Welcome to the Barclays Half Year 2020 Results Analyst and Investor Conference Call. I will now hand you over to Jes Staley, Group Chief Executive and Tushar Morzaria, Group Finance Director.

Good morning, everyone and thank you for joining us today. First of all, let me say that I hope you and your loved ones have been keeping safe and well as we continue to navigate the COVID-19 pandemic. These remain extraordinary circumstances for all of us and the impact of this crisis weighs heavily on our professional and personal lives. Truly the past quarter for Barclays has been a story of two things. The first is the resilience of the bank, underpinned by diversification of our strategy and evident in our performance. And the second made possible by that underlying soundness and strength, has been Barclays continued support for our customers, our clients, our colleagues, and the communities where we live and work around the world. As I said before, the key difference the financial crisis of '08 and '09 and now is that in a way the banks in '08 and '09 were the catalysts for the crisis, while this time we can be a firewall, helping to mitigate the impact of this crisis. I do believe this is in large part driven by regulatory and Central Bank policies over the past 10 years which have aimed at moving the economy from an over dependence on bank balance sheets to much greater reliance on the capital markets to fund economic growth. You can see the evidence of that approach in the Central Bank actions since the beginning of the crisis, particularly in the unprecedented injections of liquidity in huge purchases of corporate debt to bolster the capital markets globally. That strategy has proven to be a very positive shift in terms of the ability of corporate and governments to remain well funded and liquid as this health crisis moves towards and economic one and as we contemplate how to…

Thanks Jes. As usual, I'll summarize the first half results then focus on the second quarter performance. As of Q1 we are facing a period of uncertainty which makes it particularly difficult to give forward-looking guidance. We can now feel the initial effects of the COVID-19 pandemic and where possible I will try to give pointers for the coming quarters. As Jes mentioned, result of the first half showed benefit of our diversified business model. Despite the impairment charge of £3.7 billion, reported a statutory profit before tax of £1.3 billion generating 4p of earnings per share. Litigation and conduct was immaterial, so on this call I will reference the statutory numbers. At the Q1 profit for the half overall was down on last year reflecting the increase of £2.8 billion in the impairment charge, but income growth of 8% and a reduction of 4% in costs resulted in a profitable half and an RoTE of 2.9%. Given the uncertainty around the economic downturn and low interest rate environment, we do expect the environment in H2 to remain challenging. While we continue to believe that about 10% RoTE is the right target for Barclays over time, we need to see how the downturn plays out before giving any medium-term guidance. Net income growth reflected a 31% increase in CIB, more than offsetting income headwinds in the consumer businesses. The cost reduction delivered positive jaws of 12% with an increased cost income ratio of 57%. As a result, pre-provision profits were up 27% to £5 billion. Our capital position is strong with CET1 ratio ending the half at 14.2% up on the year-end level of 13.8% despite dipping to 13.1% at Q1. Strength of the balance sheet was reflected in the rising TNAV from 262p to 284p. Moving on to Q2…

[Operator Instructions] Our first question on the line comes from Joseph Dickerson of Jefferies. Joseph, your line is now open.

Hi, thank you for taking my question. Just the first question is, do you expect any benefit on capital in the second half from the recent changes around the treatment of software intangibles? And then secondly, from a top down standpoint, everything that you're saying suggests that you have reached an inflection point on margins. That sounds like volumes at the system level are picking up both from what we saw from the BoE data today in your own commentary, and then provisions coming down in the second half. It seems like there's a fair amount of earnings momentum available to you in the second half. Would you agree with that?

