Welcome to the Barclays' Third Quarter 2017 Results Analyst and Investor Conference Call. I will now hand you over to Jes Staley, Group Chief Executive, and Tushar Morzaria, Group Finance Director.

Good morning, everyone, and thank you for joining this third quarter earnings call. You'll have seen from our results announcement that we have this morning set new targets for both group returns and costs in 2019, and for group returns in 2020. This is a very significant step for Barclays. As you know, we have closed the Non-Core unit, and sold down our stake in Barclays Africa, marking the completion of our restructuring and we have also attained our end state capital level. We now feel confident in asserting when Barclays will start to deliver the economic performance which we know this group is capable of. In my remarks today, I will focus specifically on those targets, and in particular on our plans for meeting them. Before I do so, let me first it hand over to Tushar to take you through the details of our third quarter.

Thanks, Jes. Our results announcement this morning covered the financial performance for the nine months to 30 September, and also the Q3 results, which I'm going to focus on. We've made progress in a number of our businesses, but it's been a tough quarter in the Markets business in the CIB. In order to help you understand the trends, I've again shown material and other the materials and other items of interest, on this slide. The main one-off I'm calling out in Q3 is the impairment charge of £168 million relating to the Q1 asset sale, in U.S. cards. You will notice that, in this quarter, the effect of the compensation change introduced last year isn't the headwind it was in Q1 and Q2. This reflects the fact that we've cut performance pay accruals significantly this quarter, which now feeds through more quickly to the income statement. Following the closure of Non-Core, and sale of Africa, the Q3 results have just three segments, Barclays UK, Barclays International, and Head Office. We haven't restated segmental results for the Non-Core closure, but I'll mention the areas where this had a significant effect. We no longer had a discontinued operation line for Africa in Q3, but instead accounted for our share of the dividend received in Head Office. Starting with the group results, including that one-off impairment, statutory RoTE for Q3 was 5.1%. Excluding the charge, it would have been 6%. Of course this is short of our double-digit target, and Jes will focus on the roadmap for RoTE later. Q3 was a tough quarter for CIBs across the sector, while Q3 last year was a strong comparator. This is reflected in the income decline of 5%. Impairment was down 10% overall. Excluding the one-offs we've highlighted, this year and last year, impairment…

Thanks, Tushar. As you heard, the third quarter was clearly a difficult one for our Markets business. A lack of volume and volatility in FICC hit revenues hard across the industry, and it was also a tough comparable quarter with last year given the Brexit vote, which sparked quite a bit of volatility from July to September. While Barclays is in the pack in terms of relative FICC performance, we have underperformed in Equities. Our Equities business has been very reliant on revenues from flow derivatives, particularly in the U.S., and volatility in that segment has remained at multi-year lows. To address this, we have plans to grow in equity financing and cash equities, particularly through improving our electronic trading capabilities. We obviously want to see a marked improvement in all areas of Markets going forward, and I'm going to say more on how we intend to pursue income and return growth in that business, as well as across the group in a moment. That said, the third quarter was particularly significant for Barclays, as it was the first quarter in many years where we have not been in some state of restructuring. Having closed the Non-Core unit and sold our controlling interest in Barclays Africa in June, we now have the end state transatlantic consumer and wholesale bank which we set out to build in March of 2016. The completion of our restructuring and the strength of our capital base with a CET1 ratio standing at 13.3% pro forma for the full deconsolidation of Barclays Africa means we can now turn our full attention towards what matters most to our shareholders: improving group returns. That goal, driving our returns to an acceptable and sustainable level, is now the number one priority for our management. And today, as we announce…

Thank you, gentlemen. Our first question today comes from the line of Joseph Dickerson of Jefferies. Joseph, please go ahead.

Hi. Good morning, gentlemen. Two questions, if I may. Does your cost guidance embed any inflation around Brexit costs? And perhaps you could elucidate us on any steps you've taken regarding operations in the EU. I think in the past you've mentioned Dublin and Frankfurt. And then the second question is for a competitor of yours some – PRA increased their Pillar 2A CET1 requirement. And I was just wondering, when is this next reviewed by the regulator for you and do you anticipate any changes? And if there were changes, is this something that you would present with your capital plan and policy when you talk about it for your results? Many thanks.

Yeah. Hey, Joseph. It's Jes. I'll do the first question and Tushar will focus on Pillar 2A. In terms of cost inflation with respect to Brexit, yes, in the numbers you have, that includes any/all costs related to how we will deal with Brexit. As we've said, we are expanding our license in Ireland. It will increase our head count there by roughly some 150 people. And then we'll gauge in the process of relicensing our branches across Europe from branches of Barclays UK to branches of Barclays Ireland. I would say that the cost of reorganizing with respect to Brexit is dramatically lower than what the cost was to set up the IHC in the United States and not even comparable to the cost it took to set up the ring-fenced bank.

Joe, on Pillar 2A, it's timely of your question. I actually received our Pillar 2A guidance yesterday evening. There's nothing I need to update anyone here on, as there's no material change for us.

Thank you very much. Very helpful.

Thanks. Could we have the next question, please, operator?

Your next question comes from Claire Kane of Credit Suisse. Claire, please go ahead. Your line is now open. Claire Kane - Credit Suisse Securities (Europe) Ltd.: Hi. Good morning. So, two questions please; the first around the CIB RoTE targets. Can you give us a sense of how long you think it will take to get that business to a 10% return? Because, clearly, I think if that got there, the group would be well in excess of 10% by 2020. And also perhaps give some color around what revenue margin you're making on the leveraged balance sheet in equity and debt financing? And then my second question is around margin and rate sensitivity. Could you maybe talk about the compression you've had in UK NIM, in the quarter is down 13 bps? And also, what are you assuming on interest rate hikes in your return targets through to 2020? I notice you've given a lot of color on what the rate benefit would be in years two and three. So if you could talk us through what that would mean for your return targets. Thank you.

