Good morning, everyone, and thanks for joining the Second Quarter Earnings Call. The results we post today show a business which is performing well, having addressed the challenges of the last decade. Once again, we have shown progress against our strategy across the group and significantly. This is the first clean quarter we have reported in quite some time. In this quarter, there are no significant litigation or conduct charges. There’s no restructuring charges. There’s no cost to achieve, no Non-Core adjustments, no other exceptional losses which hit our profitability. This is therefore really the first sight of the performance of the business which we have reengineered over the past 2.5 years, Barclays transatlantic consumer and wholesale bank. And it is a positive sight. Our group return on tangible equity for the quarter was 12.3%. This was produced from revenues of £5.6 billion for the quarter, which were up 10% on the same period last year. Profit before tax was £1.9 billion, and profit after tax was a little over £1.4 billion. We grew our equity with TNAV of 8p in the quarter to 259p. And our CET1 ratio was increasing from 12.7% at the end of Q1 to 13%. It’s worth noting that the group generated a gross 44 basis points of organic capital in this quarter alone, which demonstrates the capital generation capability of the bank. We’re also pleased to declare an interim dividend of 2.5p today. And it remains our intent to pay 6.5p for the full year as we begin to increase the return of excess capital to shareholders. We were delighted to pass the CCAR stress tests of our U.S. holding company in June, an outcome which shows just how far we’ve strengthened and improved our controls, modeling and risk regime over these past two…

Thanks, Jes. As usual, I’ll focus on the Q2 results rather than H1. We continued to progress, as we reported last quarter, towards our objective of double-digit return for the group, as we reported a group RoTE of 12.3%, excluding litigation and conduct. There were no material negative one-offs in the quarter to bring to your attention. There were, however, a couple of positive one-offs in income that we disclosed totaling to circa £200 million, which are shown on the usual slide in the appendix. In the rest of my comments, I’ll exclude litigation and conduct from the income statement metrics, in line with our financial targets framework, but would note that the charge this quarter was just £81 million. Attributable profit was £1.3 billion, generating earnings per share of 7.8p. Income was up 10% overall despite the effects of the weaker dollar, partly reflecting the non-recurrence of the Non-Core income expense reported in Q2 last year. Costs were down 3%. This resulted in positive jaws of 13% and a group cost-income ratio of 59%. And in Q1, we reported significantly lower impairments, down 46% year-on-year, including further single-name recoveries in corporate lending; and the effects of changes in expected loss inputs reflecting IFRS 9, notably in U.S. cards. In terms of underlying credit conditions, delinquency measures were reassuring in all key areas, including a downward sequential move in U.S. cards in the quarter. The effective tax rate for Q2, allowing for litigation and conduct, was around 23%, but we are still guiding to a full year rate in the mid 20s. In Q1, which included significant litigation and conduct, we reported healthy accretion in both the CET1 ratio and TNAV in Q2, with the CET1 ratio increasing from 12.7% to 13% and TNAV increasing by 8p to 259p. With…

[Operator Instructions] So our first question today, gentlemen, comes from the line of Joseph Dickerson of Jefferies. Your line is now open.

Hi, good morning gentlemen. I just actually have a very quick question on the outlook statement and some of the guidance. So on – you mentioned the lower volatility in July. I guess I was surprised that you made a comment on the current quarter. I was trying to understand why you might have done that given that presumably, at least if we looked in the past 24 hours, volatility seems to have picked up, so any steer as to why you chose to call that out about the July volatility? And then secondly, on the costs, I guess something changes. Why didn’t we perhaps have a discussion of this at Q1? And how can we think about those costs being deployed into the Investment Bank, in the payback? And the timing of payback we might expect on those given that, I think, some prior investment last year of – in similar systems seems to have paid off. So any discussion on how to quantify your investments that you’re making now. That would be great. Thanks.

Yes, thanks, Joe. It’s Tushar. Why don’t I take those two questions? Yes, I wouldn’t sort of read too much into our statement on lower volume in July. It’s just a factual statement, not the price bottom. And obviously, as we pointed out on the first day of August, maybe it’s a little bit higher already, but it’s really just a comment on what others are seeing, which is that price volatility has been a little bit lower during the month of July. And that’s just something to bear in mind when you think about how the industry may perform. We obviously feel actually very good about our Markets business. I think you’ve seen in our relative revenue performance that we believe we’ve taken a bit of market share again in the second quarter after taking some market share in the first quarter and in the fourth quarter. I’m really pleased with our performance in Equities. And also, even in fixed income obviously we didn’t participate from the – what appeared to be the buoyant conditions in commodities we – with no longer a significant share in our business. But excluding that, we actually feel very good with our performance. In terms of costs, we – it’s the first time we are giving guidance for costs for 2018. Our guidance for 2019 is completely unchanged, so no new news there. On costs, I will say a few things. Firstly, just to remind everybody costs will be down this year relative to last year, were down previously and will be down in 2019 relatively to 2018. And within that, we no longer call out restructuring charges and costs to achieve or any other forms of onetime expenses that allow us to create capacity to invest. So whether it’s branch closures, whether it’s real estate – Jes talked about in his opening comments our new Glasgow campus and new Whippany campus. The costs of setting all that up, the costs of moving people there is all included in our cost numbers. And that cost number is lower year-on-year-on-year, but the point we want to make across is – get across is we’re very good at creating the capacity to invest through the use of our service company; and allowing us to invest, for the medium-term benefit of the company, in products and services, in core infrastructure, in cyber, in resilience, in digitization while at the same time costs continuing to come down and revenues continuing to go up. So hopefully, that gives you a bit more context.