Yes, thanks Joe. Let me take both of those questions and Jes may want to touch on the operating environment in the second half as well. In terms of tailwinds to our capital with regards to potential rule changes around software intangibles, and to the extent they go through, it's in the order of somewhere around 20 basis points for us. Let's see if it goes through, if it does, that's what it is but, we will see how that evolves. In terms of the operating environment into the second half of the year, in many respects, you are right in the sense that we should see some sort of, if you like mechanical benefits coming through in the second half particularly in our consumer businesses. For example, if you take net interest income for both the UK bank and in the CCP, there'll be the mechanical effect of lower deposit rates just coming through in the third and fourth quarter in the UK. Hopefully just under UK rules. We're not able to pass on lower base rates for a period of time so our deposits actually repriced in July onwards, they get the sort of no effect in the second quarter, but a full effect in Q3 and Q4. In CCP for example, we have dropped our deposit rates in the U.S. from about 1.5% to 1%, but that reduction was very much towards the back end of the second quarter. So you'll see the full effect of that come through in the, in Q3 and Q4. And in addition to that, we've noticed some peers that have lowered term deposit pricing yet again, and, we'll take a look at that. And, there's a reasonable chance we may follow suit, given how strong our funding position is. And I…

So that's helpful. I think that you had guided on the kind of roundtable following Q1 for circa. I think we tallied the £5 billion impairment charge for the year. I think the consensus that you all sent around was for around £5.7 billion, which looks like a two bill, kind of incremental charge in the second half. Are you still comfortable with that guidance or what - how would you, I guess, how would you position the current outlook now versus to what you saw coming out at the time of Q1?

Yes, the way I think about that, Joe is, if you think about the charge we had in the second quarter, the three building blocks for that, if you look at the, if you like, the underlying baseline run rate absent any changes or updates to economic forecasts, we called out £400 million. In addition to that, we had single name charges of £200 million, giving you a total of £600 million. That's the kind of run rate that we're experiencing at the moment, absent any changes to macroeconomic forecasts. So, if economic sort of forecasts don't change much from here, let alone improve, then obviously, that the internal chart ought to be a lot lower. If economic forecasts deteriorate, the thing that's most relevant to us is long-term unemployment. And, you see, we've increased the levels of long-term unemployment going into 2021 quite materially, particularly in the UK. The other thing to bear in mind here, of course, is just what happens when the government support schemes come to their natural end, whether that's the furlough schemes or various other things, we'll just have to see how the economy responds to that. But I think all things being equal, as we see today, those kind of underlying impairment levels are running at the moment would be how we looked in Q2 and you can build from there as appropriate.

Very helpful, thank you.

Okay, thanks Joe. Can ee take the next question please, operator?

The next question comes from Jonathan Pierce of Numis. Jonathan, your line is now open.

Good morning Jes. I've got two questions please, the first on impairment, the second on risk weighted assets. The first question on impairment is more qualitative, really and it's the same question I asked in Q1. I'm just interested in how thoughts goals have developed since then, on how these models are going to work. So I guess the general expectation is the general impairments will pick up into the back end of this year and next year, but how do you think the models will react to that the forward looking provisions you've taken so far, you expect the notice to start releasing fairly, quickly as we actually get the pickup in stage 3, or is it going to be this period as almost double counts where the reserves remain elevated, but the stage 3 charges pick up sharply? So I'm interested in how your thoughts have developed on the working of the models into higher stage 3 charges? The second question on risk weighted assets. I'm wondering if we could just press you a bit more on where we may go in the second half, because in Q2 there was obviously a 3% fall in risk weighted assets. So there was lots of big moving parts contributing to that. So maybe if you could give us a feel for your thoughts on the book size and the credit portfolio that's £8 billion in the quarter, but I guess the RCS and the movement sort of level out and credit card balances may level out. So perhaps really they are flat in the second half, counterparty credit risk that was down, I think £4 billion in the second quarter. Should we assume that levels out as well, so that the second half movement in risk weighted assets is really all about pro-cyclicality and maybe give us a feel as to where we could end the year in risk weighted asset terms?