I'll take the first question. In terms of the CIB RoTE, we're very clear the group returns for 2019 is 9%. The group returns for 2020 will be greater than 10%. That's being driven by profitability across the group, both Barclays UK and Barclays International. We don't give out specific RoTEs for CIB in terms of the target, but we would expect to get very close to the double-digit returns necessary in a like timeframe.

Claire, it's Tushar. I want to now cover your question on financing margins, and then NIM more generally. In financing margins, I mean, obviously, they will be driven by the market pricing. So I'm sure you can ask folks in the Market as to where that is. I won't comment on that. But there is something that's worth pointing out that may help you sort of model how we think about these things. We've talked about a recycling of risk-weighted assets, and also an additional leveraged balance sheet that we'll deploy to parts of our own trading businesses. If you think about risk-weighted assets for the moment, very, very simply, in the investment bank, you could probably assume that the investment bank is running at about £100 billion of risk-weighted assets. I'm excluding operational risk-weighted assets here, and that's a number that you would've seen in sort of years gone by. So just take that as a yardstick rather than precise guidance or anything like that. And revenues in the investment banks, I'm talking here about investment banking fees and sales and trading revenue. It's about – again, you look at prior years, no real forecast for this year, but you look at priors, you get to about £7.5 billion, so it's about 7.5%. So we'd like to think that the recycling of those risk-weighted assets should generate a meaningful revenue over that risk-weighted assets. You can make whatever assumption you like if you assume that we can't at the margin generate the average return, maybe we generate half of that or two-thirds of that, still a meaningful amount. So even if you're generating, say, 5% on those risk-weighted assets at the margin, for every £10 billion, that's £500 million of revenue. So we feel there's a meaningful opportunity there.…

Thanks. Could we have the next question, please, operator?

Your next question comes from the line of Michael Helsby of Bank of America Merrill Lynch. Michael, please go ahead.

Yeah. Thank you. Morning, everyone, and thank you very much for taking my call, gents. I don't know why, but I didn't get to ask one at Lloyds yesterday. So I've got two...

I hope it was nothing personal, Michael.

I'm sure it wasn't. So, anyway, I've got – just actually you preempted one of my questions there on the IB. But just to close the circle on what you were talking about the revenue to risk-weighted assets. What's the current revenue to risk-weighted assets that you've – getting on the £20 billion that you've identified in the Corporate Bank and what MiFID impact are you budgeting for in your equities and fixed income businesses? And I appreciate you don't want to be drawn on ROE targets, but I was wondering if you could give us any type of guide on what you think the revenue basis that is implicit in your CIB targets. So that'd be question one. And then just very, very quickly on the UK bank. The NIM was 3.28% in Q3. You're clearly growing in mortgages again. I notice you were very competitive actually in the third quarter. I was wondering if you could give us a view on what type of blended margin you're originating at currently in the UK, and if you could tell us why your fees jumped in Q3 versus Q2, that'd be very helpful as well. Thank you.

All right. Thanks, Michael. Let me see if I can answer some of them, and Jes may want to add a few other comments. So let me take them in the order you gave them. In terms of efficiency of risk-weighted assets, so I think your question was around the proportion of the £20 billion or so that we've already recycled, what's that sort of margin or revenue of the risk-weighted assets. Michael, I won't quote a precise number, because it's obviously quite complicated. But I do think that the yardstick I gave you of the blended average, just the math that I laid out of about 7.5%, and doing everything we can to generate a marginal revenue as we recycle as close to the average as we can is probably a reasonable way for you to think about it. So we do think this is meaningful over time. We're only really just sort of beginning this journey. So, hopefully, as we get into next year and beyond, you'll see the full effect of that. MiFID II, we're well-positioned for MiFID II. We'll be ready for the launch date, of course, early next year. And any sort of headwinds that that may present – and, of course, it's very difficult to quantify this, particularly around sort of the unbundling of research products, is already in our forecast, but it's nothing significant that I'd call out. We like the research product that we have. We like to continue to invest in it and having very active dialog with our clients on how that unbundling would work. The revenue base of the CIB, I'm not sure I've got the full gist of your question there, but I think it may have been so what are your – what's that jumping off point, what sort of base are we assuming in terms of growth front. I'll let Jes add to that if he wishes to. Look, I would say that there's nothing sort of particular about this. We're growing from where we are and where we have been. So we don't try and get too focused on an individual quarter. More likely this was the trend rate and that's...

Tushar, it was more about what revenue growth you're aiming to deliver. So to be consistent with your plan, is it a plus £15 billion, a plus £20 billion? I'm just trying to scale the ambition, if you like.

Yeah, understood. Look, I won't quote a number there, Michael. I understand the point of your question is and I wouldn't necessarily just focus on revenue growth in the CIB, albeit it is important and you'd expect revenue growth across the full sort of waterfront of businesses as Jes laid out. But hopefully, to give you a chance of think about how to model it for yourselves, the sort of the marginal returns on the capital deployment will give you at least a sense of at least what we would expect and, obviously, by trading better and various other things, I'd expects us to do a bit better in there as well. Jes may want to add to this.