Let me just add, Joe, that – so now that we’re behind the restructuring, whilst we will continue to run this bank more efficiently, as Tushar say, we will take costs down sequentially. When we deliver the level of profitability that we delivered in the first half of this year and we can use the management of costs, which we now have under control, if we can use that management to make intelligent investments to drive further profitability, we’ll do that. I mean we have a business that in the first six months delivered over 11% return on tangible equity. And focus cannot be relentlessly on costs when we have that level of profitability.

I got it. Thanks.

Thanks Joe. Can we next question please, operator?

Our next question on the line comes from Guy Stebbings of Exane BNP Paribas. Guy please go ahead.

Thanks. The first question was on U.S. card impairments, clearly very low in the quarter. Risks fell in Q1, sort of highlighting reassuring trends, but would you be able to give any sense on how card impairments or perhaps the flow of delinquencies in the book phased over the period? As I believe tax rebates can distort the picture a little bit. And some of your trust data has suggested a pickup towards the end of the period. I just wondered if that’s reflective of the wider trend. And also, I think you might – you said that you exited a partnership in Q2. Did that have any impact on the EBIT level? That was the first question. And then secondly, are you able to clarify the comments and guidance around NIM and income in Barclays UK, that you’re comfortable with expectations for income? Is that in reference to 2018 or beyond as well? Because obviously pointing to an exit NIM in a year below 3.20% is suggesting that volumes or – need to pick up. So some color there would be very useful. Thanks.

Yes. No problem, Guy. Let me take a stab at both of them. U.S. cards impairment, yes, you correctly pointed out that delinquencies were down quarter-on-quarter. And that’s really a function of the risk mix actions that we’ve been taking. You’re probably aware that we sold a very low-FICO-score portfolio at the beginning of last year. And we’ve been prioritizing growth in our airlines partnerships, so whether it’s American, JetBlue, Ryan, Frontier. That’s been we’ve got a good portfolio for airlines, and they’re actually growing real well. So just that change in risk mix improves sort of the credit dynamics. We did also see some actually probably higher-than-anticipated paydown of certain card balances in the second quarter. It seems very coincidental with the U.S. tax season. It’s very hard for us to obviously join those dots together, but it seems sort of timing coincidental with that then. And that also improved the quality of our book. Now of course, those paydowns wouldn’t necessarily, I expect, to reoccur on a tax season at a point in time. And I’d say, over the second half of the year, you’d expect revolving activity to probably increase, as it usually does seasonally, particularly into Q4. And that will be associated with impairment billed. We did have, I think, as a consequence of the things we talked about in Q2, probably a "lower than a sort of typical run rate" impairment quarter in U.S. cards, but probably a more typical number may be a little bit higher than maybe Q1. You talked about the partnership sales. Yes, that’s a portfolio we’ve had for some time. It just didn’t meet our returns requirement. It’s actually a very sort of prime portfolio in that regard. It just wasn’t a very profitable partnership for us, so we moved on from that. NIM in the UK, just a couple of words on that: Firstly, we actually feel very comfortable with income levels in 2018 and, for that matter, into 2019. We’re talking here about ensuring that we’re maximizing net interest income at attractive returns rather than just trying to achieve a particular NIM objective. You’ve heard us talk in the past, and we continue to emphasize, growth in our secured lending book. We’ve increased net lending in mortgages by a further £1.6 billion this quarter, plus £6 billion over the last four quarters, while actually not growing our unsecured lending book. So just the way NIM is constructed, you will have that reflected in as secured balances grow and obviously our balances then grow. The other thing I’ll just point in – point out, that – and hopefully, you got it from the script. .:

Given that we want to be prudent given the uncertainty of Brexit, it’s a conscious decision to slightly change the mix from unsecured to secured. So that is being driven by us, as opposed to market.

Thank you very much.

Thanks. Can we move to next question please, operator.

You certainly can, the next question on the line comes from Andrew Coombs of Citigroup. Andrew please go ahead.