Okay, yes. Thanks, Jonathan. Why don’t I take a crack at both of them? With impairments, yes this is a really good question. In terms of how the models behave, I think what we'll see is the way I think about it is, the book half that we've taken, if you like, the anticipated expected loss over the cycle of £2.4 billion, if our models are, I guess, two sort of things you've got to believe, one, our models are perfect at forecasting. No models have gone through this particular sort of unusual scenario. So, you have to sort of put a bit of a caveat there. And secondly, that we’ve forecast the economy perfectly as well. We may be too conservative, we may not be conservative enough, again, we'll find out. But on the assumption, we've got the call on the future economy right, and our models indeed are perfect. In principle, we've already taken the loss associated with future expected losses. However, I think your question is a good one, because the timing of that will be important. So typically, what will happen is, you'll have some credits that go all the way through to default and we would write them off ultimately, and some credits won't go through to default and we'll sort of, keel back into lower stages. I think what will typically happen is, the defaults we would be sort of conservative and maybe recognize them sooner while we recognize them mostly as they default, but I suspect they will happen sort of earlier on in that cycle. And we're probably going to be conservative in curing [ph] if you like, those on defaulted credits sort of back into lower stages. So I think the net P&L charges if they’re right is going to be…

Yes, that sounds really helpful, but because it is extremely difficult from outside to model RWAs and I'm sure it isn't in the bank itself, but would it be as good a guess as any at this stage just to bolt-on another couple of quarters of maybe £5 billion pro-cyclicality to leave this year end at around £330 million, I mean, accepting it could be miles away from that, but is that sort of guess as any?

Yes. It's tough Jonathan. The best I'd say is, if markets are choppy, that the models, the whole framework is designed to be pro-cyclical, so we will respond to that. If markets aren't choppy, then, you've probably got sort of previous quarters that you can refer to as how we sort of normally fare in the second half of the year. I think for me to give a number, it's very difficult to forecast given I don't have a crystal ball on how choppy or not markets may be.

Yes, understood. Alright, thanks a lot.

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

The next question is from Andrew Coombs of Citigroup. Please go ahead Andrew.

Good morning. If I could ask a couple of follow-ups please, relating to Slide 7. The first question is on, we can send data that you provide. Thank you for that. UK then is back to normal, U.S. is still lagging down 25% year-on-year, interested to see if you are seeing divergence between the northern and southern states within that? And if you could elaborate as to how Barclays U.S. credit card splits out regionally as obviously, the consumer card spend will drive the balance sheet and the revenues from here. And the second question is guess is kind of relates to the right hand side chart on Slide 7, looking at the digital versus branch engagement. The branch engagement is starting to come back. It's still running 14% below where it was, and it may never fully recover. So at what point do you take another look at the branch footprint? When do you review that as a potential further cost save opportunity?

So okay, just to talk about the sort of digital branch footprint and why don't I talk about some of the UK, U.S. sort of spend trends that you're seeing, first thing I would say is that the graph here I'm not sure we've put it in the caption, and we apologize if we didn't, but the UK is a measure of debit and credit spend, whereas the U.S. we've only measured credit here. Now in the UK, what we have seen is a pick-up in debit spend. So as spending has improved, its being more skewed towards debit cards. So that's probably why you're seeing a difference in those two graphs. But coming back to your question on the U.S. and for the differences by states, a few comments from us. One is, obviously you know in our business, we are probably overweight in sort of the airlines and travel retailers. We've been watching whether the spend on our cards relative to industry spend levels is any different and actually, it's been remarkably consistent. We are slightly lower in travel spend itself. So to the extent people are, was looking in the second quarter sort of flights and things like that, because slightly more of a larger spend capital, but only slightly more right to the industry for us, we did see that. But on the flip side on other types of spend, we were bang in line or sometimes slightly better than the industry, so that's very positive. In terms of, by states, individual states, the large economies, things like California, Texas and the Tri-State area, are also important to us and our cause. We're not very, if you like, sort of clustered by state, it's relatively representative. It's more clustered by partner rather than by state. And if we look at our data now we're not, we're not like sort of a nationwide sort of open card type business. It is tied to the retailer. So we don't get a great sort of, if you like index view of the U.S. in the same way we do in the UK. But on our spend at least, we're not seeing any discernible differences between, if you like, those states that are having, higher infection rates and on top of maybe some sort of restrictions coming in, for example, like Texas, versus other states, which are probably not experiencing those level of infection rates. So at the moment it feels quite balanced from our perspective. And, card spending is improving, you've seen it sort of, down almost 50% and recovered quite sharply and looks like it's got some momentum still going into the third quarter and we'll obviously see how the economies perform further into the third quarter. And Jes, do you want to talk more about sort of these, the branches and digital?