Maybe just jump in, Michael. One, we're expecting growth from across the bank's platform, so this is not simply a reliance on the IB. We expect growth in the credit card consumer portfolio about 10% per annum, which we've been achieving in the last couple years and on the back of things like American Airlines and Uber. We grew our balances in our mortgage book in the UK by £2 billion in the third quarter alone. So we see growth there. We see growth in the payments side. But then to the IB, what I would say is when we talk about that £20 billion reallocation of risk-weighted assets, assume that by and large that £20 billion had been generated or has been generating a mid-single-digit return on tangible equity. And as we reallocate it, we are clearly reallocating to businesses that are generating a return in excess of our cost of capital, and that's just efficient capital management. And in terms of the IB – and this is really the first time in – really since 2012, where we have the capacity given our leverage ratio of 4.8% to actually grow the balance sheet. And so that will be a net addition simply by applying that balance sheet, which has very low risk-weighted assets at the return levels that we're currently succeeding in getting marginally in the fixed income financing, in equity financing, and those are very profitable activities for the bank. So everything we're doing incrementally is, obviously, going to be at a higher return on tangible equity than our cost of capital.

Michael, if I just round out, your last question on sort of the mortgages. Yeah, we like the mortgage business a lot, and as you know, we've grown that book by £2 billion in the quarter. It's very much in our sort of staple, sort of sweet spot for us, relatively low loan-to-value products and margins that are accretive to our back book and we feel pretty healthy as the returns matter and bench well to the historical margins that we've been generating. So the net interest margins that we quote, obviously, we'll have a small effect of that. But we would still expect, on an underlying basis, I'm stripping out actually here the net interest margin for the full year to be above the 3.60% mark. I think that was all of them.

Okay. Just fees in Q3 jumped in the UK bank versus Q2?

Yeah. There's lots of sort of ins and outs going on there. There was a debt sale going through and that would have some fees associated with as well, which will impact those numbers. There's nothing else I'd call out significant there, Michael.

Okay. Thank you.

Thanks. Can we have the next question, please, operator?

Of course, Tushar. Your next question comes from Jason Napier of UBS. Jason, please go ahead.

Good morning, gentlemen. Thank you for taking my questions. Three quick ones, if I could. If I take the midpoint of the cost target for 2019 and assume, just for argument's sake, a 58% cost-to-income ratio. It looks like forward revenues of about £23.7 billion. But if I use consensus impairments and below-the-line, sort of, other equity costs, I'm still in the early 8s of RoTE. So, I just wonder whether you might be able to sort of share any information on whether you're assuming preference share tenders, any more efficient sort of items below the line. Or how we actually can get to sort of 9% using the guidance that you've provided today? That would be the first one. Secondly, Non-Core is obviously back in the group now. I just wonder whether you could give us a sort of a nine-month revenue drag. Or some color around what sort of drag for the full year we might be looking at and whether that's radically different in 2019, just as one of the components of that revenue growth that, I think, you're signaling. And then lastly, just on models from an impairment and an EL perspective, there have been some pretty costly adjustments through the P&L and in the net deductions from CET over the last sort of 12 to 18 months. I just wanted to know whether you'd be able to provide comfort on whether the work stream that's been going on there – what feels like may have been going on there is complete, and whether we should expect perhaps a sort of a less lumpy evolution of things like EL and the P&L impairment line. Thank you.

Yeah. Thanks, Jason. Why don't I, again, take them in the order that I have them, and Jes may want to add to a couple of these. In terms of modeling for the 2019 sort of financials, I don't want to sort of add more than with guidance we've already given out. I would say that it's worth to be looking at and I haven't seen your models obviously, but I'd encourage you to sort of just check the things like the tax line and the amount you got through for other equity. I'll let you have your own thoughts about what you make of impairments for that period. But I won't add any more than what you have. We feel very comfortable in the way Jes has laid out, that the ambition that we have is very realistic and very achievable. I'm sure if you want to perhaps with behind the scenes with our Investor Relations, you can maybe just swap models and they can maybe point to some of the things you might want to look at a bit more closely.

Just on tax, what is the thinking on forward tax in doing that?

Yeah. Look, I wouldn't model – I'm not assuming any difference in tax rates or tax assumptions. So, our sort of marginal ETR at the moment on a full year will be in the very low-30s. So, somewhere around there would probably be a reasonable planning assumption. For Non-Core revenues, for this year, no change for the guidance we'd already provided, very much as we had in the half year. So, I won't add anything to that and we would expect a meaningful runoff into 2018 and 2019. And, of course, these were negative revenues and diminishing quite rapidly. Again, we haven't given any specific guidance, but you should expect very significant runoffs of negative revenues. And then finally on models, yeah, we had – you probably may have noticed already that one of the reserves moves that we had against our capital line for this quarter was an uptick of expected loss over impairment. That was as a result of a model change in our sort of business banking area. That, of course, expected loss over impairment will be different. Of course, they'll disappear actually as we apply IFRS 9, so – and that's reflected in the guidance we gave on IFRS 9. I'm not expecting any other meaningful model changes in the impairment line. I mean, we're really focused on IFRS 9 and, obviously, that sort of gets implemented in the next sort of several weeks. So, it should become, from that perspective, much more straightforward. Of course, IFRS 9 is a new thing for all the UK banks, and I guess as everybody discloses where they are and how they're thinking about this, I'm sure you'll have plenty of questions around the consistency of the application and in various assumptions that we're all using, but I guess you'll get more information on that from all of us next year. Jes, you wanted to add anything on that?

No. Fine.

Thanks, Jason.

Thank you.

Can we have the next question please, operator?

The next question comes from the line of Jonathan Pierce of Exane BNP Paribas. Jonathan, your line is open.