Good morning. If I could follow up on costs and then one on the CIB business. On costs you talk about a decline to £13.9 billion this year, but a lot of that decline is due to the FX tailwind that you’re seeing, so what does give you confidence that the cost saves will be more than that to offset the investments going forward into 2019? And then my second question is just on CIB revenues. The corporate lending revenues, £198 million in the second quarter, are down about £100 million year-on-year, so similar to the improvement in Markets. Is the repatriation of RWAs between the two now done? Is this a new base level for corporate lending, or would you expect it to fall further from here still?

Yes, thanks Andrew, let me touch on cost and I’ll do one comment on commercial lending, I think Jes will add some more to that. On costs, yes, look, we are very, very confident in our ability to continue to manage the cost base of the company down – we’re targeting a cost income ratio of sub-60%. We did achieve that in the second quarter but that’s obviously an annualized rate that we are targeting which is inclusive of things like the bank levy, which is seasonally in the back half of the year. And the way we are able to do that is – and don’t forget, the other thing I just remind folks, it is an all-in number, so we are not calling out restructuring charges or costs to achieve or various other charge-offs, it’s an all-in number, and we are able to do that because we’re able to generate very large gross productivity savings, which we have discretion to plow back into the company and it gives us some degree of flexibility. And so our confidence in continuing to be very efficient and drive that cost income ratio down is very high. Just on commercial lending, you’re right, it’s a last I would say just a couple of sort of technical points to bear in mind before I hand over to Jes. You do get the fair value of hedges against the portfolio running through that book, and that’s quite a meaningful component in this quarter’s number, that will be what it will be in subsequent quarters. So it probably looks a bit starker than – it’s probably what’s really going on, but Jes will maybe talk a little bit about where we are in commercial lending?

The only thing I’d add to what our cost income ratio in the second quarter was 59% - was the major target we set out for ourselves. I think if you compare that ratio with similar firms to Barclays, I think it does underscore that we’ve got this bank to a reasonably good place in terms of its cost efficiency, but more to come. Under commercial lending, in terms of the redeployment of the $10 million worth of risk-weighted assets, we did that pretty much in the second half of last year, and we are effectively done with that. It still needs to get improved profitability across that Corporate loan book, but that is going to take some time because we’ve got to make sure that people are driving transaction businesses through our Corporate bank. It’s a long discussion you have with very important Corporate clients. We are quite confident that we can get that over a period of time back in the double digits.

Thanks Andrew, here the next question please, operator.

Our next question on the line, gentlemen, comes from Andrew Simpson of Bank of America Merrill Lynch. Andrew, please go ahead.

Thank you very much. Hi, guys thanks for taking my question. First one is going to be on, similar to the last question, the second one on U.S. credit cards. Tushar, can you quantify what this fair value effect is in the Corporate lending line, please? Is that about half of the decline? Or any sort of guidance there would be very much appreciated, trying to gauge what the recurring number would be in that line, I think, please? And then on U.S. credit cards, is that still a growth business now? I know there was a portfolio sale in the quarter, so you’re up year-on-year underlying, but even adding that back it, and it doesn’t look like there was much gross quarter-on-quarter there? Thank you.

Yes, Andrew. Yes, it will bounce around a bit, but it’s probably about 2/3 of the decline. It’s explained by just the hedges moving around and it will obviously change in the quarter. U.S. Cards business is definitely a growth business for us. And we talk about underlying growth, just to give you a sense of the currency rates and various other things staying on there we’ll continue to take risk management actions to – as we did last year with – we want to reposition the books. But it’s definitely a growth business for us. The thing that we are really excited about the Cards business in the U.S. it has a few characteristics that’s very attractive to us. One is, although receivables are larger than they are compared to a UK card business, as a market share matter, we are still relatively small, somewhere around the two-or-so percent market share. So you can comfortably grow your book and keep very good credit controls when you’re still relatively small in the U.S. market. So that’s one thing. The second thing is the U.S. economy, we feel very constructive on. You can see the macro data coming out of the U.S. and everything that we’re seeing you can link them to is actually down slightly for us in our Cards portfolio. And the other thing that we like it about a lot is the partnership business is something that we believe we have an edge in. We have grown that business quicker than the market has grown, and we like to continue that. We are cautious, as you’d expect us to be, when you’re growing an unsecured lending book. We are very focused on risk metrics, and you’ve seen us take actions last year when we wanted to get the position back to where would prefer it, but we are very much keen on growing it and confident we can do. Is there anything you want to add to that, Jes?

The American Airlines continues to be very strong for us, balances where up 10% year-over-year. JetBlue is doing exceptionally well, those balances were up 33%. And then remember what we like about the partners – our core brand business, 70% of that book is under signed contract until 2022. So it’s got great stability to it. There was probably 6% this quarter, and we are still confident that over a couple of quarters, we can maintain a 10% year-over-year growth rate.