Yes, so a couple of trends I think coming out of the pandemic. For sure, the use of digital networks from our consumers and small businesses across the UK has been increasing. And use for instance of cash has been prior to the spending item that has most contracted during the pandemic. And while in the short term that clearly impacts our transactional volume, particularly in the branches, in the long-term the more we can get consumers migrating to a digital offering and using the mobile banking app and online to manage their transaction volumes, the better for us. There's a higher margin way to engage with our consumer. These would be the branches and we were running some 800 branches. Now, we've been, slowly decreasing our branch footprint over the last couple of years. The branches were very important during this pandemic though. You know, a lot of customers and small businesses that are under stress that are concerned about their financial future and having the ability to go in and to talk to someone physically in a branch is very important for the well being of our consumers. And we see it in the engagement scores we have with our consumers. I think the impression that Barclays has remained open for business through its branches has been providing support to our communities where we live are the clearly value there. The other things that we did as response to the pandemic, are the call volumes overall of customers with issues with concerns. Now in some - at some point in time, we're about four to five X what they were this time last year. In order to give relief to our call centers, we actually began to retrain a lot of people in our branches, so that as of now, we are fielding about 200,000 incoming consumer calls every week with our personnel that are resident in the branches. So rather than just being there waiting for someone to walk in the door, we're actually repositioning the branches to do much more than that, take incoming calls, make out coming calls, to keep that engagement with our consumers in the time of this crisis as high as we can. In the longer term as finance increasingly digitizes, I think we will always be evaluating our branch footprint. Now imagine the trend that we've seen over the last couple of years will continue.

Thanks for the question, Andy.

Thank you.

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

We have a question from Chris Cant from Autonomous. Chris, please go ahead.

Hi good morning. Thank you for taking my questions, one on cost and then a follow-on RWAs please. And the cost income ratio across the UK and CC&P, I know you've shuffled some stuff between divisions, but if I just merge them together to ignore that, was 67% in the second quarter after adjusting for the preference share impact. I understand that you expect some top-line recovery there, but if I look at 1H, which obviously includes the first quarter when you didn't have the impact of the late tucked-in and COVID was in full flow, it would be 62% across those two divisions, again, adjusted for these. You've still got your target of less than 60% for the Group over time, including head office, which is a drag on CIB, which would normally be above that level. So what do you expect the cost income ratio for your retail facing businesses to be if you think about the UK, CC&P and around what do you expect the cost income ratio to be next year and looking into 2022? And on a related point, the cost income ratio for the CIB of 49% looks unsustainably low. It looks low versus what the CIB divisions at other banks have printed. Could you comment on your comp recorded policy please? What is going on there? Because it looks like you're not really reflecting the very strong performance in the bonus accruals. And I'm just not sure how your year-end conversations with desk heads will go later in the year, given that you're also flagging the strongest ever capital ratios, should we be worried about a 4Q comp catch up again? And just one quick follow up on RWAs please, on Jonathan's question, I understand your reluctance to guide, but it does feel like this is a bit of a random number generator from the outside. First, do you have any more model change impacts in your back pocket to come through in the second half and what's the quantum please? Presumably do you have visibility on management actions? And you said to look at prior periods movements Tushar, last year we saw a £14 billion reduction in the CIB in the fourth quarter, are you’re suggesting we might see the same this year absent a big spike in volatility? Thank you.