Thanks very much. Good morning both. Got two questions, if I can. The first is on these return targets. Again, I'm sorry to press you a bit on this, but clearly the returns are based on an equity Tier 1 ratio of about 13% rather than – obviously then we have to back out what the TNAV is associated with that 13%. At the moment, there's about £4.5 billion to £5 billion gap between your equity Tier 1 capital and your tangible accounting equity. I just want to make sure I understand what you're assuming the gap will be by the time we get to 2019, 2020. So, you said excess expected loss will disappear understandably. The cash flow hedge is another big part of that gap at the moment, £1.2 billion, for that's amortizing out at about £500 million a year. So, are you assuming that gets close to zero as well by 2019, 2020? And then, the other big one is the PVA (54:00). So, I'm really just trying to get a sense as to what you think that gap ultimately will be between equity Tier 1 and tangible equity so we can properly ascertain what these return on tangible equity targets are actually being based on. That's the first question.

Jonathan, do you want ask both questions, then we'll try and get them done...

Yeah. The second one really relates to slide 36 and 37 in the appendix because with interest, so you're suggesting your stress test buffer could be in the region of 4.5% to 5% and that's encompassing not just the Capital Conservation Buffer and the Countercyclical Buffer, but your previously stated management buffer as well. I'm just really trying to clarify here, are you saying that in the event that you were to suffer stress test losses of sort of order of magnitude, and therefore have to hold a stress test buffer 4.5% to 5%, you're willing to not hold any additional management buffer on top of this, and therefore risk dropping into that PRA buffer in the event you had a bit of volatility in the equity Tier 1. I'm just trying to understand your thinking on that.

Yeah. Okay. So, why don't I answer in the order you've got them. So, for the difference between TNAV and regulatory capital, rather than sort of go through individual lines that sort of reconcile the difference, it may be more helpful for me to tell you that, overall, we're not assuming a meaningful reduction at all in our tangible net asset value. If anything, it would – we would expect it to grow from this space. It gets very complicated and I'm modeling the reserve line items in here and tangible book value. So, rather than getting to that, probably just to let you know, at least from our planning purposes, we're assuming tangible book sort of going up from here.

But is that – sorry to interrupt. Is that what the 9% to 10% targets are based on then?

Yeah.

Is it based on TNAV as we are and maybe growing a bit?

Yeah. Correct.

Okay.

Yeah, that's exactly right, Jonathan. The stress test buffer, the way I think about it is the following. So, our current capital base is 13.1%. Our systemic reference point would be around 8.3%. So, I guess, well, the way I think about it, we could absorb the best part of 500 basis points of stress draw and still be well above our systemic reference point. And when I look at historically, we try to calibrate all of this to historical experiences of the stress draw in the annual stress test, banking (56:36) stress test. And we haven't really got anywhere close to 500 basis points. So, at this stage, I think holding about 13% capital should be adequate to withstand any of the most significant stresses that we've had. Of course, Jonathan, you'd expect us to be driven by – if history and experience changes, we'll adapt accordingly. But at this stage, I'm not anticipating needing to do that.

Okay. That's helpful. Thanks very much.

Okay. Thank you. Can we have the next question, please, operator?

Your next question comes from the line of Andrew Coombs of Citigroup. Andrew, please go ahead.

I'm going to come back to this trying to square the circle between the costs and cost-to-income target and RoTE if I can, first. Thank you for your comments thus far, clarifying this tangible NAV and tax. I guess the last line to focus on, therefore, would be the loan loss line. I think the previous management team used to guide to a through-the-cycle loan loss charge of about 75 basis points, but that was prior to the Africa disposal. So, I'd be interested to hear what you think your through-the-cycle loan loss charge is. That would be my first question. The second one which would be drilling down into the Markets result and the revenues, on fixed income, if you strip out the Non-Core adjustment, the treasury gains, it looks to be broadly in line with the U.S. peers. The equity result, you mentioned specifically that it has significantly underperformed the peers. You said it's because you're too reliant on U.S. flow derivatives where volumes have been very low. So, could you, perhaps, elaborate on what proportion of your equity revenues are due to U.S. flow derivatives? And also, how quickly you think your investments in electronic and prime can pay dividends on that front? Thank you.

Yeah. Thanks, Andrew. Why don't I take the – I'll be brief on the loan loss and I'll hand over to Jes to talk more about sort of equity market. I won't give a specific guidance on through-the-cycle loan loss rate. I'm currently running at about 66 basis points. Everything that we can see at this stage suggest a continuing benign credit environment, these are short-term indicators. If you want to get a sense of how we modeled the future environment because obviously we are quite sensitive to things like the change in unemployment, GDP assumptions, price recession, I think (59:00). I'd just refer you back to somewhere around July, August economists' consensus forecast, and that's further the assumptions that we took. A somewhat of a mild slowdown is probably the way I'd characterize it, how that consensus look, but I wouldn't give out a through-the-cycle number. I'd let you sort of look at that and form your own conclusions. Jes, do you want to talk about...

Yeah, Tushar. On the – you're right on the FICC number, we would be down. If you take those two adjustments, that 25%, that's sort of in the middle of the pack of the U.S. investment banks. Clearly, I think everyone are feeling the impacts of low volatility and low volumes. But on a comparable basis, the FICC was in line. So, where we were surprised in downside was in the equity and primarily slow derivatives – I won't give you exact percentage, but it is a meaningful number for us. We lost some personnel. There are some trades that didn't go our way. We have put a new team in place. And we'd say away from that in the equity cash commission basis, we actually gained market share in both the U.S. and the UK. And on the LSE, we're number two now. And again, remember that business was always brand new to us six years ago. In equity financing, we actually had a very good quarter there. Our balances grew 28% year-over-year. And that, again, can correlate a little bit to putting more balance sheet to work and the impact that can have on your equity and fixed income financing. So, in terms of electronic trading, we are rolling out new capabilities in terms of our pre-trade technology and platforms across the Markets business. I think we have a journey to go through. I think it's something measured in quarters. But what you're likely seeing today in the rates business, we have an immediate impact when we put our new platforms in place. And we do believe that we can regain this position we had in the equity line overall.

