop healthy savings habits. We are pricing to, as far as possible, maintain our franchise rather than attract hot money. And we will price competitively, but not uncommercially.

So to the extent that we see competitive pricing going in that direction, then obviously we would not follow it. I think the other thing just to put in the mix, as everybody is looking at the impact of buk NIM, please do not discount the impact of impairment. So all of this behaviour, this conservatism and behavior is also flowing through into the impairment line. And buk impairment has been lower than consensus for nine successive quarters. So just worth bearing that in mind. Second point that you asked about, which is around the deposit elsewhere in a high rate, persistently high inflationary environment, we would expect to see high level deposits flow from retail customers towards corporates. That’s exactly what we see. And given our franchise, that is what you’re observing.

So UK corporate deposits are very stable. You see some migration, but very stable in totality. And what we’ve seen in the quarter is a continued inflow more from global corporates. That’s particularly fairly long tenor term funding, competitively priced, but good for the deposit franchise overall. So, very much a continuation of what we called out actually in Q Two and indeed Q One.

Anna Cross: If I may just step in and emphasize the point #### made about the link between deposits and impairment. I think to me it’s one of the interesting things that we’ve seen, where we’ve seen people using their deposits to pay down debt, whether it’s mortgages or other things. One, it showed that they had the ability to do it. So obviously it’s helpful with impairments, but it also gives you an idea of the type of credit quality of customer we have, which I think is a good thing. So, as #### said, nine quarters continuously of positive surprises, meaning lower impairments than consensus in buk and people using deposits to pay down debt. It’s all a good thing about credit quality. Okay, thank you. Thank you, guy. Next question, please.

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.

Those decisions will be different bank by bank and institution by institution. And I wouldn’t comment further than that. In terms of the hedge, our hedge strategy has been very consistent over the last few years. So what we do is we identify rate sensitive balances, we exclude those from the hedge, and then on top of that, we maintain a buffer and we hedge the remaining balance. We monitor that hedge on a monthly basis. And what you can see year to date is that we have trimmed our corporate hedge thus far. We do that by making the decision to pause all our part of the role month by month. And those are active decisions that we take. So we’ve got ample opportunities to adjust that hedge as we see deposits behavior changing as compares our hedge strategy versus competitors.

I wouldn’t comment on it. Just to follow up then, does that imply you see rate insensitive balances within your savings accounts? There are some balances within our deposits overall that are rate insensitive. So much of our current accounts would be rate insensitive simply because they relate to operational deposits. That will be true in Buk, as it is in the corporate bank, as it is in the private bank, although you’d expect those constituents to behave differently. So that is certainly true. There is also some rate insensitivity in savings because customers, and indeed corporates, do use some of their savings balances as sort of rainy day funds simplistically. And particularly in instant access accounts, we see customers turning over their savings within the period of about a year, for example.

So we have demonstrable evidence of that insensitivity. ####, great. SPEAKER A The next question. Your line is now open. Yes. Morning everybody. Could I just ask you just trying to get the implications right for sort of 24 and 25 now, because if I look at the maths correctly, and I suppose I’m just checking my maths here, it looks like you’ve got an exit margin of somewhere around 290 into next year. And I guess we would imagine that that’s going to continue to deteriorate because a lot of these deposit trends are long term trends. If you look back to the last time, interest rates were at 5%, the structure of a deposit franchise was completely different and the margins were much smaller than you’re getting today. If that is the case, that looks to me like we’re looking at maybe 500, 600 million off consensus for next year just for net interest income.

And yet consensus is only looking at a 10% return on tangible even. Now, I assume you want 10% to be some sort of a base and you wouldn’t want to be delivering lower than that. Is it the cost? Is it the cost program? Should we be looking at the cost program to offset that? Is that where the difference comes from? Or how else can we get ourselves back to 10%? Or should we be thinking that actually that is a risk? Now. Let me take that and I’m sure will add sure. I’m not going to comment on the exit rate from Q four. What we’ve done is we’ve given you a range, ed, we’ve told you what will happen if we see similar deposit trends. No, but I’ve just taken my math, that was all. We know what three are. Okay, so it is two nights. That’s great. Thanks.

Yeah. So your math, as I would expect, I’m sure, is very robust. As we’ve said before, it may or may not deteriorate next year. I mean, we’ve got a real tailwind from the hedge, so I’m going to go back to that. Secondly, we’ve got this neutralization of the mortgages month to month, and then you have ongoing deposit behavior. So you’re right to say that we’re in a different place to where we were sort of and we’re going all the way back to 2006, 2007. I mean, I would remind you that at that point the liquidity positions of the very large banks was very different. So all of the large banks were running loan to deposit ratios well in excess of 100%, 100 and 5161 hundred and 70% in some instances. And therefore those fixed term deposits were essentially being used in lieu of wholesale funding to large part.

So it’s a different structure of market overall. So I’m not going to comment on where we end, but I would urge you to consider that we then make the jump from buk to group. So a percentage point or a bit of buk roti is 20 million. That is 0.1% of group income. So in all of these considerations, we need to consider the rest of the group. So, yes, Buk NIM is stepping back a bit, but we’re also in a position where actually the market for markets, and particularly banking, is significantly depressed. So banking is coming off a decade low. We’ve seen pretty low levels of unsecured lending in the UK, relatively muted demand for wholesale debt, both in SMEs and in corporate. And of course, if you look across into CCNP, the US cards business continues to grow and the private bank continues to so I take the math point on Buk, but it is a relatively small part of the group.