Thanks.

Thank you. Do you have next question please, operator?

Of course we can. For our next question, gentlemen, comes from Claire Kane of Crédit Suisse. Claire, please go ahead.

Hi, good morning. A couple of follow-ups, please and then one other. Just on the U.S. Cards, sorry, Jes, I can’t hear you so well, but are you still committed to the 10% net growth in balances even adjusting for any of these portfolio sales or partnership losses? I mean those ones flagged to that pool. And just to say, on this recent sale, is that deal closed? Is there any risk that, that gain you’ve booked this quarter could reverse later on this year? And then a second question, your comments around the Corporate lending reduction this quarter, given the RWA reallocation is largely done and we obviously have those hedging effectiveness losses. Can we now expect that business revenue to grow from here? And then finally, just given the capital now at 13%, are you looking perhaps to do the share per buy – the per share buyback this year rather than next? Thanks.

Let me just – yes, we are still comfortable with our 10% year-over-year growth rate in receivables in the U.S. Card business. So and what I spoke to was how well we’re doing with people like American Airlines and JetBlue and how stable the contracts are that we have in that business. So yes, we are still comfortable in that underlying growth trend. I’ll pass on the capital issue to Tushar.

Yes. And just the other point also, the small point you had, Claire, on the closing of the deal, yes, there’s – the accounting for that has taken place, so nothing else I’d call out there. In terms of – let me answer the question on the capital position and I’ll come back to commercial lending. Look, the capital position, we feel good that we are back to our end state, obviously we took a bit of a dip because of the settlement with the Department of Justice, but you can see our tangible book value and our capital getting back to levels of which we would like it at. 6.5p: As well as thinking in about other efficient forms in which we can get capital back to shareholders. So that’s probably one for later on. In terms of commercial lending, the objective function here is the returns as much as targeting revenue growth. In some ways, if I look at probably the issues of the past is by focusing just on top line in commercial lending, we would probably have a situation that we have at the moment where we weren’t focused enough on returns. But rather than guide you to expect commercial lending revenues just to improve, I think between Jes and I, we are much more focused on getting commercial lending returns up. And that will be continuing to ensure that the capital allocation to that business is generating the most productive return or to put that capital to a better use.

Great, thank you.

Thanks Claire, can we see a next question please operator.

Of courser. Our next question on the line, gentlemen, comes from Martin Leitgeb from Goldman Sachs. Martin, please go ahead.

Yes, good morning. For my side two questions, please. And the first maybe for Jes. The word Brexit doesn’t feature in the presentation, I think it’s on Page 44. One has to read up to into the fixed income appendix to get to it, which I found surprising. I just wanted to ask you, given where the progression of the Brexit negotiations to date, how concerned are you with regards to Brexit, maybe on a scale to one to 10? And then the second question on Equities and Equities’ particularly strong performance this quarter. Could you shed a bit of light on where the strength in Equities is coming from geographically? And then I think on the slide you referenced that in terms of U.S. revenue, you see yourself as the number one European Investment Bank now. Could you elaborate whether this is equities investment banking driven? Thank you.

So first on – thanks, Martin. First on Brexit, I think of Brexit within the context of other restructuring that the bank has had to face, whether it was setting up the IHC in the U.S., which was a very significant undertaking and then the, obviously, enormous lift of setting up the ring-fence bank in the UK. So strengthening our existing bank subsidiary in Ireland and then redomiciling our – or relicensing the branches across the UK, across Europe, whether it’s Frankfurt or Paris, that’s a much easier task for both the IHC and the ring-fence bank was. So we are preparing for whatever eventuality comes out of the Brexit negotiations. We want to make sure that Barclays can continue to do whatever business we do in Europe, European clients tomorrow that we do today and feel that we will have the legal structure and the financial structure to allow us to do that. I think the issue about concerns, vis-à-vis Brexit, is really with respect to the fact that probably our single biggest risk as a bank is the beta exposure to the UK economy. And obviously, if Brexit leans heavily on economic growth in the UK, we are going to feel that impact. Now what we do, like our strategy of being transatlantic, is we have over 40% of our business in the U.S. right now. It’s an economy, as you know, is growing quite well and there’s a lot of activity there. So we are – I’m not going to talk where we are on scale of Brexit, but I don’t think that risk is really to the Barclays’ business model. I think the risk is simply to what it may or may not do to economic growth in the United Kingdom. In terms of the Equities business, it’s pretty broadly aligned. Geographically, we are principally in New York and in the UK Cash equity flows were good. We rolled out during the quarter a new trade routing system, which I commented on, which has increased quite handsomely the volumes in electronic trading for us. As part of the redeployment of risk-weighted assets last year, a good portion of that went to our equity financing capability, where we are financing the balance sheets, mutual funds and hedge funds. And I think we’ve picked up good market share there. And then our flow derivatives business, particularly with corporate clients, we’ve had a very good couple of quarters there, and kudos to the team. What I do want to make clear, it is not positioning or taking risks to any degree different than what we have in the last couple of quarters. So it is flow business, it’s driven very much in flow derivatives and in equity financing.

