Welcome to the Barclays' Q1 2018 Results Analysts Investor Conference Call. I 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 first quarter earnings call. 2018 is the first year in the last five, where Barclays began with a clean operating model. Our strategy is focused on improving profitability and increasing cash returns to our shareholders over time. And the performance we have reported today shows another quarter of successful execution against that strategy. Excluding litigation expenses, our transatlantic wholesale and consumer bank produced in the first quarter a group return on tangible equity of 11%. Within that trend, both of our operating businesses delivered double-digit returns, with Barclays UK at over 15% and Barclays International at over 13%. Barclays UK's underlying performance has been solid in this quarter. We grew our mortgage book by nearly £1 billion and had a strong (1:16) season with flows up around 35% year-on-year. Income is down, however, driven by non-repeating items including the Visa gain recognized in the first quarter of 2017 and the remediation charge which was booked in this quarter. We chose to increase investment in our leading position as a digital bank including in core technology enhancements and customer journey optimization, as well as expenditures on our branch closures. On the asset side of the business the mortgages is exposed to margin pressure, our NIM held up very well in the quarter at 327 basis points. And our strong position in deposit should benefit us as interest rates rise. We were also delighted to be the first of our peers to successfully stand up our ring-fenced bank on the 1st of April. So, nine months ahead of the regulatory deadline to do so. This was an enormous undertaking, effectively creating the largest de novo bank in this country's history and the thousands of colleagues who made that a reality deserves great credit.…

Thanks, Jes. Our Q1 results represented a major step forward, achieving our objective of double-digit returns for the group as we reported an 11% group RoTE excluding litigation and conduct. Importantly during the quarter, we resolved a very significant outstanding conduct matter, the DoJ RMBS investigation. This resulted in a provision of £1.4 billion in the Q1 result. And we also took a further provision of PPI of £400 million, taking the remaining provision to £1.7 billion. In order to help you better understand the trends, we've included a slide in the appendix with these material items and other items of interest which I'll reference as I go through the results. In income, there was some negative effect from the non-recurrence of the one-offs of £290 million highlighted in Q1 last year, mostly in BI, while in cost, we had a reduction of around £50 million in SRP spend and a small positive effect from the compensation changes introduced in late 2016. The statutory attributable loss for the quarter included litigation and conduct provisions totaling £2 billion, which are largely non-tax deductible. So, the attributable profit excluding these was £1.2 billion, generating earnings per share of £0.071. The RoTE was in double-digits for BI and also for BUK, excluding litigation and conduct, and I would note that the CIB reported a 13% RoTE. Despite the head office drag, overall group returns were also in double-digits excluding conduct. Q1 does tend to be seasonally strong but the benefits of our diversification are showing through in the group returns. Income was down 8% overall, principally reflecting the non-recurrence of those one-offs in Q1 last year and the effect of the weaker dollar. Impairment was down 45%, reflecting single name recoveries in corporate lending and the effect of improved consensus economic forecasts principally…

Thank you, gentlemen. Our first question today, gentlemen, comes from Claire Kane of Credit Suisse.

Hi, Claire.

Hi, Claire. Claire Kane - Credit Suisse Securities (Europe) Ltd.: Hi. Good morning. So, my two questions. Firstly, on costs. So, you haven't changed the 2019 cost target given the FX tailwind you have and given you are running down 6% year-on-year already. And that target versus 2017 is only minus 2% to minus 4%. Now, just – I guess I can appreciate the FX benefit will fade, but just really could you give us some sense of – are you going to be much at the lower end of that range? And also, what's the likelihood that you could actually come within that range for this year for 2018? That's my first question. The second question is on the consumer cards and payments business. How should we think about the revenue margins going forward? Would we expect your revenue growth to lag your 10% balance growth and for that to be compensated through lower cost of risk? And also, could you update us really on what your broader plans are in the U.S. payment space given the announcement with PayPal? Thanks.

Yeah. Thanks, Claire. Why don't I take the cost and touch on CC&P and Jes may want to add on some of the – what we're doing around payments. With cost, we're pleased with our cost performance. Obviously, we are benefiting from – on the cost line, I guess, a stronger sterling of course, as you guys are all aware. Unfortunately, a stronger sterling is less helpful to profit. So, I wouldn't necessarily take that in of itself as a positive and must prefer a weaker sterling. I think like as we've done in the past, Claire, we've only given specific guidance for 2019 as we get into 2019 and we see what currency rates prevailing then, we will moderate the objective accordingly. We've deliberately given a range of cost outcomes for 2019 just struck at the (28:25) historical rates. And the reason for that is I think is maybe just sort of your question if performance in our top line isn't as robust as we would like then we would, obviously, have the opportunity to drive cost lower. But we are keen on ensuring that we keep a healthy level of reinvestment back into the company and you can see that across all of our businesses. Jes will talk a little bit more about sort of payments and PayPal, but you can see that in some of the consumer-facing businesses that we have with card acquisitions. We talk about the automated processes that we have around mortgage approvals. On average we're approving mortgages within 10 days now and for a non-broker originated mortgages, it's substantially lower than that. We've put some productive investments into some of our re-trading platforms. So, we are keen on reinvesting back into the company, but doing that ensuring that our cost base is appropriately sized and certainly, intending to have a cost/income ratio of below 60% next year. In terms of CC&P very briefly, yeah, as the J curve for that business evolves, you would expect revenue growth slightly to lag receivable growth, but the businesses that are growing well for example some of the airline accounts whether it's JetBlue, Frontier, Hawaiian, American, these are really, really good accounts. And like JetBlue, I think, stumbled over the last couple of years. So, you will see those J curves, if you like, complete and go back into more if you like consistent or in fact revenue growth even outstripping them receivable growth, but it'd be a little while to come here. Jes, do you want to add any points on...

