Welcome to the Barclays Q3 2018 Results Analyst and Investor Conference Call. I'll now hand you over to Jes Staley, Group Chief Executive; and Tushar Morzaria, Group Financial Director.

Good morning, everyone, and thank you for joining the third quarter earnings call. I am pleased to report another quarter which demonstrates that we are firmly on track to produce improved returns to shareholders as our strategy continues to deliver. Performance in the third quarter of 2018 was significantly better than we achieved in the same quarter of 2017, for the group and in both of our constituent businesses, Barclays U.K. and Barclays International. Notwithstanding the usual seasonal effects in the numbers, overall, the group produced a return on tangible equity in the third quarter of 10.2%, which means an RoTE for the nine months to date of 11.1% due to litigation and conduct. As you know, our returns targets announced this time last year are to achieve a group RoTE of greater than 9% in 2019 and greater than 10% in 2020, based on a CET1 ratio of 13%. We are demonstrating with each passing quarter that Barclays is going to achieve those returns targets, and on a sustainable basis. Year-to-date profit before tax is up 23% at £5.3 billion. This reflects a strong performance across the bank as well as a benign impairment environment. Barclays U.K. year-to-date PBT was up a touch to just over £2 billion, and the nine months RoTE is an impressive 18.9%. The quarterly performance was strong, showing a significant improvement over Q3 2017, with PBT up 18%. Barclays U.K. remains a leader in digital banking and we continue to invest to maintain that position, including the development of our Open Banking platform, which we launched in September. We are the first major High Street bank offering a true open banking API aggregation solution within our mobile banking app. Already, we've seen encouraging numbers of our customers link their accounts from other banks, and…

Thanks, Jes. I'll begin with a few words on the nine months results, and then I'll focus on the quarterly results as usual. As Jes mentioned, our RoTE for the first nine months was 11.1% excluding conduct and litigation, a good result with both BUK and BI delivering double-digit returns. This does reflect the lower impairment charge that we would expect going forward, and Q4 will also reflect the usual seasonal effects, notably the bank levy. But I'm encouraged by our progress towards our group returns targets, and the result demonstrates that we are out of our restructuring phase. We generated EPS of 21.6p, excluding litigation and conduct. With the CET1 ratio now at 13.2%, we're comfortable with our regulatory capital position, and we've received regulatory approval to retain the outstanding $2.6 billion retail preference shares, as Jes mentioned, and to call the 8.25% AT1, both on the 15th of December. Looking now at Q3. We also reported a double-digit RoTE of 10.2% for Q3, excluding litigation and conduct. As in Q2, there were no material one-off items in the quarter to bring to your attention. There were, however, a couple of items in Q3 last year that we set out in an Appendix slide, notably £168 million impairment in relation to the asset sale in U.S. cards, and just over £100 million in structural reform cost. In 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 for this quarter was £105 million. I'd also note that the sterling-dollar rate is almost flat year-on-year. Attributable profit was just over £1 billion, generating earnings per share of 6.6p. Income was down 1% overall, while costs were up 2% as we continued to invest despite income…

[Operator Instructions]. Your first telephone question today, gentlemen, is from Joe Dickerson of Jefferies.

Gentlemen, just a couple of things. So first of all, it seems to me like there's some - the regulatory approval to redeem the USD pref is actually quite a significant development particularly ahead of the stress test, and god only knows what will happen around Brexit. So that seems to be quite positive, would you agree with that? And then secondly, in terms of reiterating the 9% RoTE guidance for next year, given that you can redeem this instrument, given that for the first nine months of this year I think we're at something like 11% RoTE, should we see any prospect of upside to that target? Any color you have there would be appreciated.

Thanks, Joe. I'll do the first question and pass the second one to Tushar. Yes, it is significant that we got the PRA approval in front of the stress test and in front of issues that may arise from Brexit. So you're right with that.

Yes. Look, I totally agree with it Jes. And just to add a little bit to it, it's quite a significant quantum of capital as well. If you add the AT1 and the dollar prefs together, it's almost £1 billion or 33 basis points of capital. And we're very pleased that, obviously, we think we've got a very strong capital position, and more importantly, a strong capital trajectory. It's important that our regulators obviously share that view as well to allow us to take these earnings-accretive actions in advance of both the ECB and, indeed, the PRA stress test results. Your second question around upside to RoTE target, I think, Joe, look, we've been asked this question several times, I guess, in the past. There's things that go in our favor and things that don't go...

The RoTE is getting better, which is why I asked the question.