I think your final question, Martin, was on just dollar revenues and rankings. I mean, we’re really referencing the Dealogic investment bank fee tables where we’re the best performing, if you like, non-U. S. bank in the Americas. A little bit harder to do insolent trading revenue, you don’t get quite the sort of the market share, volume share. So when we look at, sort of, a coalition survey that we get in somewhat a little bit in arrears, I think it’s clear we are consistently taking some market share over at least the last threee quarters, and that’s what we would like to continue to do.

Thank you Martin. Could you have the next question please, operator?

Of course we can so the next question today, gentlemen, comes from Christopher Cant from Autonomous. Chris, your line is now open.

Good morning thanks taking my question. Also two if I may. You mentioned, Tushar, that capital won’t improve evenly due to investment. It felt a little bit like you were perhaps guiding...

Hi, Chris, sorry, just a touch hard to hear on the phone. Do you mind just maybe speaking up a bit.

Let me start again. Is that better?

Yes, that’s great, thanks.

So you mentioned, Tushar, that capital won’t accrue evenly due to investment and it felt like you were perhaps guiding to a bit more of a capital drag in the second half. Should we be assuming as faster intangibles build for the rest of the year? I know that, that didn’t really change much in the first half? And then secondly, the UK payments regulators announced a review of merchant acquiring, seemingly in response to concern that exchange cuts haven’t been passed through in full. Could you please let us know how much of your Consumer, Cards and Payments revenue was actually payments-related? And how much of that do you think might be at risk in relation to changes to the merchant acquiring regulation in particular? Thank you.

Yes. Thanks, Chris. Yes, the comments around capital over the year is just – just to remind people that we have been steadily accruing capital, I mean, the last several years now at about somewhere around 100 or 100 plus basis points as we restructured the company and generated organic earnings as well as paid a bunch of fines along the way, but we haven’t done that linearly. So it’s just to remind people that capital doesn’t necessarily accrue linearly, and we want to prioritize utilizing that capital for productive uses as well as accreting it. The other thing, just to remind people, is that we do include against our capital ratio with each quarter a foreseeable dividends. You saw that on the slide under the pension contribution in Q3, you’ll see that on the slide as well. So somewhere in between, I think that adds up to something like 18 basis points or something like that, will go out from our capital base in Q3 and that will be offset by, obviously, profit generation and in other moves. So just – really just to remind people of the dynamics there. But the big message is that we’re still with the right capital place for the group. And as Jes has mentioned in the past, I think as we continue to generate capital above this level, we like to get that back into shareholders’ hands in some way, form or another, starting off with a 6.5p dividend. Your question on the UK payments regulator, yes, we haven’t called out the amount of income coming specifically from our payments business. It’s something – just trying to be helpful, we’ll think about doing. I think it’s a little bit early to quantify what effect that review will have, it’s a little bit hot off the press and no doubt there will be quite a period of time. We believe, though, that we have been very, very fair to our customers, particularly I think that particular review was talking about rather smaller customers and clients, and they got a raw deal from merchant services providers. We’re, obviously, an important participant in that market and believe in ensuring that we’ve being fair to all of our stakeholders, both our customers as well as various other stakeholders in that business. So we’ll see where that goes, but nothing I’d draw attention to as yet.

Okay thanks.

Can we ask next question please operator.

Yes sir. The next question on the line comes from Ed Firth from KBW. Firth, please go ahead.

Yes, good morning all. I just have two questions. The first was just coming back on these, the costs for the second half. It looks like you’re signaling reasonably material negative jaws. And I’m just trying to think, is it possible to give us some sort of quantification of what this investment spend is and where it might fall? I mean, should we imagine that, for example, the IB costs will grow in line, will move with the revenue, I guess, so we’ll see that flexibility? Or is there still some investment that might cloud that? So I guess that was question number one. And the second question was just on the share buyback. I notice you’ve dropped the share buyback comment, having repeated it in the last two set of results. Should we read anything into that? And I guess particularly in the context of your comments around prioritizing investment. And I suppose there’s also been a lot of speculation around M&A, et cetera, and I think in the past you’ve highlighted that your own shares were probably the best value, but I guess this speculation is often focused around a stock arguably even cheaper than yours. So how do you see that and what sort of comments can you make on that as well?