You’re right to call out efficiency. We’re very focused on that. We see that as a key part of driving our returns. And obviously we’ll come back to you with the whole picture in February. Yeah, and I’ll just add on the efficiency part of the structural cost actions. Think of it as a longer term approach to increasing the growth of this bank. That’s what the efficiency is about. It’s not about making ledger work. Can I just come back on that in terms of efficiency, though, are we talking CIB efficiency? Because your retail bank is making over a 20% return on equity. I mean, that feels like a really good number on most benchmarks. I don’t know why you would want to take costs out of that particularly. So is it like head office and CIB or where would we be seeing that?

So, look, we’ll give you the details later. I applaud you for recognizing the rote of our retail bank. It has not come up yet, but you’re absolutely right. It’s doing 20% and it’s doing well. But in every part of the bank, there are things which we can do better. Okay. And so that’s not to take away from the performance of the retail bank. ####, I wouldn’t have okay, thanks. Thanks. The next question comes from Jefferies. Please. Go ahead, ######. Your line is now open. Hi, thanks for taking my question. I guess a couple of things. Just going back to this charge that you intend to take in Q Four, could you just talk about what your hurdles are in terms of payback and timing, just to give us a sense of time frame and payback? And then secondly, on the CC and P margin, there was a 63 on my number, 63 bips pickup, quarter on quarter in the margin, which was significant.

And I guess how do you think about the trajectory of that, particularly given the growth in US receivables? And I presume that a fair amount of the growth in the US receivables is coming from the GAAP, which is a higher yielding book. So how do we think about the margin trajectory in CC and P? Okay. Thank you, I’ll take those. I’m not going to go into the Q Four charge in detail at this juncture, we’re obviously still evaluating actions. You might expect that depending on what those charges relate to, the payback might be slightly different. So you’d expect, for example, property to take longer to pay back, whereas other actions that we might take would be faster. But when we talk to you in February, ##, we will outline what we’ve done and what we expect that payback to be.

In terms of CCNP, you’re correct. The net interest margin has stepped forward in the quarter. There are two real impacts in there. The first is growth in US receivables. So the growth in the cards business, as we said, balances are up 11% year on year, and that clearly has a powerful effect. At the same time, we see deposit migration in the private bank, which is no different to what we see in either corporate or in Buk. So that has an offsetting impact. Although in the private bank, what we see is a flow into invested assets. So we retain that income. It just goes on to a different line. There is a one off in the third quarter. It’s not huge, but I would strip that out. Ongoing. So that’s why we’re saying we’d expect Q four NIM to step back towards Q two NIM.

So don’t think of this step up as permanent. Think there is momentum in the number, but this is somewhat exaggerated by that one off. Okay. And then can I just be cheeky and ask one other question, just given because I think there’s been some confusion. If it’s a small one, it’s kind of a yes or no question anyway. But do you expect to deliver in line with your 10% or greater return in 2024? We will come back to you on 2024 guidance when we talk to you at the full year. As ###### said, that’s when we plan to update the market on our expectations for returns, capital allocation, costs, distributions. But you should read that we are very focused on returns. Ongoing. Thank you. Okay, thank you. So can we go to the final question, please? Our final question today comes from from City.

Please go ahead. Your line is now open. Good morning. Thank you for squeezing me on two questions. One, hopefully very short. First question. You’re encouraging us to look at the group Nii, including the CIB. So perhaps you could just comment on the transaction. Banking revenues obviously up a lot year on year, but they are down Q on Q, which slightly bucks the trend versus what we’ve seen at US peers. So perhaps you could elaborate on what drove the Q and Q decline there. And then second and broader point on deposits and pricing just in relation to the 14 point FCA Action plan. I think their fair value assessment was due by the end of August. You had to provide details on communication and evidence, what you are providing to the consumer by end september.

I think the next big thing is this whole debate around on sale versus offsell, which comes in from the 31 July 2024. So anything you could say on on sale versus offsell, how big a bucket of offsell products you have, how the pricing compares, et cetera, et cetera. Thank you. Okay, so let me start in terms of transaction banking, did step back quarter on quarter, there was a relatively small impact from deposit migration. And again, I would say within corporate we’re seeing migration from our non interest bearing into interest bearing, but those deposits are remaining within the bank. So that’s certainly not the larger part of it. What we did see is an impact from the returns in our liquidity buffer. There’s nothing idiosyncratic going on. There more that for any liquidity buffer, the returns are in two parts.

The first is the carry, and then the second is, in any particular quarter, you would see some disposal income. In this environment, that disposal income has been very low. And given that much of that buffer income is actually attributed to transaction banking, it’s had a disproportionate impact in this quarter that will obviously move around a little bit. So we’ll see what happens through the Fourth. So on the consumer duty piece on SCA, we actually did our mailing through July and August in relation to savings. That was exactly, as you point out, designed to ensure that our customers are very much aware of the savings businesses that we have and the rates on offer. And increasingly, we see our customers using digital means to look and observe that anyway.

But that mailing is behind us. We will do a further mailing in November and December to our current accounts. And for us, off sale is relatively small, so I wouldn’t call it out as an impact. And okay, so with that, thank you, #####, for the #### rather for your final question. Really appreciate you attending the call today. Thank you for your continued interest.+