Yes - no, and I'd take it in the spirit of - that we've had above-trend performance, if you like, or above-target performance for some time now. I think the difficulty when you put yourself in sort of management's position when you look at a year like next year is it's a little bit harder to know what the wider economy will look like next year. I think we feel very confident with the diversified business model that we should be able to cope with most eventualities and feel very comfortable with our targets. I would say that we did say it was greater than 9%, so we haven't capped how good it will get, but I think it's - let's see how next year turns out. And if we're doing better than those targets, obviously, will apparent early on in the year.

I'd just add, Joe, this time last year, the gap between our then performance and that target of 9% was about 350 basis points, and the question was how do you bridge that gap. We're in a fortunate position now that there is no gap. In fact, we're running higher than 9%. And the question is how do we sustain the performance that we've managed in the last nine months. And that's obviously a much more comfortable place to be. So - but as Tushar said, we've given ourselves room to the upside.

The next question on the line comes from Claire Kane of Crédit Suisse.

Two questions from me. Firstly, on the U.K. margin performance, I guess, good NII progression quarter-on-quarter, good mortgage growth. Do you think the NIM is progressing slightly better than you previously thought? I think you said now you might exit the year at the lower end of the range, 320, rather than maybe below. So just could just talk us through how that's progressed given the rate hike you had in the quarter. And then my second question is around the comment, just a bit of technical one, just on the £165 million of lower legacy funding. Should we assume £100 million of that is in the NCI line and then £65 million in Head Office income? So £65 million is already in your kind of £360 million annualized legacy funding cost.

Yes. Thanks, Claire. Let me take the second one first and then I'll come back to margins. The second one, quite straightforward, it's all in the NCI line, and it's really the after-tax effect of not having to pay the preference share coupons from the first quarter next year on an annualized basis, and it's all in the NCI line. But obviously, we'd sort of getting the job fairly right in our models. Back into U.K. margin. Yes, look, I think it's an interesting space. We're pleased that we kept margins broadly flat in the third quarter. I think when you look at what's going on at Barclays there, we are prioritizing secured lending relative to unsecured lending, so you would expect a natural sort of dilution around margin as we prioritize lower margin but lower riskier business on the firm position that we've taken for the last couple of years. Also going on, the mortgage market is very competitive. And we have seen pricing respond to that competition, so I would say there's the downward pressure on asset margin. And then on the flip side, of course, there was a rate rise in August and we passed on less of that rate rise than we did previously. And you put all that together and we're sort of pleased we held margins flat. I think when we look prospectively, we are keen on prioritizing secured lending relative to unsecured lending. So I think, if nothing else, you would expect to see that sort of dilution of reported NIM. But we feel good without it. It's a good, risk-adjusted business, we pay real careful attention to ensuring that even though there's downward pressure on asset margin, it's a competitive business, that we do returns levels that are sensible for us, and we certainly won't be doing business where returns levels aren't justified on the returns basis. And the other thing, I guess, that we are beginning to see a little bit of is some more competition on the liability side. Obviously, you've seen one of our U.S. competitors enter the market in the U.K. That's got a lot of potential. That in and of itself is not so much of a big deal, our liability balances were up £1.5 billion in the quarter. But I think away from that, you're seeing some of the larger lenders pricing up liabilities. That's an interesting space for us because our loan-to-deposit ratio is below 100%, so we're probably less geared towards having to lock up that funding in the same way other competitors may be, but we'll see how that plays out. I hope that gives you a bit more color, Claire, on what's going on behind the scenes.

And Claire, hopefully, the shareholders recognize that looking at the profitability of Barclays U.K. that the shareholders appreciate that we're being prudent around credit in the U.K., and we've been that way, really, since the referendum vote.

The next question on the line, gentlemen, is from Andi Coombs of Citibank.

Two questions from me, please. Firstly, I just want to look at the loan-loss provision, the IFRS 9 adjustments you've taken on revised macroeconomic forecasts. I think it's the second adjustment you've made to your model in three quarters, doing a U.S. model adjustment in Q1 as well. I just want to get a feel, it's very difficult for us, from outside in, looking at the IFRS 9 adjustment. Your res in the U.K. are flat and your revenues are actually up. So just a feel for - are there any other hidden gems that you can pull out using IFRS accounting? Or do you think the benefit from this are now largely complete? And my second question would be around AT1s. I think the redemption of the retail prefs have been well flagged. I'm more interested in the $2 billion AT1 redemption that banks do in Q4. Now that comes after 2.5 billion of issuance in Q3, so I just want to think how you think about that AT1 bucket going forward. And I think you've got almost £11 billion, so you're running at quite a big excess versus an RWA base. However, I'd argue your binding restraint is your leverage ratio on the stress. But as you pointed out, you're running at 4.9 spot versus a 3.8 hurdle. Is that how you think about the AT1 to a greater extent?