I'm just going to give you an anecdote around the J curve. We started the American Airlines co-brand in the first quarter of 2017. You spend money in terms of advertising on inside the airline. You spend money in terms of having very attractive sign-on reward programs. In the first quarter of 2017 as we started we acquired 30,000 new consumer credit card clients through American Airlines. By the fourth quarter of 2017, that was up to 120,000 in that quarter. So, that's the growth rate that you can get, but it does require a marketing spend upfront and that's what gives you the J curve. So, it will be some time before revenues catch up with that 10% year-on-year growth rate in receivables. But I used to expect that that catch up to accelerate as we go through the end of 2018 beginning of 2019. Obviously, we're very pleased with the announcement with respect to PayPal, particularly here in the UK where we're connecting their payments platform into our banking app, which is I think perhaps the strongest banking app across the UK, connecting it to our mobile banking as well. We think this will be immensely beneficial to both PayPal and to Barclays, given the breadth of our 24 million consumers across United Kingdom. And given, I think there are significant market shares in the payment space. So, I think that's reflective of a new approach across technology, which is partnering, and we like this partnership with PayPal. In terms of the U.S., we are – we have been incrementally increasing our digital bank. As you know, we gathered a lot of retail deposits in the United States and bringing a relationship with PayPal, I think opens up opportunities for us in the United States as we want to grow that consumer footprint.

Yeah. Just one other point before we go into the next question that was just pointing out on your question around CC&P and revenue growth. The other thing we look at very closely is just how jaws are performing as we grow that business. In Q4, jaws were broadly neutral and I'm referencing here, obviously, local currency because FX rate moves can cloud that a little bit. And jaws in Q1 were really only very slightly negative. So, we're again being very cautious in ensuring that we can grow that business but without experiencing at those jaws. I hope that's helpful. Can we take the next question, please, operator?

Our next question, Tushar, is from Joseph Dickerson of Jefferies.

Hi. Good morning, guys. On my two questions, I guess the first one is on the hedge accounting that you've called out in the Head Office. And it seems like the second quarter in a row where the Head Office negative income has been quite material and your guiding to further negative income in that unit. I guess can you please explain in detail what precisely this hedge accounting drag is? And also, is it something new that cropped up, because it hasn't been flagged before? So, some detail there would be very helpful to think about in particular the trend going forward. And then, secondly on the iBank. So, there is a 64% cost/income ratio in the quarter in the investment bank, and, obviously, Q4 there are some Q4 inflation related to the UK. Is there a number we can think about going forward, obviously, subject to the environment remaining fairly, okay? And on that how much of the investment bank performance around that cost/income ratio both on the cost side and the income side relates to some of the specific actions you've taken around the balance sheet and committing capital to clients and how much of it would you say is – I know it's always difficult to do, but, obviously, you've spent a lot of time committing capital to customers over the past couple of quarters. How much of the move in the investment bank is specific to Barclays and how much is market? That will be very helpful for us. Thanks.

Yeah. Thanks, Joseph. Why don't I cover the hedge accounting and just briefly touch on IB costs and then Jes can perhaps give you a bit more color on some of the drivers of our performance balance sheet versus market share, et cetera. What may be helpful for you is in terms of this year, as you are thinking about where Head Office may look over a full year, I'd say there's only two items on the top line that I would call out there, one of which you've probably already had in your models somewhere, but that's the legacy funding instrument that we've reported now in Head Office. That'll run as we called out about £90 million a quarter while those instruments are outstanding. Obviously, if we were to retire those instruments then that just drops out of the top line. The other component is hedge accounting, which I know will be new to many of you. I mean, in simplest terms, hedge accounting is all to do with the relationships we have between fair value hedges and our consumer or banking book businesses where we take the benefit of hedge accounting to show our P&L on a matched basis. When you break those hedge relationships, those built-up cash flow hedge reserves need to amortize back into P&L over time. And that's quite a technical accounting determination. On occasion, depending on exactly how those hedge relationships are broken, you'd recycle that P&L immediately, and under other occasions where you're portfolio hedging, you have to recycle that P&L back over the life of the original hedge, and that's what we're seeing here. The reason why you may not have seen it in the past is that I guess we've got less and less in Head Office, so the puts and…

Tushar.

Yeah.

Tushar, can I just ask, where was this £90 million impact from the legacy capital instruments booked before? Why is that being flagged now? You've been paying the 14% on those instruments for some time.

Yeah. We haven't decided it just now. We talked about this at the full year results so that hopefully you had a chance to anticipate this that we would be reporting here. Where it was allocated, £30 million of it, we've called out, it was allocated to the markets business. The rest was proportionally allocated to the rest of the bank. The reason why we're sort of highlighting it now or sort of reporting it now is that these are instruments that are not really indicative of our marginal funding costs. We're not really paying anything like these levels to generate new funding. And, therefore, when businesses are making marginal decisions or just potentially make an incorrect decision – and we would be expected – you know the RCI that you're familiar with will come for a call next year. We've got the dollar pressing (39:06) there which of course we have a quarterly call feature in. So, these are probably transient in nature as well, and, therefore, it sort of gives you a sense of knowing when they drop out and what the effect of them may – effect they have.

Excellent. Thanks.