Yes. Thanks, look, why don’t I start on cost and Jes will talk on, sort of, capital distribution. Cost in the second half, it’s the first time we’ve given guidance, and just – it’s to help people think how we’re thinking about cost shape obviously we’ve got the bank levy coming into the fourth quarter, and you’ll see what that is. Just as a reminder of that seasonal effect. The investments that we’ve been making, we believe, are paying off. You can see that in our income line with very strong positive jaws in the first half of this year. Now the revenue line won’t always be linear, but look at the improvements that we are making in products and services in our UK bank, in our U.S. Cards business as well as some of our Markets business. And it’s an ongoing journey. I think it’s important for a company like ours to continue to have the capacity, to continue to invest. And that’s really all that’s going on there. And again, I would just like to stress to folks that we are able to do that while paying for everything. It’s an all-in cost number. There is no restructuring charges, there is no, sort of, passes on onetime items, while overall costs are going down and income is improving year-on-year. So not much to say more than that at this stage, Ed. I think over time, we may try and talk more and more about what’s going inside our cost line, but that’s probably all we’ll say for now.

Sorry, sorry, Tushar.

Go on.

You did change the accounting, I think it was last year, around the Investment Bank, in terms of making sure then – and I think at the time you signalled that, that would mean that the costs in the IB would move more in line with the revenues. So I’m just trying to think, if we are expecting a seasonal revenue downturn, which is pretty normal, we’ve had that most years, should we expect the cost to go down in the IB with that? Or is there something different we should be thinking about?

Go on, Jes

Yes. I think the statement that we changed accounting so that we can more correlate revenue with cost with best lines is correct. And you could assume that we have applied that in the first half of this year, and we will apply it second half of this year as well. So going to the share buyback, we are laser-focused, now that we have clear quarters and hopefully in front of us and the issues of the decade behind us. We are focused on returning excess capital to shareholders, and buybacks are as much an opportunity for us today as it was in the last few times that we’ve managed it. So don’t read anything into the language, we know where the stock is trading right now, we know the economic benefit of using excess capital to execute share buyback. It is still very much front and center for both Tushar and myself. And then along that line, there is no consideration of an M&A transaction, and there will not be – there is – we are not opening retail branches in India, we are not going to get back in the financial markets of South Korea, we are focused on running the bank as we laid out in March 2016, delivering returns like we delivered in this quarter and taking those returns and returning them back to our shareholders.

Great. Thanks so much.

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

Of course we have. The next question comes from Jennifer Kirk of Mediobanca. Jennifer, your line is now open.

Thanks for taking my questions. Two questions, please. Firstly, sorry to focus on but circling back to the Corporate lending income line, RWA redeployment seems to have been a drag here, but I’m assuming that those RWAs have been redeployed elsewhere. Appreciate if you could give us the income delta there between income loss and gained on redeployment? Secondly, just on your capital allocation. You seem to have reallocated Head Office RWA out across both Barclays UK. and CCP but not into the CIB. Within this, if I look Q-on-Q, the equity allocation in the UK. has increased in line with your high RWA, which makes sense. But in Barclays International, the equity allocation in CCP has lagged the rate of RWA increase. And the equity allocation in the IB has increased despite the RWAs going down. Net-net this means the CIB is now on a 14.5% CET1 versus 13% to 13.5% in the other segments. I was just wondering if you kind of walk us through the rationale on that one? Thanks.

Yes. Jennifer, I was signalling to Tushar. To your first question, we are done with the redeployment. We were taking risk-weighted assets that were basically commercial loans in the Corporate bank that were generating low single-digit returns from annual equities and reallocating primarily to the Markets business and the IB, to places like Equities financing where our return is strong double-digits on tangible equity. Making that redeployment has allowed us to make the statement both in the first quarter and the second quarter that our Markets business is generating, overall, a double-digit return. And as we said, this is the third quarter in a row where we think we are gaining market share.

Jennifer, on capital allocation, just – it’s an average equity allocation over the period. So you have to look at average risk-weighted assets. Of course, there are reserve movements. And there is nothing sort of unusual going on in terms of allocation of capital out to the businesses. We are allocating now at 13%, so minus, obviously, reserve moves that are sort of relevant to those businesses over the average of that period. If you’re struggling to see, sort of, how that triangulates, I’m quite happy for maybe someone in IR to give you a call later on and just take you through the numbers, if helpful, but there’s nothing I’d call out on there that’s unusual.

Great, thanks.

Thanks, Jennifer. Yes, next question please operator.

Yes, of course. The next questioner on the line is Fahed Kunwar of Redburn. Fahed, please go ahead.