Yes, thanks, Andy. I think these are probably both one for me, and Jes may want to add some comments in - afterwards. Let me start with the loan-loss provision. You're correct in identifying we have had two revisions, if you like, to our economic sort of environmental forecast, and there's a second one in third quarter we put out through. That's really just a function of where publishing economists see the environment. And that we - in the first revision that we made earlier on in the year, that was mostly around house prices in the U.S. And in the second one, it's really more around unemployment levels. To help you guide, sort of think through what the effect of these would be, if I look at the third quarter - and I thought I had this in some of my scripted notes, so I'll just sort of call them out again to help you pinpoint them. I think in the U.K., absent any improvement or, indeed, deterioration in underlying credit conditions, I'd expect the impairment charge to be on the low 200. But I don't have a call on what the economy will be forecasted to be, so that's absent any [indiscernible] there. In the Corporate and Investment Bank in the fourth quarter, that's usually a sort of seasonally high impairment quarter, principally driven by single name actions. What tends to happen is that when companies get into difficulties, they tend to end up reaching their covenants and various other measures usually around the end of their calendar years. But that's not a forecast to say we expect to see a lot of single name delinquencies. But we do, they usually manifest themselves in the fourth quarter of the year, and you probably saw that certainly last year…

So I guess my broader question would be that you've issued $2.5 billion, You're redeeming $2 billion. Is that kind of the trend we should expect going forward, that you're managing the AT1 around the current level? It's not that we should expect a number of redemptions for the absolute balance?

Yes. Look, I don't want to guide too much on that because they will be somewhat driven by pricing. Let me give you a good example. If you look at our most recent issue of AT1 versus the deals we're retiring, it's a 200 basis point to mid-swaps improvement. So it's very economically rational for us to call these ones. It may well be, when we get to this time next year with another block of quarter available, I don't know what those refinancing spreads will be and I don't know where the market is. I don't know the foreign exchange rate. So I'd like to have that optionality. So I don't want to guide too much, but it's all going to be driven by the facts and circumstances at the time. Thank you for your questions.

The next question comes from Robin Down of HSBC.

Just a couple of quick ones for me. Firstly, I think Jes mentioned earlier on the media call the idea of doing buybacks in 2019. I just wondered if you could give us a bit more color around what you were saying and what were the sort of intentions are there? And then the second, you kindly gave us some guidance on Head Office revenue numbers, but we got sort of, kind of minus £90 million a quarter coming from legacy instruments. But I'm guessing that the bulk of that is coming from the RCI. So when we look at 2019, should we think about it as being kind of minus £90 million for the first couple of quarters and then dropping in Q3 and Q4? And I just wondered if you could also give us a bit more color around where you think the hedge number might be in 2019 as well.

Yes, Robin, I'll take the first question and then I'll give Tushar the Head Office question. The - vis-à-vis buyback, I'll just say, as we look back on '18 thus far, the first quarter was marked by a £2 billion payment to the U.S. Justice Department and to PPI claims. Since that time, we've continued with a more than doubling of our dividend versus last year. We'll essentially pay roughly £1.1 billion in dividends for 2018. And as Tushar mentioned, the capital equivalent of calling the preferred shares is about £700 million. So we're returning to shareholders, in one form or another, roughly £1.8 billion this year. As we look to '19, where we have clear air or we don't see any significant litigation issue in front of us, we should have the ability to return even more capital to shareholders. And clearly, with the stock at this level, we would discuss with our board and our regulators a stock buyback program at the appropriate time. We're not going to give you any more guidance on that until the year-end results, where we will talk about our capital plan as approved by our board and discussed with our regulators.

And Robin, why don't I just cover the couple of questions on Head Office? In terms of legacy funding costs, you're right, a decent slug of that is coming from the reserve capital instrument, the RCIs. Now we'll see what the facts and circumstances are, but they do come available for a call in the middle of next year. I guess you'd expect us to behave economically, rationally. So were we to call them, I think it's a fair assumption that you expect. I actually called it out in my scripted comments, about 2/3 of that £90 million will drop out if we were to call the RCIs. But the hedge accounting unwind, it's tracking to about £200 million this year. I haven't given specific guidance for next year, but it will be smaller. And then beyond that, it really sort of falls away as an immaterial item. We probably won't even be talking about it in two years' time, I imagine. So probably next year is the only time you'll see it smaller than £200 million, but I can't give any more guidance on that at this stage. I may give sort of more as we get to the full year when we have greater visibility on it.