And Joseph, vis-à-vis the cost/income ratio, we stand – are very confident behind our target of getting that cost/income ratio below 60% in 2019. Obviously, with our mix of businesses, we have different contributors to that cost/income ratio. Our consumer bank we would expect to be in the low 50s, if not below that, and we were on our way to getting there. With respect to the Corporate and Investment Bank at 64%, you would expect a corporate and investment bank to run at a higher cost/income ratio than a retail bank. At 64%, we are very competitive with The Street. I think that underscores the fact that we have the scale to produce the revenues they want to and at a competitive profitability. In terms of your questions about the growth in markets and where it's coming from, the first thing is there has been a gain on our side of market share both the fourth quarter and the first quarter that our dollar revenues in the markets business was up 21%, whereas the U.S. banks on average were around 10%, and the European banks I'm sure you've seen. So, that was a strong performance on a relative basis. In terms of (40:31), where would you attribute that improvement from, as we've talked about, both Tim Throsby and myself, it's a function of people, technology and reallocation of risk-weighted assets and balance sheet. I think the people factor has been very important starting with Tim himself and the team that he's put together below him. Technology, we're about halfway through the re-engineering of our electronic trading platforms. The initial rollout was in the fall of last year around vanilla interest rate swaps and you can see in our Tradeweb market share presence around package trade and interest (41:12) swaps, our market share has grown 4x since we launched that electronic trading platform, and we have more to go as we go through 2018, but tech has clearly had an impact for us. And in terms of reallocating capital, what we talked about is in the second half of last year, we took £10 billion of risk-weighted assets that were in our corporate loan book that were generating in terms of those overall relationships RoTEs in the low single-digit, reallocated that £10 billion to our markets business between credit, equity financing and macro where we were generating at the marginal rate high teens, low 20% returns on tangible equity and you can do the calculation backing in of how does that improve our profitability. So, I would say overall that most of our performance in the first quarter was driven by the investment we've made in people, technology and better allocation of our risk-weighted assets. But obviously, everyone in the market benefited from improved conditions and this is a market that will show volatility, but we like the progress that we're making.

Thanks.

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

Our next question, Tushar, is from Jonathan Pierce of Exane.

Hi there, chaps. Two questions. The first is on the return on equity guidance. The second on the U.S. Card book. On the RoE, when you put the RoE guidance in place, the TNAV was £2.81 and you explicitly told us for planning purposes that was going up. Now since then, the TNAV's down 11% and I accept there's some acceleration of TNAV headwinds in the last few months, but it still looks like it's going to struggle to get back to £2.80 anytime soon. And then, of course, we've had the change in the U.S. tax rates. So I can understand why at full year you were reluctant to increase the RoE targets at that point, but why are we not seeing an increase in RoE guidance now? I mean, what has changed to maybe dampen your enthusiasm a little bit since Q3 on the numerator in this whole RoE equation? That's the first question, please.

Yeah. Do you want to give us both of them, Jonathan, and we'll try and cover...

Yeah. Sure. The second question is on the U.S. Card book. I mean, I can see that delinquencies are flat in the first quarter and, clearly, U.S. books tend to be a bit more seasonal and assisted in Q1. But the formation of new NPLs in your U.S. book is clearly picking up I think, and I'm really wondering at what point would you stand back from your growth target for balances of 10% compound a year over the next few years. And I guess just a supplementary on that, you mentioned economic forecast changes in the U.S. and this is the first set of numbers we've seen where at least sort of changes in IFRS 9 having some impact. Can you give us a sense of the scale of what those change in the forecasts, the impact of that on the impairment charge in Q1 in the U.S. Card Book was, please?

Yes. Sure. Thanks, Jonathan. So, let me take them in the order you gave them. I think in terms of a return on tangible equity guidance, if anything, we're more enthusiastic about our profit objectives than we were when we set those targets. You mentioned a couple of things that are beneficial, obviously, U.S. taxes are, of course, extremely helpful to us and what we've guided you to a lower tax rate, and you've probably flown that through. The rate environment looks still helpful. Currency rates are probably less helpful than we would like, but they'll be what they'll be. So, I think I certainly wouldn't make any suggestion or leave you with any sense that we're any less enthusiastic about our profit objectives. Now, how that translates into a return on tangible equity obviously is where tangible book will be. Now, you're right to call out that the two one-time effects, IFRS 9 and now conduct and litigation and stuff, we have some a sense of and as well as you do. Tangible book, absent those two things, it would have grown £0.07 just from profit redemption. But again, then, we've got two items that are very hard for us to forecast, the currency translation reserve and the cash flow head reserve. Of course, the cash flow head reserve is an interesting sort of item for us because it puts downward pressure on tangible book as rates back up, and of course that helps EPS. As rates back up, you can see how rate-sensitive we are. Asset movements in those sort of reserve items, we don't have the crystal ball on the currencies and rate levels in the future. Tangible book should grow from here principally from profit redemption net of any distributions out to shareholders. And hopefully, you'll…

No, I'm fine.

Yeah. Okay. Thanks. Thanks, Jonathan. Should we take the next question, please, operator.

The next question, Tushar, is from Michael Helsby of Bank of America Merrill Lynch. Michael, please go ahead.

Thank you. I've got two questions. But just before I ask my question, I just want to clarify a point that you made before on that centre. So obviously, there was negative £258 million in the first quarter. You've told us that £90 million of that was funding and you're guiding to £100 million to £200 million of hedge in effectiveness for the full year. So, it kind of implies that there's another big negative in the first quarter unless you're saying the actual hedging effectiveness is extremely small in the remaining quarters. So just to clarify, is that what you're saying or if it's not what you're saying, can you tell us what the other big negative was in Q1? So, it's more of a clarification. And then, my actual questions are on just back to the U.S. card book. I think delinquencies in credit card books are a little bit misleading given the pace of the charge-off that you typically follow. So, I was wondering if you could tell us what the charge off rates were in the U.S. Card book and how that actually changed quarter-on-quarter and year-on-year? And just linking into your PayPal deal, what's the economics of that? How should we think about it, and what's in it for you? And then, it'd be really helpful if you could just give us a comment on the momentum in the CIB as you've gone into Q2? Thank you.