Thank you very much.

Thanks, Andrew. Can we have the next question, please, operator?

Your next question, gentlemen, comes from the line of Robin Down of HSBC. Robin, please go ahead.

Hey, guys. Just a couple for me. Sorry to come back to the RoTE targets, but what assumption are you making in terms of the £3 billion RCI? Are you assuming that gets called in June 2019 against your numbers? So, that's kind of question one. Second question on the U.S. side. Obviously, we got Trump talking about tax cuts. I was wondering if you could tell us what percentage of your profits in 2017 so far have come from the U.S. side so we can sort of try and get a more accurate sensitivity there. And then, if I could just sneak in a third one. You've kind of given us a sensitivity to 100 basis point sort of rate increase across the yield curve. That feels probably a little bit sort of pessimistic in terms of rates. If we have a 50-basis-point increase in rates, could you give us a ballpark year three estimates of that? I'm assuming we can't just simply halve the 100-basis-point number because the structural hedge obviously wouldn't work through in quite the same way. Thank you.

Thanks, Robin. (01:02:40) your answers, I'll take them, I think. Yes, we do assume that the RCI is ought to drop out in 2019. I've got to be a little bit careful here. I don't want to sort of pre-guide to some sort of call of an instrument which you wouldn't expect me to do but, generally speaking, you'd expect us to behave economically. So, I imagine there's no big secret there. In terms of our U.S. profits, we are profitable in the U.S., so any cut in headline corporation taxes in the U.S. is definitely beneficial. We haven't given profitability by currency. And I don't really want to do on a call like this. But it's probably enough information out there, and you can look at our IHT filings, our Y-9C call reports that we file with the Fed and various other such requirements that maybe IR can help you with those. So, you can get your hands on that.

Right.

In terms of the rate increases, yeah, I mean, just to remind everyone, we haven't assumed actually in our baseline forecast is much on an rate environment at all. We only put this sensitivity out because obviously as we are getting closer to next Thursday, I guess is more of an expectations that rates may move. If we only get, let's say, a 50-basis point parallel shift upwards, it wouldn't be anything clever than approximately half. I mean, there's a little bit of complexity as you point out given the shape of the curve. But I would – for planning purposes, you can assume approximately half is good enough. I would just caution though that this is a parallel shift across the entire curve upwards. I'm not saying that that's the right environment we would get at all. I'm sure it will be different to that, so see these numbers with caution.

Right. Thank you.

We'd really like to see (1:04:35) yields similar to the U.S. yields right now. Next question?

That would be helpful. Thanks. Next question please, operator. And the next question please, operator? Yeah.

The next question comes from the line of Ed Firth of KBW. Ed, please go ahead.

Yeah. Morning, everybody. Can I just ask a couple of questions, I guess, about the sort of strategic direction of the group, and how you manage that. And I guess, it's really about the additional leverage now that you're giving into the wholesale business, which I guess sort of goes to the whole theme of more and more resource and attention going into an area that I guess continues to underperform. So, do you have like a time scale on that? I mean, if you give them the £50 billion, is this like for a three months, is it for a year? At what point, if the performance continues at the current level do you say that's enough and perhaps it's time to take some resource out of that area?

Yeah. I'll take that. Again, we have gone through an enormous restructuring of this bank in the last couple of years. In order to settle on our strategy of being a Transatlantic Consumer and Wholesale Bank. We have massively simplified this bank's platform, we've reduced its head count by 60,000 people. And very importantly, we have resolved our capital issue. Even just in the last year, we've moved from an 11% CET1 ratio to over 13%. A lot of that has been on a dramatic reduction in risk-weighted assets and balance sheet allocated to the Investment Bank. We have made an extraordinary cut, now that we've got to our end-state capital levels, the strategy is going to be prudently grow our businesses across the overall platform of Barclays as a bank. But giving some capacity to the Investment Bank, particularly around balance sheet, because we know we can drive double-digit returns with that incremental balance sheet in terms of returns on capital. Let's say, the £50 billion is a number that we've given the IB to deploy over the next couple of quarters. And there is actually capacity to go beyond that, and this is not punching up risk-weighted assets, as we've said, the CIB, RWA will stay flat, that's in the plan to achieve that 2019 9% RoTE target. So, it is primarily balance sheet that we'll be using in addition to the reallocation. We're not going to change our strategy. We've been focused on restructuring the bank now that we are we want to be as of two months ago to take a quarter to question the strategy which was predicated on being a diversified consumer and a wholesale bank. This makes no sense in our view. And you cannot cut yourself to glory, and those that have tried to do that will ultimately fail.

Okay. If I could just come back quickly, I mean, (1:07:43) my only observation would be that that you're already making an 18% return in the UK business, and I guess your interest rate sensitivity suggests that that's going to jack up sizably in your opinion if interest rates go up. I mean, you're talking about another £1 billion of revenue, something like that. So, you'll be getting up to mid to high 20s. So, the disparity between the performance of your areas of your group is going to get bigger, not smaller, I guess in the short-term. And I just wonder...

Yeah. And having lived through a variety of economic cycles while working at JPMorgan, there is a kind of cyclicality between consumer businesses and wholesale businesses. So, right now, sitting with very low interest rates, but very, very low volatility, an unsecured consumer loan book is going to generate a significant return on capital. I don't believe we have solved economic cycles. When you have a downturn and unemployment goes up, you will see an immediate impact on the profitability of your unsecured consumer loan book. But when that downturn happens, I assure you volatility is going to go up significantly and alongside that will be the profitability of your wholesale businesses. That's happened through every economic cycle that I've lived through.