The next question from the line comes from Guy Stebbings of Exane BNP Paribas.

Firstly, can I just briefly come back to U.S. card asset quality and the pickup in arrears. I mean, I appreciate the pickup is still fairly small and sort of off a low base, and the industry itself has seen a slight pickup. But directionally at least, are you becoming at all concerned by this trend given, obviously, it's a key growth area for you? Or are we still a long way from NPL formation levels that would lead you to question your strategy here? I mean, are you surprised at all the trends appear to be worse in your U.S. book than your U.K. book, for instance?

Yes - have you got another question or just that one?

Yes. The second question was just on structural hedge. I see the NII contributions, I think £600 million year-to-date. I was just wondering if you're able to give us the notional balance? Because I don't think we've had that for a while, and that would just be helpful in terms of thinking about the contribution going forward.

Yes, sure. So on the U.S. card arrears, it's not something we're not concerned about. In fact, if anything, we've taken some actions over the last sort of 12, 18 months to reposition, if you like, the risk mix of that business by selling sort of a low rated tranche of risk, £1.6 billion or so of our receivables last year, which will be [indiscernible]. And then this year, I mean, the airlines portfolio's growth is outstripping the rest of the sort of portfolio. So over time, you'll definitely see the risk mix change. Of course, there's a seasoning effect in cards, so you won't see that benefit come through yet. Probably in a year or so's time, usually about 18 months or so. We feel kind of happy with the growth in the business as well. Our receivables are up 4% on a dollar basis underlying. We think we have the ambition to grow even a bit better than that. But we want to pay detail and attention to credit control and where we are in the cycle. But at the moment, it actually feels pretty good, and certainly doesn't - anywhere near thinking that we need to sort of put the brakes on in growth in that business from a credit control perspective. Structural hedges, yes, we haven't given the balances. I have a funny feeling we may never have given those balances, but you might remember this better than I will. We haven't made much change to the structural hedge profile in recent times, Guy. 10-year rates are now, last time I looked, about 1.5%. You've probably seen the bottoming out of the sort of the grinding down, if you like, into lower rates from a structural hedge. We are reasonably rate sensitive. If hedges - if rates get back up and stabilize, it takes a little bit of time to grind back up into higher rates. But in sort of the outyears, that can become quite a powerful effect to net interest income. But I take your point that you'd like to know more about that, and we'll have to think about what we can show you in future quarters. Jes?

Let me give you just some more insight into how we think about this. There are two economic realities that we face today as a bank. One is almost record historic low unemployment in the U.K. and in the U.S. And that is the most attractive time for an unsecured consumer credit portfolio like we have in the U.S. and the U.K. The other part of the economic environment is we're at almost record historical lows in financial asset volatility. And I'm sure as you read every bank commenting on earnings, there's a really high correlation between volatility and performance in one's markets business or one's wholesale business. So as we think about the overall risk profile and overall return profile of the bank, we do believe in economic cycles and we do believe that there will be another economic cycle. So remaining balanced as a bank strategy matter. I think it's important given where we are in the cycle right now.

Perfect. Very clear. Can I just come back on the structural hedge very quickly? It would be helpful to get the notional balance because when I look at it, it appears to me like you might be earning sort of less on that in terms of yield relative to some of your peers. But I don't have all the numbers to work out the exact math, so that would be very useful help to give it to us at some point.

Yes, noted, Guy. And I understand where you're coming from. Hopefully, the - and I know it doesn't quite answer your question, but the sensitivities that we've put out historically, hopefully, gives you at least a sense of at least our gearing towards the rate. But I take your point, you wanted to compare absolute sort of net interest income at today's levels; it's a little bit tricky to do and we'll have to think about how best to help you on that in further disclosures.

The next question on the line comes from Chris Cant of Autonomous Research.

I had just one, really, but it's got two parts. The first is very straightforward. If I think about your headline return in the CIB for the nine months, the 9.7%, obviously, in the first half, you were calling out a particularly chunky write-back you had in the third quarter. And I understand that you haven't adjusted for that in that 9.7%. If I just adjust back the provision write-back that you've had during the year, essentially 0 in the provision line, which is obviously quite generous especially in light of your comments on potential pickup in the fourth quarter or timing effect around the fourth quarter, that would imply an 8.8% nine month RoTE for the CIB on my math. And the CIB doesn't intend to generate any profit in the fourth quarter. I think the average for the last four years has been about minus £100 million. So if I just annualize that 8.8%, that would imply 6.6% as a run rate for the year at this point. So the first question is, do you agree with that assessment of your current run rate? And following on from that, obviously, you're quite pleased with the performance of the business in terms of market share, lead table positioning. But I guess the question is around adequacy if CIB returns are going to persist. It's been a pretty good year for the CIB overall, it seems, in terms of your commentary. So do you expect to deliver meaningfully better rate of return than that 6.6% in 2019? And if not, will you accept calls from the activists to scale down parts of that business?