Yes. Thanks, Michael. I've probably not seen more than a couple of questions but that's okay. That's okay. Our Head Office clarification, yeah, it's important that we get this clear for you, guys. So, to your point, Michael, guiding to £90 million a quarter on legacy funding instruments, guiding to £100 million to £200 million for the full year in hedge accounting, and you're right to imply that that leaves a further negative in Q1, which I wouldn't expect to reoccur. That negative in Q1 is really a combination of two things and sometimes it will be positive, sometimes it will be negative. One is actual hedge ineffectiveness which is – there is no sort of predictability around that. We've had positive quarters. We've got negative quarters. But it will be translated to zero. And the net result from treasury operation which, again, we've had positive quarters and negative quarters and net-net translates, it will be zero. So, hopefully, that clarifies for you.

Okay. Thank you.

On the U.S. Cards, I'll just cover that briefly and then I'll hand over to Jes on CIB. And he may want to say something on PayPal. On US. .Cards, the charge-offs quarter-on-quarter, now, I don't think we've disclosed this for Q1, but it won't look that different from full year results. And I haven't got the annual report in front of me, so I'll get someone to refer you back to credit risk losses as we disclose them. But, essentially, it's fairly unchanged, I would say, and still feels a very attractive credit environment for us, but I take your point. I think as we go further, particularly in an IFRS 9 world, we may be more frequent in disclosing net charge-off rates. But in terms of year-on-year and sort of sequential quarter, Michael, it looks fairly well behaved and consistent with the risk appetite that we have when we thought we didn't quite well paid on that risk.

Okay. Thank you.

Jes, do you want to comment?

Yeah. So, on the PayPal, we haven't set out actual economic numbers for The Street yet. But what I would say is given the market share that PayPal has in the UK and the sort of last mile of Payments Plus, we have 10 million consumers in the UK that bank with us electronically and we take our mobile app connected to PayPal, it just has enormous potential for us. So, I think as we work on the partnership going forward, we'll obviously start to give The Street some economic numbers as to the implication. Vis-à-vis the CIB, the comment I'd make there is we had pretty good performance across all three months in the first quarter. So, it was not a quarter made of one month and I'll sort of leave it at that as you think about that business going forward.

Thank you.

Thanks, Michael.

So, just to push you on this PayPal, Jes, enormous is a very big word in more ways than one but, obviously, you're leading this as quite a material new relationship for the group. Is that how we should think about it?

Yeah. I think it's important, yeah, given the scale of PayPal in the UK and given our scale, I think it's important. I don't want to get ahead of myself. And so, more to come.

Okay. Thank you.

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

The next question, Tushar, is from Andrew Coombs of Citigroup. Andrew, please go ahead.

Good morning. Firstly, I just want to come back to the CC&P business. I have a question and request on that one and then a second question. On CC&P, if I look at the provisions Q-on-Q, ever so slight dip, £259 million to £252 million, that's despite favorable effects on that line, you've had the positive U.S. model adjustment that you refer to. So, it does seem like the underlying trend is heading up, which would fit with some of the arrears and delinquency data that you've shown. So, can you just give us a feel of what the underlying increases in that book Q-on-Q. And my request would be, would it be possible to split out NII and fees for CC&P. Currently, you only played it for international. But given you're changing the business mix in that business to a lower risk approach, it would be very helpful for us to see the risk adjusted margin there. My second question is then on CIB, particularly the equity strength. You draw out financing in derivatives. Previously, you said during I think second half of last year, U.S. equity flow derivatives had been weak. You'd lost personnel, you'd replaced them. So, can you just give us an idea of how much of the improvement in equities is because that's come back online versus how much is some of the strategic initiatives underway like the electronic platforms and also, the corporate equity derivatives build that you've got underway. Thank you.

Thanks, Andrew. So why don't I take the CC&P questions and I'll ask Jes to cover the equities point. On your request for splitting NII and fees, lets – fair point and we'll take it onboard and we'll have to think about that, but I understand why that request is there, so leave that with us. On the impairment trends, I think Michael might have touched on this as well and I probably didn't get around to answering it. The impairment build – and we haven't sort of broken out the, if you like, the effects of revisions to economic forecast and the sort of like-for-like, if you like, impairment build. I would say though, there wasn't anything unusual in this quarter. So, I think if you sort of go back onto, if you like, the old accounting standard it would be as you probably would have expected, there was nothing unusual that we'd call out. The delinquency trend which I appreciate somewhat can be a lagging indicators, as much as a predictive indicator were relatively very small pick-ups on a very stable sort of base. And that's how sort of underlying impairment would have looked as well. The book is growing but of course there's a seasoning effect before you get the impairments build on the book. And that seasoning effect, of course, comes with revenues as well. So, hopefully that sort of helps give you some context, and, Jes, do you want to cover CIB?

Yeah. I wouldn't underestimate the impact when you bring new management team in like Tim, like Steve, et cetera. And there is a demonstrable commitment to the business. And then you couple that with the reallocation of risk-weighted assets that we talked about with providing some additional balance sheet. In terms of the electronic trading platforms around equity, that's actually more to come. We focus first on the rates and the currency side. Your comment about activity with corporates is very correct. And we also not only engaged with our traditional buyside clients, but also we're reengaging with our corporate clients and there are a couple of important transactions for us during the course of the first quarter. But I would say overall a lot has to do with our commitment to that business and we're feeling the results of that.

Thanks, Andrew.

Thank you.

Can we have – thanks, yes. Can we have the next question please, operator?