Okay. Thanks very much.

Can we have the next question please, operator.

Jes and Tushar, your next question is from Martin Leitgeb of Goldman Sachs. Martin, your line is now open.

Yes. Good morning. Can I have two questions please? The first one on Brexit and the second one to follow up on your comments earlier on equities. Barclays is a global investment bank, but the only one which is headquartered in the UK and as such, I think it doesn't take much analysis to conclude that Brexit should have in principle a disproportionate effect on Barclays' business relative to its peers. And I was just wondering if you could comment in this context, if you're putting any of the revenue weakness we are seeing in the IB down to some clients moving away business from the UK domiciled banks to, say, a eurozone or U.S. banks ahead of Brexit or do you think the weakness currently is entirely due to franchise underperformance? And also further to that, how do you think Barclays successfully can compete in investment banking in a post-Brexit world? Why would certain clients choose Barclays or UK domiciled banks, say, over some of the more international or eurozone PS for that continental business? And do you expect a potential Brexit related impact on your IB franchise going forward? The second question, just to follow up on equities and Global PS have reported equities roughly flat year-on-year. Barclays' equity result today is down 25% year-on-year and 20% quarter-on-quarter, significantly underperforming the rest of the Street. And I hear your explanation on the dependents of flow, but struggle somehow to accept it as a whole or as a sole reason for that underperformance. Was there anything else you could call out which could have gone wrong in equities, say, an outsized trading loss or do you think this marks franchise loss in some specific areas, and are you concerned that this could continue the space of franchise loss? Thank you.

Thanks, Martin. Why don't I take those questions, and then Jes may want to add. In terms of Brexit, do we feel that that's having an impact on our defined (1:11:15) business? I think, actually, no, our – certainly, look at our fee business. We've had a record nine months year-to-date. We actually got number one fee sharing in UK. Obviously, that's part of Europe, some cross-border activity there. We have a record fee share for us, at least, in debt capital markets and leveraged finance. So, that franchise has held up very well. When I look at things like foreign exchange, for example, electronic foreign exchange, we called out our FX business did very well. Our volumes in electronic foreign exchange were up 25% last quarter versus the year before. It's quite interesting because you remember the year before that was on the back of the EU referendum. So, we're not seeing any slowdown in client activity dealing with us, given our domicility. And we're not really expecting that to be an issue as we restructure our business to ensure we're compliant with rules and regulations. I don't think that actually affects us any more than others. I'd argue in some ways that it's perhaps a little bit easier for us to restructure our business to be compliant against some of our peers who probably weren't as present in Continental Europe as a booking location in the way we have been through what is already a licensed bank in Dublin that's operational with its own board and various other requirements that it will require. So, I'm not sure Brexit is at all an issue for us. I'd almost at the margin say potentially helpful rather than unhelpful.

I mean, to add to that, we are one of the largest underwriter of debt capital markets for issuers in the eurozone and a major primary dealer for almost all the sovereign credits in the eurozone. And all we've heard is they very much are encouraging us to stay completely engaged in Europe. If you look at the reactions to Brexit for most of the banks, most of the U.S. banks have talked about a far greater impact in terms of their London operations than we have pointed out. And I continue to believe that counterparties across this industry do not want to be 100% concentrated with U.S. firms. And so, there is a role in the global capital markets for non-U.S. players, and we intend fully to have a significant role there. And you see it in a lot of our businesses. As Tushar talked about, our fee business is at a record level through the first nine months. I think there's no indication of people pulling away from us and no indication that Brexit will disproportionately penalize Barclays versus any other bank.

Yeah. And so, moving on to second question, Martin, just the equities business. Yeah, we're disappointed with the result. I don't think there's any sort of permanent degradation other than what is (01:14:12) degradation business. I mean, that's a real driver for this quarter we did have, and I think other banks called it out a weakness in equity flow derivatives. Volumes are actually held up okay, but the ability to capture the bid off from those volumes was quite tricky. And that's a larger part of our business relatively than any others. And I think businesses did real well like financing. Even our financing balances are up quite a bit. It's a relatively smaller part of our business than others. We've got a new team there as well. Jes called out that we've made a very significant management change in the equities business, and we feel pretty good about where we're going go from here. Could we have the next question, please, operator?

Your next question gentlemen is from Fahed Kunwar of Redburn. Fahed, please go ahead. Fahed Irshad Kunwar - Redburn (Europe) Ltd.: Hi. Just a couple of questions. On the Investment Bank, Jes, if I heard you right, I think you said the marginal RoTE on the corporate business was kind of mid-single digit and the marginal RoTE on the kind of business you're looking at investing is now kind of grazing your cost of equity. So, if that's been the case, why hasn't this reallocation happened before? What was stopping it from happening before, because if you're talking about flat RWAs and it can't really have been a capital issue. So if you could just help with that. And the second question was just on UK margins. So, taking out – actually, you're at 357 basis points for the quarter which is still quite a decent tick down from the second quarter, and you're looking at that increasing to 360 basis points in 2017. So, I think your deposit cost, you said this before, haven't got much room to go down. Are you assuming as well as the base rate rise that the end of TFS means that mortgage rates start to go up considering the pressure we've seen on that in the last few months? Thank you.