Well, why don't I cover sort of just the way you've thought about it. I think, firstly, sort of the not adjusting, if you like, the credit line, I mean, it - hopefully, you've gotten used to us trying not to adjust. But we'll just give you the information; you can include and exclude as you see fit. The way we think about it is that, that impairment number is as much a function of good credit control as it is just whatever - accounting effects or whatever. And if there's one place where we have seen a little bit of stress in the U.K. is in corporate credit. And through really our risk team firstly coating that exposure and be avoiding lending to some of the very troubled parts of that sector, the ones that people would be familiar with. We've avoided some of the more significant credit issues. So I would put that down to good risk management control, and we'll see where it goes. But obviously, risk management control has a cost to it. It's not costless. So we may avoid impairment but, obviously, there's a cost to avoiding that impairment as well. So I think you've got to look at it on a balanced basis.

You did adjust for that in the third quarter. I mean, you specifically called it out and said, "Our typical quarterly impairment rate for the CIB is something like £50 million a quarter." The bit of math I just presented was assuming zero per quarter. I presume that your returns target heading into next year don't assume ongoing write-backs in any of your businesses.

Yes, look, Chris, I don't have the crystal ball on the economy. But if impairments are lower, it's because we're making very deliberate decisions to either lend less or hedge more, and there's a cost associated with that. If we feel the economy is strong and we'd want to lend, then we wouldn't hedge as much. So I think you've got to look at it in the aggregate. And I think it's fair to judge the business - in my view; you should take your own view on it - without adjusting for corporate impairment, which is as much driven by single-name credits as it is by any sort of portfolio effects.

If I just annualize your 9.7% headline, that's still around 7% return. It's not - let's put aside the debate about provision write-back. If I just annualize your 9.7%, accepting the fact that you don't intend to make any money in the CIB in the fourth quarter because of the levy, that will be a 7%-ish-type run rate. So do you accept that that's the current run rate for the CIB?

Chris, we're not going to prejudge the fourth quarter. The CIB RoTE was 9.7% for the first nine months. It's 130 basis points higher than it was last year. The issue that the activists is focused on, that we understand, only it hasn't been articulated to us yet, is in the markets business. And we've been very clear, the markets business is higher than that 9.7%. It's comfortably in double digits. I would also add, the CIB is running lower RWAs this year than it was last year, and despite that, generating 130 basis points of improved profitability. We are gaining market share across the entire markets business. We've done that now for four quarters in a row. You can make - we deliver numbers that aren't with adjustments sort of Non-Core or whatnot, and I think those numbers speak for themselves.

Okay. And on the second part of my question in terms of if - do you expect to deliver meaningfully better rates of return in 2019 in the CIB? And if not, what's your response to the activist calls to scale down part of that business likely to be? [Indiscernible] improvement.

We've gone through a 2.5-year restructuring of this bank. We dropped the RWAs in the Investment Bank by over £100 billion. We've completely remanaged the cost profile of this bank. This bank is generating a double-digit return. We don't believe the time is now to reconsider a new restructuring.

The next question, gentlemen, comes from Martin Leitgeb of Goldman Sachs.

Firstly, on the IB. I was wondering if you could provide a bit more color on what the source of market share gains was this quarter and what precisely within Equities and FICC have experienced those gains? And I'm essentially trying to understand if we should expect you to continue to gain share on those segments going forward or by when you would expect to start to perform more broadly in line with industry trends going forward? And the second question is more broadly on Brexit. So if we were to assume there would be an orderly withdrawal agreement, transition period and so forth, where would you see most upside here for Barclays going forward? If that were to happen, would your risk appetite, for example, in the U.K. change that you would again start growing card balances as an example? Or how do you think in terms of upside potential here for your franchise would you benefit if there would be kind of an orderly withdrawal with a longer transition period?