Our next question, Tushar, is from Martin Leitgeb of Goldman Sachs. Martin, please go ahead.

Yes. Good morning. I have two questions and a very brief clarification, if I may. And my first question is on the Investment Bank. And this morning, one of your main competitors, Deutsche Bank, announced they are pulling back out of certain products. And I was wondering if you're seeing further scope for market share gain on the back of this? Is the investment bank currently the size you want it to be? Is this the new steady state going forward, or do you see further opportunities to invest on top what you have earmarked already and to deploy more capital into the Investment Bank? My second question is on London and London property and some of the recent data shows a weakening property market. And I think what's coming out of the postcode lending data is that Barclays is in particular exposed to the performance of the London housing market. Could you share what your expectations are in terms of the London property markets from here and how your book could cope in such a scenario? And, finally, the very brief clarification on PayPal, is this a brand-new agreement for PayPal, or is essentially PayPal switching from one bank to Barclays? Thank you.

So, I'll take the IB question and pass the property question and PayPal one to Tushar. On the IB side, we are very comfortable that the capital that we have allocated to the Corporate and Investment Bank is sufficient for us to be the scale player that we are seeking to be and to deliver the services to our customers that we wanted to. I recently, in an interview, highlighted the CVS transaction and that, given our scale, we were able to write an underwriting check of $20 billion for that deal. The only three banks that have written a $20 billion underwriting check JPMorgan. I think your firm Goldman Sachs and Barclays. So, we have the capital allocated. With additional capital that this bank creates now what we want to do first and foremost is find areas in our consumer business which have the levels of profitability that we find attractive on a risk return basis. As you see we're doing today in the UK around our corporate bank and as we're doing today around our high-quality FICO score, co-brand cards in the U.S. So, we want to put additional capital into those consumer businesses. But perhaps even beyond that what we want to do as we generate excess capital is return it to our shareholders. And that's the real, I think, step function that we have to make. Increase the amount of capital that is flowing back to our shareholders.

And Martin, on London real estate prices, residential real estate. Yeah, you're right, the postcode data shows a fairly, I guess a broad spread of postcode that are showing some declining in-house prices. I mean, for us, our loan-to-value stock is, I think, probably in the very low 60s. And the new production that we do tends to be again towards the slightly lower end of loan-to-value. Now our sweet spot is probably in the 80-ish percent or so. And it's something we pay a lot of attention to. We look at it very closely. We haven't changed really our risk appetite for a number of years. And most of the mortgage activity we have as we've said in the past, a lot of it is re-mortgage business. And that comes through broker channel. So, that's very helpful. And I think interestingly for London when you look at our stock of mortgages I talked about the overall loan to value of being in sort of the low 60s. For London, specifically, actually it's below 50%. So, we feel very well-positioned and still like that business and still prudently write new business. But as you can see from our loan to value stats, we're towards the cautious end of that spectrum. Regards to the PayPal, it's not rotating one bank to another one. This is a brand-new relationship with Barclays. It's transatlantic, as it's in the UK and the U.S. Early days, but PayPal are obviously a very serious player in global payments, we're obviously a very serious player in the UK in payments and increasingly so in the U.S., we're very excited about this tie-up. And I think there's going to be some very interesting business opportunities that we'll be talking about in the future that derives from this.

Perfect. Thank you. Very much.

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

Our next question Tushar is from Jason Napier of UBS. Jason, please go ahead.

Good morning. Thank you. So, the first question was about CIB and I guess, we will come to our own views on where market revenues may well be in the second quarter. But in terms of two of the businesses that I guess notionally ought to be more stable, corporate lending and transactional banking, corporate lending looks to be perhaps suffering a little bit on the FX front and the reallocation of capital. And transactional banking is certainly stronger than I had expected. Could you give a sense as to whether you think the kind of first quarter run rates are dependable for those two items in terms of gearing to FX and to the changes in RWA allocation that you have previously flagged? And then secondly, just to try and be a little bit more explicit on mortgage pricing in the UK. I appreciate you've put on £1 billion in balances in the first quarter, but that looks considerably slower than what you managed in the fourth quarter or the third. Just wonder whether you could talk to whether that is down to flow pricing, whether as confirmed by the likes of Virgin, Lloyds and Royal Bank you are interested in having the market price higher to have a greater volume appetite at least as far as you're concerned. Thank you.

Yeah. Thanks, Jason. In terms of the corporate lending and transactional banking lines, there's actually less foreign exchange exposure there. It's predominantly sterling based, it's really mostly UK clients and we're probably, if not the largest, certainly one of the largest corporate banks for UK businesses, those that are headquartered overseas that need access to sterling markets if it's a (65:25) corporate banking matter as well as domestic funds. The corporate lending line, you're right, has somewhat come down, principally because of rotating capital that's earning a very low return into other parts of the CIB where returns are more attractive. And we've made good progress on there but there's still a little bit more to go. So, there may be a little bit more downward pressure on that corporate lending interest line. Of course, if interest rates back up, there will be some sort of meeting effect there. Transactional banking is a good business for us. One of the things we like when we're talking to these large multinational corporations who – or we've got capital committed out to them we really want to earn a better return is could they give us more transactional banking business whether that's foreign exchange, trade finance, cash management, liquidity management, et cetera. And so, hopefully that business at least stays where it is and begins to tick up over time as well and somewhat driven, of course, by just general corporate activity, but not so much on foreign exchange. In terms of mortgage pricing, I think the key point to point out there is discipline for us. We're not going to chase pricing. We like the mortgages that we do. We like the returns that we do, but we're not going to chase pricing down. And I think £1 billion of net production – a touch lower, there's some seasonal aspects of that, as you'd imagine – we feel pretty good with. We have seen some margin pressure ease somewhat (67:02) from obviously swap rates easing up as well. But also, there's a lot of sort of discussion around with the term funding scheme coming to an end, will that have an impact on asset margin, and that may be driving a bit of it. And, of course, as we see asset margins stabilize or even improve, our returns for new business will continue to tick up and, of course, that'll be very exciting for us. The other thing I'd mention on the term funding scheme, of course, our loan-to-deposit ratio is a touch lower than some of our competitors. So, we probably won't be as – I won't use the word sort of squeezed or so, but perhaps we have a little bit more flexibility around liability pricing, and that may be of some advantage to us as well.