Yeah, I'll take the first question. So, to be very clear, the corporate loan book is well north of £60 billion. There is a part of that, a loan book, where the returns on tangible equity for the specific credits is mid-single digits. And that is what we are looking to either get those corporate clients to pay us more for the credit that we're extending or to take the credit back. And then to be very honest, the reason why we're focused on that now as to where we focused on before, is before we reorganized the bank mid last year, the corporate business was part of our retail bank. And I don't think anyone has asked a question about the return on tangible equity of Barclays UK recently. And now that is put together with the Investment Bank, we're going to maximize the return on risk-weighted assets across that business platform.

And Fahed, on your question on UK margin, just a very small dip I guess we had in Q3, principally it was actually driven by I quoted out in my scripted comments, you may not have spotted it. But we had some remediation in our collections area that flows through our net interest income line. And so, just a formula for calculating NIM, the NII over assets gets affected by that. On a full-year basis, that's come and go now. So, on a full-year basis, we still expect NIM excluding ESHLA in the UK to be about 360 basis points. We've not assumed any rate rises at all. And we'll see what happens on that front. Can we have the next question, please, operator?

Your next question from the telephone is from the line of Chris Cant of Autonomous. Chris, please go ahead.

Hi. Good morning. I had a couple, please. The first, you've talked, Jes, previously about being through the belly of the restructuring or strategic reform costs I think, but your guidance today implies quite a big step-up in spend there into 4Q. And during your remarks, you talked about that one you're really dropping away in the second half of next year. So, I'm just wondering if you can give us some color around what the total structural reform spending is this year and what will be next year so we can get a better sense for what's happening with underlying costs? And the second question, in your slides, you call out an assumed normalization of market volatility as part of the improvement in the CIB return on tangible equity. I'm just wondering, can you give us some more information around how much additional volatility you're assuming here. And if I think in terms of global IBC pools (01:18:57), 2016 was sort of a bit of a blip on a continued downtrend over time. So, are we assuming we go back to 2016 levels of volatility halfway back to that? I'm just trying to get a sense of how much that's actually driving the improvement. Thanks.

Thanks, Chris. It's Tushar here. Why don't I take the one on costs and then Jes can talk about sort of the volatility in the assumed levels. In terms of SRP cost, we gave that sort of budget out of about £1 billion, which is still correct in that sort of spending, the shape of that. We're probably literally in the peak spend now. And you can imagine – and unfortunately, it doesn't get talked about too much. But, for us, this was a very significant change. We're creating an UK bank essentially from scratch. Barclays Bank PLC was our main trading entity. We're extracting from that our UK operations and incorporating a brand-new bank to Barclays Bank UK PLC, as well as our Service Company. So, what does that mean? It means we've got to move all our customers and accounts, but actually give a whole load of new swap codes (01:20:04) associated with that and moving people around our branch infrastructure, moving internal employees, tens of thousands, like a third of our internal employees into our Service Company. That's a brand-new legal entity. That's up and running. We're closing the books on that basis for the first time this time around. So, it'd be – and I won't sort of bore you with all the nitty-gritty that needs to go on with this, but we're sort of in peak spend. I think the point of your question is sort of what happens into next year. That spend will continue into the first six months of next year. We become operational around about the Easter timeframe next year. That point in stock had been a way (01:20:40). And as Jes talked about on the call, I think as that stocks have been a way (01:20:48) that will drop out as well further gross cost efficiencies. And then, the whole idea is to recycle that back into some of our interesting growth opportunities. For example, when we haven't been asked about but worth throwing out is U.S. cards, which you can see the J curve and American Airlines is having. Uber will have a similar thing. And we expect to grow those receivables. That's good investment spend that we like, and there's various other examples. So the merchant acquiring, we haven't talked about much as well. We rolled out a new merchant acquiring platform which we think give ourselves the best middle back office acquiring platform probably at least in the UK, if not in Europe and elsewhere. And that's a growing market, spend up 10% year-on-year already. And our ability to monetize our spend goes up with that platform. So, there's a whole host of things that we're going to see some good stuff coming out of. But with that, I'll stop there and hand over to Jes on the market volatility.

I think on the market volatility, I mean, obviously, our plans are predicated on volatility, recovering from the very low levels we saw in the third quarter and that everyone on the Street experienced. But recoveries to levels that we saw in 2016 and 2017 are still modest by historical standards. So, I think we're still looking at a modest degree of volatility with volumes in relation to that and not betting on recovery to sort of levels we saw immediately post crisis. So, I think if you wanted to model, that'd be more around what we're seeing in 2016, beginning part of 2017.

That's helpful. In terms of 3Q being very soft, do you have any comments on October trading, please?

Yeah. Chris, I'll give you my stock answer. The answer's no, but – and you shouldn't take that as good or bad...

It was worth asking.

Yeah. Not good or bad. The only reason I say no is that – as you guys will be aware in the UK, if I give trading guidance now on this call I'd have to accompany it with a Stock Exchange announcement, and so we just don't do that. So, no comment, but don't take that as good or bad. But thanks for your question. Could we have – I think given where we are, so we'll take two more questions. Could we have the next question, please, operator?

Of course. Your next question is from Tom Rayner of Exane BNP Paribas. Tom, please go ahead.

Yes sir. Good morning, chaps. So, just two, please, from me. First one, on U.S. Cards, the £168 million loss of deferred consideration on that asset sale, can we read anything into the underlying credit quality of the U.S. books from that? Or is that very much a specific issue? That's my first question. And I have a second question just on the sort of rating of Barclays. I don't know if you want to take that now or after the first one?

Yeah. If you wanted to just ask the question, Tom, I will do it in one go.