Hi, good morning. Thanks for taking my questions. Just I had a couple of question on Barclays UK. and one on capital, if you wouldn’t mind. Just to clarify, if I look at what consensus has in for 2018 on Barclays UK. it implies 3% half-on-half growth in revenues. I think in the outlook statement, you talked about steady revenue progression the second half 2018 versus first half 2018. So is 3% growth in revenues half-on-half in 2018 what we should expect based on your comments about being fine with market expectation on revenues? And the second question on Barclays UK. was just thinking about your comments around focusing on NII rather than margin. And I think it was last quarter or perhaps the quarter before where you said that you’re actually going to focus on margins rather than volumes. You’ve seen, obviously, some spread improvements coming through in the UK. in the last, kind of, month or so. The base rate potential could be higher today if MPC raises rates. I’m just wondering what’s changed your tone on that? Why have you now shifted towards focusing on volumes rather than margins versus where you were a quarter or so ago, considering the change in disparate environment in mortgages? And then my third question on capital. Barclays UK. is sitting I think a 14.1 core Tier 1 ratio. So the rest of the bank is but finishing sitting sub-13%. I understand, you guys want to do buybacks because of the valuation, but how confident are you, you will get regulatory approval to do buybacks considering that the rest of your peers seem to be heading up towards a 14% core Tier 1 ratio and you’re sitting at 13%? Thank you.

So just to take them in the order you gave them. In terms of expectations, I said in my sort of scripted comments that we gave some guidance for NIM, but when I look at income expectations that the market has, I feel okay with them for 2018. Hopefully that answers that question. Now there’s really no change in terms of volumes and NIM. The comment I made on NIM, and apologies if they didn’t come across clearly, was really focused on mortgages itself, that we are trying to do what we can to ensure that we are producing front book mortgages that are still at very attractive levels, which we continue to do. But as we grow the mortgage book relative to the unsecured books, I mean, it’s just an output function, obviously it’s a lower-margin business, but, obviously, it does throw off good net interest income, particularly good risk-adjusted net interest income. And finally on capital. Look, I think it’s appropriate for us to speculate on regulatory approval, will let that process take place. But you mentioned that Barclays UK. capital, as a legal entity function, at 14.1%, the rest of the group must be sort of somewhere a bit lower than that. That, of course, is correct. Obviously, the Barclays UK. legal entity has the domestic SRB attached to it, which you don’t need to do in an international bank, that gets held at the group level. Then we’ve obviously got a countercyclical buffer in the UK. Obviously, the UK. bank is just a UK. bank so it attaches more weight to it, then. But of course, that countercyclical also will apply to the international bank in a small portion. So the key point is at 13% of the group, we are able to capitalize our subsidiary and move capital around appropriately. And as capital requirements change, if countercyclical buffers move up or other things change, we’ll also keep the market informed on that. But we feel at this stage, around 13% is sufficient, and we are keen on getting capital back to shareholders, as Jes has mentioned in the past, and keep you updated on trying to do that as we need to.

I’ll just add – maybe if I add three points to that. One, is after last year’s stress test, we said publicly that we continue to view 13% as our instate CET1 ratio. When we increased the dividend from to 3p to 6.5p, obviously, that was done in consideration of where we are with our regulators and our level of capital, and reiterated again that 13% was our instate CET1 ratio. And also, I think, quite frankly, one of the things that the stress test showed is there is a diversification benefit that this bank has from having the business it has in the U.S., the wholesale plus the Consumer business. So I think there is a diversification benefit which allows us to run comfortably at a 13% CET1 ratio.

Okay. Thank you very much.

We have the next question please, operator?

Of course. The next question on the line comes from Robin Down of HSBC. Robin, please go ahead.

Good morning. Just a couple for me. Firstly, the structural hedge contribution base in Q1 and Q2 is a down quite a lot on last year, and I was just wondering if you can give us a bit of color as to what has driven that? And then second question, actually following up from the previous question. One of your competitors has, obviously – I think is was Pillar 2a letter from the PRA and that’s obviously fallen for them. Just wondering if you had also got your letter and whether or not there is kind of no change there? And if I can finally just sneak in a small technical one. Just on the U.S. Card sale, could you give us some indication of timing of that? And whether we’ve seen the impact in the quarter of, I guess, the revenues you have lost with that card sale? Or whether that’s still to come in Q3? Thanks.

Yes, on the structural hedge, yes, I mean, it’s quite straightforward in a way. You’ve obviously seen LIBOR rates increase off the back of the increase in rates that the Bank of England put through previously. So of course the structural hedges, fixed versus floating, you’ve just got floating leg that we pay on increasing. So that’s all that is, there’s nothing else going on there.

This doesn’t indicate volume change.

No, that’s right, we haven’t got the notion or anything like that or anything like that, it’s just LIBOR rates going up. Pillar 2A, yes. We’ve got – if we had anything to update you, we would have done. I think different banks probably get their information at different points in time, we haven’t got anything to disclose at the moment. And U.S. Card sale, yes, you should have seen that sort of dropped out as an accounting matter. So yes, that should be pretty straightforward, hopefully, in your modeling.

Thank you.