Thank you.

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

The next question, Tushar, is from the line of Ed Firth of KBW. Ed, please go ahead. Edward Firth - Keefe, Bruyette & Woods, Inc.: Yeah. Good morning, all.

Hi, Ed. Edward Firth - Keefe, Bruyette & Woods, Inc.: I just had two questions. One was just a quick one in terms of detail. I just wondered if you could give us the credit risk loan position for Q1. Unless I've missed it, I don't think that's in the announcement. So, that was question number one. And then question number two, I just wanted to ask you about the mix of business because – and how comfortable you are or whether you feel we should see the sort of similar levels going forward, because I think if our numbers are right, I guess around, what, 75% of your profits now come from the investment banking operation, which is up markedly on last year. And I guess sort of related to that, if I look at the business ex the investment bank, that has performed pretty poorly. I mean, I think earnings are down about 30%, something like that. I get what you say about the hedge, but I assume that is – a lot of that is going to be related to the banking operation. And you've now got a cost/income ratio in the investment bank which is below the rest of the group, which I would have thought is almost unique in banking. So, I just wondered if you could give us some kind of idea of how we should look at the sort of non-investment banking piece and how we should see that going forward.

Thanks, Ed. On the CRL, credit risk loan, we haven't put them into the Q1 release. We tend to give price-sensitive disclosures at the full year and the half year. Obviously, with CRLs that will be accompanied by some more information around IFRS 9, probably staging and et cetera. You've seen some of that in our transition document. So, you won't find it in this quarter's release, but I think that using the annual report for now will still be a pretty good reference point and you'll get it again at the interims. Edward Firth - Keefe, Bruyette & Woods, Inc.: So, cover ratios, you – so just to be clear. So, cover ratios you think are broadly flat on the quarter.

Yes, that's right. I mean, we – yeah. Edward Firth - Keefe, Bruyette & Woods, Inc.: Okay.

There's nothing I would call out that's a significant change, yeah. Edward Firth - Keefe, Bruyette & Woods, Inc.: Great.

And your second question around business mix, profit mix, cost/income ratio. Look, I'd say a few comments on that. One is, of course a business like the CIB has tremendous operating leverage. So, as you know, banking is a scale business in most regards, whether it's consumer banking or wholesale banking. And certainly within wholesale banking you can have quite powerful revenue generation over a shorter timeframe that provides very powerful positive operating leverage. I think you've seen that in the first quarter. With regards to the consumer businesses, I think profits are probably on a reported basis down, but I would just – I mean, they're obviously down, but there are some factors there that I wouldn't sort of point to being indicators of where the long-term profitability of those businesses are. So, if you take our UK bank, for example, top line was down but really it was down because we had a gain last year in the sale of the Visa preference shares, that's obviously non-recurring. And we had a remediation item that's actually negative income this quarter. So, underlying income is actually broadly stable and we're pleased with our performance given the asset margin compression that we're seeing year-on-year that I know looks like you guys track very closely. And our Consumer, Cards & Payments business, of course, you've got some fairly meaningful top line reductions, one driven from the one-off factors and the sale of the subprime portfolio as well as the income loss from the sale of that subprime portfolio, although the impairments, of course, would be very high as well there, as well as currency rates that bring that top line down. Underlying income actually in CC&P (71:41) base is actually up 6%, and of course we're growing that business. So, I think I wouldn't sort of just take this quarter and extrapolate out. I think there's a different balance to the group when you look into some of these effects. And the other thing I would say, we are growing the consumer business. There is new capital going into both the UK business and the CC&P business and that's something we're really keen on developing over time. So, (72:30)... Edward Firth - Keefe, Bruyette & Woods, Inc.: If I look at the – sorry, if I look at the non-CIB business, you made, what, £600 million in the first quarter last year and this quarter you made £400 million. And I'm just trying to get a sense as to whether we should – is that the sort of reduction that we should expect for the rest of the year?

Yeah. Look, Ed, I'm not going to give you a profit forecast obviously. Edward Firth - Keefe, Bruyette & Woods, Inc.: Sure.

And you probably weren't asking for that anyway. But I'd just encourage you to look through how we think NIM will develop, look through how we see the growth of CC&P develop, look through how we see the balance sheet of the UK business develop, the rate environment (72:50). So, I guess what I'm saying is we're actually quite optimistic about that business. I'm not going to give you profit guidance on that and I know that's not what you're looking for. But, hopefully, you're getting a sense from us that we like our positions in those businesses and we're looking forward to growing those businesses over time. Edward Firth - Keefe, Bruyette & Woods, Inc.: Sure.

The only thing that I would add, Ed, is going back to March of 2016, the foundation of the strategy is to have a diversified business model and we want to have a balance between our consumer business and our wholesale business. We think that is the safest platform with which to run a scale bank like Barclays. And we want to deploy our capital in a way that gives us the proper balance. And any one quarter might swing one way to another, but the overall objective is to be balanced between our consumer and wholesale businesses. Edward Firth - Keefe, Bruyette & Woods, Inc.: And so, I know it's just the first quarter. So, Jes, would you feel that the sort of 74% coming from CIB is perhaps sort of overweighted this quarter – it normally is, I guess, in the first quarter towards the CIB, and we would expect a more balanced look through the rest of the year? Is that a fair assumption?