Yeah. Well, I guess – I mean, if you look at Barclays, not just recently, but over sort of a number of years, I think it's fair to say that the sort of discount to book value is usually put down to too much capital being invested in a business where there's volatile earnings. And typically, you don't make your cost of equity through the cycle, in other words, too much equity invested in the Investment Bank. And I just wonder, firstly, do you agree with that assessment? (01:24:18) and if you don't, you don't. But if you do, maybe you could sort of talk about where the market is wrong now? Is it failing to understand the opportunity that you're putting forward to boost returns by these various balance sheet optimization that you discussed or something else? I'm just trying to understand what your thought process is around the sort of overall CIB strategy, I guess. Thank you.

Well, I will take the first one, Tom, and I'll ask Jes to talk about your second question. In U.S. Cards, yeah, that impairment is a one-off of a portfolio that we sold at the earlier part of the year, it was one of the lower rated parts of our book, so the least sort of credit-worthy, if you like. So, no impact to ongoing business. In fact, I'd say the – in quality, the credit quality, the underlying business is actually pretty good. We were slight uptick in delinquencies from Q2 to Q3. That's sort of quite seasonally about the U.S. tax season in Q2. So, it tends to be a relatively one of the more benign quarters in the year and then flat year-on-year. So, we're pretty constructive on the U.S. environment. Something – we're generally quite cautious on these things, we monitor it carefully. And our indicators are telling us that there's nothing of significant stress in there, but it's something we'll continue to monitor. But, no, the underlying quality of the book remains very healthy and the risk-adjusted returns are extremely healthy and we would like to grow it in a controlled basis. Jes, do you want to?

Yeah. So, I'll make three points then Tom. One is I encourage everyone on the phone to read the report that was published last week by Standard & Poor's in terms of our credit ratings. And it upgraded a number of our credits and gave that same credit to Barclays UK and Barclays International rating that it gives to the group, which is a terrific outcome for us. But very importantly, in giving the credit rating for Barclays International, they focused on the diversified business model as a key component to the credit strength of that business, which is very much a fundamental tenet of our strategy. So, I encourage you to read that report, I think it would be very helpful. In terms of the CIB in how one trades, what I would say, if you look at the U.S. universal banks, there are the five largest banks now, they are all trading well north of book value. And, in most cases, they have investment banks that I would argue if you carve them out are generating high single-digit returns and account for a very significant percentage of their revenues and earnings. In fact, so people like Morgan Stanley goes back to really much, if you will levered into their investment banking platform than Barclays is by quite some measure. And so, they are not being penalized to the degree of business that they've got. Quite the contrary, I think the market has gotten quite comfortable that the volatility of the U.S. banks is down significantly and, therefore, they are trading well north of book value. The main difference is they are, right now, returning 100% of their earnings in stock buybacks and dividends. And I think it's that return of excess capital that has very much driven a drop in their cost of capital and, correspondingly, where their stocks trade vis-à-vis book. This is my final point. What's important about Barclays, I think, is to recognize where are we in the recovery of this bank post the financial crisis. This bank went into the financial crisis in 2006 with the second largest balance sheet in all of finance. And the restructuring, given the size of that balance sheet and the level of capital we had has taken a very long time. And we only completed the restructuring of this bank a couple of months ago. So, there is a difference in timing as to where the U.S. banks are versus where we are. I don't think it's a business model issue. I think it's a timing issue of the recovery. We've closed Non-Core. Now, we're focused on driving earnings and we have all the instruments at our hands to deliver the same level of earnings that you see coming out of the U.S. banks, and that's what we're going to do.

Okay. Thanks. And just very quickly on a follow-up. Do you think there's any element of regulatory advantage in favor of U.S. IBs over Europeans at the moment? Because there's something that often put forward as a reason for maybe why market share has been shifting a bit sort of away from you to the U.S. investment banks, what's your thoughts on the regulatory environment?

I think the regulators, by and large, Tom, have done a reasonable job of trying to keep a level playing field. They haven't got everything right as you see in the negotiations of Basel III or what not. But I think, by and large, the regulatory environment, both sides of the Atlantic can complain about one thing and not complain about another. My own personal view is one of the big differences of the European banks versus – I think two differences, between the European banks and the U.S. banks coming out of the financial crisis. One, is the capital markets are a multiple bigger in the U.S. than they are in Europe. And the capital markets driving the performance of U.S. banks as opposed to their own balance sheet is much more significant in the U.S. and in Europe. The second component to that is, interesting enough, on the back of Basel I where the decision was that a AAA security pose zero risk and therefore had no capital against it. The only regulated financial institutions that didn't fully follow Basel I were the commercial banks and the U.S. Federal Reserve. They maintained leverage ratios which is why, to a large degree, the European bank balance sheets got much higher as a percentage of their capital than the U.S. banks and consequently the recovery has taken longer.

Okay. Thanks a lot for that.

Thanks, Tom. Should we take the final question then, please, operator?

Gentlemen, the last question that we have time for today is from the line of Robert Noble of RBC. Robert, your line is now open. Please go ahead.

Good morning. It's just a clarification on the interest rate guide. The 100 bps parallel shift, is that global? And so, if it is, how is it split between International and UK? And I want pause (01:30:55) on those two scenarios just there.

Yeah. Look it's not guidance. That's probably way too stronger word. It's just a scenario. None of us are forecasting 100 basis points parallel shift, because principally, we're very anchored to the UK. So, think of it very much of the UK sensitivity that's where the bulk of that impact will be from. But please don't take it as guidance. This just gives you a scenario of what may happen.

With that, I think that's the final question. So, thank you all for joining us on this call and we look forward to seeing you on the road with any follow-up meetings.

Ladies and gentlemen, that does conclude the Barclays third quarter 2017 results analyst and investor conference call. Thank you all for joining and enjoy the rest of your day.