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

The next question on the line comes from John Cronin from Goodbody. John, please go ahead.

Hi, there and thank you for taking my question. One for you, Tushar, and then one for you, Jes. On the PPI, could you speak a little about your most recent experience with respect to claims volume and, indeed, upheld rates? And then the second question is – look, stepping back beyond this morning’s stock performance relative to expectations coming in, clearly a strong set of results that arguably validate the strategy pursued. In that context, Jes, do you have any great concerns? Or what would you say about further possible agitation and distraction as a consequence of the presence of a certain shareholder on the register? Thank you.

Okay. Thanks, John. Let me take the PPI question. Yes, look, we’ve got and we feel pretty reasonably provided at the moment on anything we can see. If we look at our, sort of, burn rate at the moment and look at our provision level, it’s kind of as we expected. We’ve seen the CMC, the claims management companies, sort of the introduction of the fee caps, so that will – we’ll see how that plays out. But by and large, everything we see at the moment, we feel pretty reasonably we have provided. So we’ll see where we go from here.

In terms of the overwhelming sentiment as I go and visit with shareholders is to stay the course. The bank has gone through an extraordinary restructuring which is now behind us. New print the returns that we delivered in the first half of the year. We’ve got a management team committed to the strategy articulated in March of 2016. Clearly, we are focused on the share price and the returns to our shareholders as we put the restructuring issues behind us and we generate profit levels like we demonstrated in the second quarter, we will be able to start to return significantly more capital to our shareholders than we have historically. Again, just looking at the weight of conduct and litigation expenses and things like PPI over the last couple of years, it’s been a long journey that our shareholders have gone through. We believe that it’s largely behind us now. We believe the strategy is delivering a level of profitability. At least the first six months, way ahead of our cost of capital, we’ve given you our targets for 2019 and 2020. I think all that the last six months have done is to reinforce our confidence in delivering at those targets or better. So management has to be focused on running the business and executing the strategy, and that’s what we’re doing. And if we get it right, and I think today’s numbers hopefully give encouragement to you, our shareholders. And if that happens, the stock price will take care of itself.

Thank you.

Do we have the last question? I think we’ll take an several more question to the operator.

Of course. Our final question today comes from James Invine of Societe Generale. James, please go ahead.

Hi, good morning. I’ve got two, please. The first is on CIB. You obviously put quite a lot of extra resource there, both from the balance sheet and in terms of the headcount. I was just wondering if you could give us an idea of the tailwind that, that revenue line has enjoyed in Q2 this year versus last year because of that investment? I mean if I say something like 10%, is that about the right number? And then the second question is, there have been some press articles that you’re looking to expand your, kind of, primary U.S. retail and do more there. Just wondering if you can give us an update on what your thoughts are, please? Thanks.

I’ll ask Jes to talk about U.S. Consumer. CIB tailwind, I mean it’s a really difficult thing for us to answer. Obviously, we talked about the three prongs of our strategy is to make sure that we have the right people, the right capital and the right technology, and we’ve made progress on all three. Tim Throsby, since him coming in the beginning of last year, has been a terrific add for us, and he’s reset his management team relatively quickly, and I think that’s making a difference. Jes has talked about the reallocation of capital within the CIB, the points of leverage as well. That definitely has made a difference, for example, look at our Equities financing business. And then technology, Jes has given examples of how we’ve rolled out some more e-trading capabilities and the way we connect to our clients. So I don’t think you can put a number on any one of those things, I think it’s all three factors driving improved performance and allowing us to take a bit of market share for the last three quarters running, and that’s our intention to keep going in that vein.

And in terms of – first let me just state, the overarching strategy of the bank, of being transatlantic Consumer wholesale bank, is not going to change. We are not going to open retail businesses in India, we are not going to change the geographic footprint of the institution. We are laser-focused on, first and foremost, returning excess capital to shareholders, that’s above all else. We do believe we have a very attractive Consumer business in the U.S. The returns coming out of that Card business are quite strong, and we are doing that whilst improving our FICO scores, while expanding our business, particularly around the co-brand. I think we’ve done a very good job of having a digital deposit gathering business in Delaware, which essentially allows us to fund the UK. receivables through U.S. deposits at a very profitable margin to it. We have talked about growing receivables there, about 10% per annum, and that will take some capital support. Whether we expand the nature of that digital consumer business, that’s something that we look at when we look at the future terrain in front of the bank. So I think it’s safe to say as we begin to focus on growing the footprint, the U.S. consumer market is one that we find very attractive. But I do want to reiterate that, first and foremost, we are really focused on returning capital to shareholders.

Thanks, very clear. Thank you.

Thanks, James. And thanks to everyone on the call. Appreciate it, as always. Hopefully, that was helpful. And I’m sure we’ll get to see some of you on the road in the next few days. Thank you.

Thank you.