I think it's fair to repeat what I said before which is that in terms of new capital allocation to businesses, right now, we would be putting that new capital into the UK and U.S. consumer businesses. Edward Firth - Keefe, Bruyette & Woods, Inc.: Right. Thanks very much.

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

Of course, Tushar. The next question is from Christopher Cant of Autonomous. Christopher, please go ahead.

Hi. Thanks for the call. Two, please. If I could just push you on the earlier question on P&L per share coming down. You target 13% CET1 and you're at 12.7%. So, 30 bps of CET1 on your current RWAs will be about £1 billion of extra TNAV about £0.05 per share. That would get you to £2.56 per share. Even allowing for the unwind of the IFRS 9 transitioning which might be about another £1 billion over time, I just don't see how you would get anywhere near the old greater than to £2.81 per share guidance given your CET1 target unless you're planning to run meaningfully above 13% on CET1. And I understand that rates for driving cash flow hedge impacts which are hard to forecast quarter-to-quarter, but you were anticipating rate moves when setting your targets back in 3Q, you were expecting some rate rise benefits to come through. So, it feels like there is some offsetting negative on the numerator in terms of just reiterating rather than improving your RoTE guidance. And I get that you're stressing the more than 10% for 2020, which gives you scope to do better. So, it would still be the correct target, but why is it not also more than 10% in 2019 given the tax rate benefit from the roughly 10% decline in TNAV? What's your expectation at the 3Q stage?

Yeah, Chris. A couple of points there. I think on the rate wise, it's actually the long-end of the curve that really affects the cash flow hedge reserve rather than sort of short rate. And that's obviously trickier to forecast. And yeah, we don't have – probably no one have the crystal ball on that. And as we said before, we like rates backing up generally if it's a good economy because that's more profitable for us. In terms of capital ratios, you sort of landed precisely on 13%. We've always said around 13% and we'll keep you updated as to what that level needs to be. Obviously if it's – we don't need to run any more capital than we need to, but I wouldn't necessarily just leave it at 13%. Although, I take your point that that's where the returns guidance was struck off (76:25). To the extent we generate additional capital over and above that we need to maintain our reg ratios. I think what we do with that capital that could also be accretive to both earnings and tangible book value. For example, if we were to repurchase shares that, obviously, would change TNAV as well. The point I really wanted to make at those when we talk of sort of step back if you just look at consensus generation of profits from here and not my number sort of just published consensus for the rest of the year and next year net of sort of, if you like, preannounced distribution. You get a much higher tangible book value than we have today. And that's how we think about where we believe the profit generation potential of the company is. And you're right to point out that we have some good tailwinds from U.S. tax rates possibly from interest rates. And we'll see where FX rates go. So, rather than trying to be too precise on modeling the sort of quarter in, quarter out, I think it gives you a sense of where our ambitions and profit objectives are for ourselves.

In terms of the consensus TNAV building, I mean know you didn't publish a consensus TNAV with the most recent consensus, but you did publish capital and consensus as you're building capital of 13.9% for 2020, which is obviously a long way above the circa 13%. I think that would be stretching the bounds of circa 13%. So, that doesn't really seem to square off with what you're telling us in terms of how you're calibrating your RoTE target.

You're right. 13.9% is I wouldn't call that around 13%. It could be more like around 14%. But I guess I'd go back to, Chris, what do we do without excess capital if we were to reduce share count. Obviously, TNAV will change but – and if we have a lower TNAV, then we had when we were striking our target, we don't have any changing view about profit potential. If anything, a higher degree of confidence, given things that you mention for example U.S. tax rates, we expect returns to be better. But hopefully that gives you the context.

Okay. Thank you. And as a second one, could you please give us a sense of how much of the current £1 trillion of leverage exposure relates to the CIB please? And an update on how much would be the additional £50 billion of leverage capacity has now being deployed?

Yeah. On the first one, let me put that in the request bucket. I understand why you've loved to see that and we'll consider that point. The £50 billion of leverage is largely deployed unlike risk weighted assets that are quite a great think to put to work. Okay?

On the CIB leverage though, I mean, if I think about your sort of relates the tangible equity point, you're reporting at 13% RoTE for the CIB today and that's based on about £30 billion or £20-something billion of allocated capital. If I think about what you said on leverage in the past that, at the Analyst Breakfast post-4Q, you said you expect the group to run with about 5% leverage ratio, that sort of ballpark. If we say that the CIB is about £800 billion of leverage capacity which, given the total assets for BBPLC are about £900 billion per slide 43, it feels like a right sort of ballpark. I appreciate I might not be getting that quite right, but the right sort of ballpark. I would imply much higher level of allocated capital for CIB on the leverage basis than you're using to your 13% RoTE statement.

Yeah. So, we think of leverage, Chris, as I've mentioned in the past, very much, much as a backstop, not a frontstop. We will run the company and to be constrained on CET1 and that will be our primary measure of sort of bringing allocation of capital that's why we've sort of allocated enough, like 13% CET1. We have a diversified set of businesses in Barclays International, the legal entity and that allows us to optimize leverage capacity accordingly. Obviously, we have some consumer businesses which are very underleveraged but actually have a very high risk-weighted assets density and a bunch of wholesale businesses which obviously consume more leverage but generally lower risk-weighted assets density. We tend to use leverage in the aggregate as a backstop measure and CET1 is a frontstop measure. So pretty comfortable with the way we're allocating capital and therefore striking our returns. And the BI entity as a whole – yeah, Chris, the BI entity as a whole obviously on that measure add a comfortable double-digit return. Hey, Chris, just a bit conscious of trying to get others on the call as well. So, I know we're meeting later on. So, I appreciate your questions and we'll definitely spend more time with you when we have the usual breakfast with the analysts if that's okay.