Yes, Martin, I'll take the first question. I would sort of - and thanks for noting the uptick in market share and the market - I would lay it at three issues. One is people. We've had a pretty significant change in the management of our markets business over the last two years since Tim came onboard. And we are very confident that we've got very talented people in that side of our business today. The second one is we have increased the use of our balance sheet and that is resulting in increased activity from the buy side to - through Barclays. For instance, in the third quarter, our equity prime brokerage balances were up 11%. So by giving a balance sheet with very low RWAs to our investing clients or institutional clients, that's where we're gaining the market share in basically our flow agency business. And then thirdly, tech. We started 1.5 years ago an entirely new investment program to overhaul our electronic trading capabilities. So we've now completed that for rates in our interest rate swaps business. And we've seen a 10x increase in the electronic trading that we're getting on that side of the business. We just recently rolled out a whole new electronic trading platform for our Equities business with all new routers. And the feedback we've gotten from our major equity and institutional investors has been very positive, and our volumes are up significantly. So it's a combination of getting the right people there, giving them the support of senior management. We have increased our balance sheet. And we're generating very attractive marginal returns where we've done that. And then finally, we are overhauling our tech platform. And we're almost done there and that's generating additional volumes for us as well. And the Brexit question, Tushar?

Yes. Thanks, Jes. So Martin, I think the stance we've taken certainly in our U.K. consumer business going into where we are is a somewhat cautious stance. We've talked about that for a couple of years. We have been running our unsecured lending book for over two years now and have prioritized very modest growth in mortgages. I think if there's an orderly exit and, if you like, the economy, the conviction around the strong economy in the U.K. continues, and as importantly, if the U.S. and Europe continue to be strong, I think the U.K. will benefit from that. There may be an opportunity to reposition our staff there. That could be very beneficial because we have terrific franchises across the whole waterfront of retail small business and Corporate Banking. We are quite diversified. So if it doesn't turn out to be like that, that it's a bit more of a less orderly exit, shall we say, we've called out that half of our revenues in our international bank arrives from the U.S. - or are based in U.S. dollars. So we have a currency hedge there. We also - of course, many of those dollar revenues are in consumer businesses in the United States as well, so we don't see that necessarily being linked to anything that's ancillary to the U.K. I think the other thing that feels quite interesting to us though is regardless kind of whether it's orderly or less orderly. By having an operational bank on Mainland Europe, through our bank in Dublin, one of the most exciting opportunities for us is for Corporate Banking to participate in a euro-gearing-type activity. So the ability for a U.K.-domiciled bank to provide Corporate Banking services with a relatively light footprint on Mainland Europe, but to participate in Euro banking services as well as being a sterling clearer; and of course, we're already a bank focus in the U.S. So I think that sort of feels like quite an interesting proposition given our geographic mix. But the way we think about this as which way this will go, I think we're reasonably well positioned from those outcomes.

Yes. As I've sort of referred to in my comments about the electronic payment system that we rolled out in the corporate bank and the impact it's had into the drop in manual processing, that also has extended our functionality in terms of taking the Corporate Banking network to Europe, irrespective of what happens with Brexit.

The next question on the line comes from Fahed Kunwar of Redburn.

Actually, a couple of questions. The first is on Barclays U.K. Performance was very strong in Q3. It looks like if I annualize it, it's up 4.5% half-on-half. I think you talked about being up 3% half-on-half in Barclays U.K. revenues. Does that mean, i.e. that we should expect a slowdown in 4Q? It's certainly what consensus is expecting. Or should we expect kind of some benefit from the rate hike to start coming through in 4Q? Actually, revenues can be stable or up even on a good Q3. So is 3% still right? Or is it going to be better than that on the U.K.? And then on your point about U.K. liabilities - sorry to add to that question. You talked about upward pressure on time deposits but obviously, the big banks are still seeing large shifts into current account because the rate environment, while increasing, is still very low. So how much is the increase in time deposits on your funding cost offset by the increased generation of current accounts, which obviously is all free? So that's on the U.K. On the capital side of things, how should we think about risk-weighted growth and actual core Tier 1 build? Because if I do the math, and I won't go through it, we've got pensions, IFRS 9; dividends, and consensus have come up with 40% payout; a little bit of litigation on PPI, you only generate probably 30, 35 bps, I think, a year even with the current generation. So do you think that actually you can pay all the way down to 13% going forward? Or do you think actually risk weights won't grow from here? What am I missing in terms of where you think the buyback is coming from in terms of the capital levels you currently hold? Because 13% as it stands is very low versus the other U.K. banks at the moment. So if I can get an answer to those two, that would be great.