Thanks.

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

Our next question, Tushar, is from Robin Down of HSBC. Robin, please go ahead.

Good morning. Obviously people have been exploring the TNAV development, but can I just explore the Core Tier 1 development from here? I guess on the numerator side, are there any sort of one-offs or things that we need to be aware of going forward? I guess you'd probably take a hit if you call the preference shares, you'll still have (81:55) prefs in a few weeks but anything beyond that. And then, on the RWA side, my expectation was that BarCap RWAs would be kept broadly static with reinvestment out of the last corporate book and into the market business but obviously, the RWAs are moving up, I think the market RWAs were up reasonably noticeably within Q1. Can you give us some color about how you see that developing? Is that the function of sort of volatility we had in Q1? Will some of that come back or do you expect further growth from here? Thank you.

Yeah. Thanks, Robin. On the uses of capital, yeah, where we to retire the U.S. dollar preference shares, we'd have to pay for that from capital as we've done it the past. So, we may or may not choose to do that as well as any other sort of perhaps a fair liability step that we take actions those that we do periodically. Not so much on the numerator, but once again, we've got the deconsolidation of Africa. That will be accretive to the ratio. In terms of other negative adjustments, though, I don't think too much on the horizon apart from discretionary uses of capital around things like LME. You mentioned BarCap for RWA. Just to remind folks, we don't really have a BarCap...

Sorry.

(83:25) it's CIB...

I'm stuck in the past.

Yesteryear. It's funny how names stick.. But, yeah, I know you mean the CIB. Think of CIB RWA, if you look at it year-on-year, Q1 2017 to Q1 2018, they're actually about flat. But if you look on sequential quarter, typically, we use more RWAs in the first quarter. It's just a busier timing market, and it's seasonally quieter timing market towards the end of the year. So, yeah, Jes just mentioned a number of times, CIB, RWA, and capital will stay where it is. But do expect the consumer businesses to be ticking up over time.

So...

I know it's been going for...

...should we expect the RWAs...

Yeah. Sorry. Go on, Robin.

All right. Should we expect the RWAs to come back then a touch in the markets business in Q2?

Yeah, look, I don't want to give quarter-by-quarter guidance but broadly stable on a year basis, definitely no net growth as we look on a trend basis.

Great. Thank you.

I know we're coming up to about an hour and a half. So, shall we – and I think we've had a change to go around most people – should we make this the last question please, operator?

Our final question this morning, gentlemen, is from Tom Rayner of Exane. Tom, please go ahead.

Thank you. Thank you very much. It was an honor to be last. I just wanted to come back really to the CIB and comments, Jes, you made about the cost-income ratio at 64% leaves you competitive, gives you the scale to generate the sort of returns you need to make. Clearly Q1 is a strong revenue quarter certainly for the IB part of CIB and there is very much a mix if we – if you actually disclose the costs, I think we'd be able to see quite a difference between the cost/income between the Corporate and the IB or as Robin likes to say, the BarCap part of the business. I'm just trying to get a sense about how happy you are with the progress you've made in dealing with the costs and controlling the costs within what was the stand-alone investment bank part of the business? And then just as a supplementary just on the revenue. I mean, looking through your commentary, it looks as if the main positive versus perhaps expectations in Q1 was the equity derivatives driven by better sort of higher volatility and I think other investment banks have suggested that that was really a January-February phenomenon. By March some of that have already unwound. And I just wondered if that was something that you also saw that the real driver there had tailed away by the end of Q1. Thank you.

Yes. So let me make a couple of comments. One thing that we sort of feel very good about is we took a quite a significant economic charge at the end of 2016 in order that we could align our comp accrual with our revenues. And I think given the volatility of CIB, having the ability to move your accrual – compensation with your accrual of revenues, I think, is very important, and we did that in the first quarter. So, we had a very nice revenue print in the CIB and we reflected that in the cost line. And I think that reinforces our comfort with the cost-to-income ratio that we see in that business. The other thing I would add is, we also stood up in the first quarter our service company that we call now Barclays Execution Services. The 82,000 employees of the bank – now, 55,000 are in that service company where we run processes through what we call transaction cycles across the entire bank. So, how we manage data is managed in that – in Barclays Execution Services across the consumer bank, the card business, the private bank, the wealth business, the corporate bank, and the investment bank. And running your core processes across the bank in a single entity allows you to extract very significant efficiencies and we look to extract those efficiencies now and in the next couple of years. So, it is what in fact is driving to that cost target of £13.6 billion to £13.9 billion in 2019. So, we've got greater correlation between comp and revenue. We also have efficiencies coming out of that service company, which we think is a unique organizational model amongst major banks. And I'd leave it at that.

Thanks, Tom. And thank you...

And – sorry, Tushar, just on the revenue and driver of the equity derivatives volatility issue.

Oh, right. Yeah. Yeah. So, I think as Jes mentioned earlier in the call, obviously, there was more volt in markets in February, and that's helpful to our business. But, I mean, Jes has mentioned earlier in the call that we sort of had a sort of steady performance across all three months rather than sort of one month making the quarter. And I hope that gives you the context. It's obviously not talking about Q2 trading.

No.

I won't say any more than that, but hopefully that's helpful.

Okay. Yes. That'll be it. Thank you.

Okay. Thanks, Tom.

And thanks, everybody, and so many of you, hopefully, we'll see on the road over the next couple of weeks. Thank you.

Thank you. That concludes today's conference.