Thanks, Fahed. Let me have a go at both of them and Jes may want to add stuff. I'm not going to give sort of a, yes, revenue forecast for Barclays U.K. Think of the U.K. business as we've obviously got a decent market share, one of the largest small business banks, 10% of mortgage market share, largest card market share, et cetera, et cetera. So you wouldn't expect us, I think, to necessarily grow our top line well above the way that the U.K. is growing. I think the way you should think about the U.K. business is if the U.K. economy grows, that should be good for us. If the rate environment improves, that should be good for us but index it to the, really, the U.K. beta. And in operational improvements, you've seen us deliver positive jaws in this quarter and that's something that we're very focused on showing some operational improvements over the year. In terms of the churn, if I got the gist of your question right, you're really sort of asking about if there's a migration out of current accounts into sort of time deposits, what does that do? We haven't really begun to see that much yet. It's something that we are, of course, quite focused on and looking for signs where that rotation may happen. But we haven't seen it yet. And we've had two rate rises, and it still seems quite sticky in current accounts at the moment. In terms of capital build, look, again, I won't go through the maths as you suggested, but I'd just maybe think about it in a slightly different way. If you look at, just this year, in 2018, if we receive regulatory approval, then we'll pay 6.5p in dividends over 2018. We've talked this morning about retiring the U.S. dollar preference shares as well as some dollar AT1s. That's, what, about 6p as well? In addition, we paid about 8p to deal with the DOJ fine. I'm not even including PPI in that. We don't expect to be paying a DOJ fine of that quantum next year, of course. And we don't have any dollar preference shares of course for next year. So that sort of gives you a sense of the capital generation capacity of the bank. And it is an objective of, I think, the board and management to improve returns of capital to shareholders. And I think we'll probably talk more about that once the board has come to a decision around that, around the full year results. Jes, anything more you want to add to that?

All right. So paying out 20.5p and landing CET1 ratio at 13.2% underscores, I think, the capital generation ability of Barclays.

Sorry, Tushar, can I just - on the - I know you don't want to give guidance on the U.K., but you did give 3% half-on-half. Is that still - has that guidance been taken away now? Or how should we think about that guidance because that's what's in consensus?

Yes, I don't remember giving - I'll have a look at that. I'll get our quotes for that. I don't remember giving that guidance, unless I'm just going nuts here. We'll get back to you.

The next question comes from Rohith Chandra-Rajan of Bank of America Merrill Lynch.

Just a quick one from me, really. Just on CIB, obviously, a very good revenue performance. But then looking at the cost line, you've kind of flagged investment spend led to cost growth in the quarter. So I'm just wondering how you think about that balance between investment and efficiency going forward? And I think, Jes, in answer to a previous question, you sort of suggested that we're coming to the end of the tech build-out in the IB. So really just thinking about the cost trajectory in CIB, please.

Yes. No - obviously, our objective is to deliver a double-digit return to CIB through the first three quarters. We're close. But we did fall behind, I think, in spending on our technology platform. And we needed to address that. So we have done that. We did fall behind, we think, in the scale and certification of our corporate transactional platform, particularly around payments. And we want to extend that to Europe, so we've been spending money on that. We are going to manage to a lower cost-income ratio overall for the group to get it below 60%. And we're comfortable that we can do that. But also given the profitability of the bank, we need to start spending for growth. And the growth, whether it's in the Barclays U.K. numbers, whether it's in the U.S. credit card numbers, whether it's in our small business banking, that growth takes investment. And today, we have the ability, as we freed up cost from things like setting up the ring-fenced bank and setting up the IC and dealing with conduct litigation issues, we have the ability to invest in our platform to stay in front of basically the digitization of bank.

And does the CIB - will the CIB cost-to-income ratio reflect the overall group trajectory?

Yes.

Yes. So we expect to improve it, yes.

The next question comes from Ed Firth of KBW.

Can I just bring you back to the question about profitability? I get what you're saying, you've obviously had a pretty busy 2.5 years in terms of restructuring. But if I look back at your 2015 numbers, you were quoting a core return on tangible at a 10.9%. We're now at 11.1%. And I guess the bulk of that difference is you now don't include litigation cost. So it's probably pretty much flat if you had them the same. And your targets are arguably some way below now, really, for the next 2 years even current levels. So I guess you'll be frustrated by the share price, I get as much in terms of your comments around buybacks. But what could you point to over the next two years that you think is actually going to change investor sentiment or views on the performance? It seems to me to be pretty steady in terms of, really, for some consistent period now.

Ed, so - and I'll pass it to Tushar for his comments. But what your analysis fails to take into consideration is we had significantly recapitalized this bank since 2015. We're running on a much stronger capital base and a CET1 ratio of 13%. And back in 2015, I think you're somewhere around 9%. So you need to adjust for a 400 basis point improvement in capital strength of the bank. And you also should add to that, that the calculation of risk weight for assets is much more rigorous today than it was 3, 4 years ago. And so I think when you take an adjustment for the calculation of risk and an adjustment for the higher capital base that we are properly running on today, that has a pretty big impact in making an apples-to-apples comparison of 2015 versus 2018.

Yes, I think that's right, Jes. So I think the only thing I'd add to that is at some point, the share price will be for others to determine. What management can do is focus on the things that we can control, and that's trying to deliver an acceptable level of profitability on the capital invested in the company with a degree of sustainability and volatility that's appropriate, and that's what we're most focused on. But there'll be others - share price [indiscernible]...

Okay. It was actually 11.4%, but okay.

The next question, gentlemen, comes from James Invine of SocGen.

I've got two, please. The first is just on the U.S. cards portfolio. Just wondering if you've got any new partnerships there in the pipeline? Or if we're just relying on the existing partnerships to supply the growth looking forwards? And then the second is on Brexit. So you've talked about what you're doing in Ireland and so on. I was just wondering how much effort is required from your clients to make that switch as well, i.e. how disruptive is it going to be for them? And I was just wondering, when you're thinking about the targets, have you factored in any client losses who use that switch as an opportunity just to maybe look around at some other banks?

In terms of cards, we can't disclose names but obviously we continue to talk to potential co-brand card players in the U.S. We are one of the more active co-brand participants there. We've got a couple of programs that are relatively new. American Airlines, which is less than two years old, showing great growth. JetBlue, which we won from American Express, is showing great growth as well. Obviously, the big contract we got late last year was Uber. And a lot of work is done - is being done to maximize their 60 million consumers in the U.S. that have an Uber app on their cellphone with an embedded credit card. So the opportunity for growth on that Uber platform is significant. So it'll be both the current programs that we've got and - another point that we can point out is almost all of our programs are locked in to 2022. So it's a very secure book of business. Vis-à-vis Brexit, we are very focused on the impact, particularly in the supply chain in the U.K. and what may happen in that supply chain, all the way down to - we're a major player in the agricultural industry across the U.K. $1 in every $4 lent to farmers in the United Kingdom come from Barclays. And the agriculture sector may be one of the most impacted sectors in Brexit. Every farmer in this country gets a subsidy from the European Union today. So we are focused on it. But we've been very prudent in our underwriting standards across the credit platform, as we've talked about. And really, what we need to do is to work with our clients to make sure Barclays does everything it can to help them deal with any eventuality in Brexit.

Yes. And I think on the other part of that question, counterparties, do we expect any counterparties either rotating away or towards us? We certainly don't expect any one - or any meaningful amount to rotate away from us. We've been very focused on being ready for Brexit for some time now. So it may be an opportunity for others that may not be as prepared as we are for them to rotate to us. But that's for clients to decide rather than us.

Okay. And I mean, if you've already kind of been through this process with all of your clients, you got commitments that they will just make the switch from London to Dublin?

Yes, there was an active dialogue. The entity is up and ready. It's licensed. It's rated. So absolutely. So, so far, so good.

Our final question this morning, gentlemen, is from John Cronin of Goodbody.

Just picking up on your PPI provision comment in the report. So you see that as appropriate, but you closely monitor complaints trends. Just curious as to what complaint trends have looked like recently, particularly in light of the FCA's update this morning? Second question then...

Yes, why don't you ask both questions, and we'll take them in that order?

Sure. The second question is on the CIB. So clearly, very strong performance in recent quarters. Do you see that as putting paid to any longer-term concerns in terms of your ability to effectively compete given the balance sheet size and very strong capitalization of your U.S. competitors in that market? Or do you have some lack of confidence in terms of the long-term trajectory of that business?

Yes, let me cover PPI and I'll ask Jes to talk about the competitive nature of CIB. Our PPIs in place have been reasonably stable. So, so far, it's sort of within our projections. I think there's two more marketing campaigns before the August deadline. So you normally get a bit of flurry of activity around those marketing campaigns. But as we stand here today, we feel reasonably well provided. But it's something that we'll have to stay focused on. Deadline is getting closer and closer, which is a relief for all of us.

And on the CIB, no, I think we have all the balance sheet that we need to successfully compete against the U.S. regulators. But you also need to recognize our largest footprint and investment is the U.S., regulated by U.S. regulators exactly as if we were a U.S. bank. And then whether it's the top 3 underwriter of debt globally, what we're doing on our prime business, financing fixed income to credit, we think we have all of the capabilities necessary to compete. And the bank's balance sheet overall, if you look at the total balance sheet compared to the U.S. players, particularly people like Morgan Stanley and Goldman, we have plenty of balance sheet capacity to compete.

Thanks, everyone. I think we'll wrap up the call there. I appreciate your time this morning, and we might meet some of you on the road after this call. Thanks again.