Thanks. Let me make opening comments and let Tushar answer the rest of your questions. Well, we stand by our target of a 60% cost income ratio for the bank over time. The first half we delivered 57%, so those are the numbers. Obviously, in an environment like this when spends just literally fell off a table at our two principal consumer businesses UK and U.S., you're going to have a move in your cost income ratio. And also remember, we felt that it was very important that this bank stay open for business and stay engaged with our small business and consumer clients and maintain the employment headcount for us to do that. We also publicly came out and said that we were going to cancel any redundancy moves in our consumer businesses until we get through the end of September. During that moment of crisis like this, it just doesn't seem appropriate to us that we start laying off a lot of people. So I don't think that current cost income ratio in our consumers business at our – at all are reflective of what will be in a normal state and they have been comfortably below 50% in the past and they – I didn't feel comfortably good, get below 54%. In terms of the CIB, that cost income ratio obviously very, very strong in the first half of the year. I would expect that to go up as the market progressed. So you essentially have the – the pandemic creating a distortion on one level in the UK and then creating a distortion to a certain extent on the level – on the CIB to the positive and our anticipation is in the third and fourth quarter, next year you'll start to normalize those cost income ratios and our target remains the same. In terms of accrual for compensation, again, the ultimate decision around compensation will be made at the end of the year and beginning of next year. We are very aware that we are in an industry with competitors and we have to recognize what the industry is doing and we want to pay or compensate people fairly, but also we have a very uncertain economic environment right now and we need to be mindful of that. We are accruing and I think I'm not worried about being able to keep the very talented people that that help us in the wholesale side of our business.

Yes and just around that Chris, I think the other thing I just – I know, probably those that spent a long time looking at our numbers are aware of, but as a more broader comment, our costs have been declining in absolute terms for a number of years now, that we call the four [ph] firms, by sharpening environment that we're operating in, so cost discipline is an important thing for this management team. And then perhaps even more so given some of the uncertainty we have on the top line. And your question on RWA, as I said, in terms of - are there any sort of – I think your question was, are there, we got any sort of model changes or something like that in the back pocket? Nothing I would – nothing I would call out. I mean, as the rule changes it may or may not happen on software intangibles as SME factors that we didn't put through. I mean these are relatively small, and then I wouldn't call them out as sort of big drivers of our capital ratio. I think really what will be the – as we look at it now for the third of a week into July, will be just weather volatility in markets sort of goes back to anything like they were sort of in the March-April period that that will transmit some pro-cyclicality. If that does, RWAs will inflate and we're okay with our capital ratio going back a bit. If it doesn't, then it might be sort of more what we are used to. In terms of the fourth quarter, it does tend to be – it's just the way the – because you've got Christmas and New Year right at the back end, the trading book, settlement balances, et cetera, just tend to be very low at that point in the year. So you do get a sort of an additional, if you like, tailwind if that remains the case this year into the fourth quarter, which don’t think you've seen in most years now. So not much more I will give other than that, Chris.

Thanks very much guys.

Yes, thanks for your question Chris. Can we have the next question please?

Our next question comes from Alvaro Serrano with Morgan Stanley. Please go ahead.

Hi, can you hear me right?

No, [indiscernible] Alvaro.

Is this better?

Yes, slightly better. Yes, go ahead.

Sorry. Most of my questions have been answered, but I had a follow up call – follow-up question on provisions. You've seen quite a lot – I mean, you've done obviously a good effort topping up the reserve build and credit cards, but just qualitatively, your balances in credit cards are down 18% I think in the UK, and surely more than double digit in the U.S. From a qualitative point of view, can you give us an impression how that de-risked your book? What kind of clients are paying down the balances? I don’t know if you have any color on the rating of those clients. Is it good clients that are paying it down or is it across the board? Is it a high balance or small balance? Just something that can you give us a qualitative impression of is that really de-risking the book or the riskier clients are still there? Obviously, holidays have almost reduced to zero, but just qualitative on the balances and related to that in obviously in Q1, you had a big oil sort of reserve. I think it was £300 million. Oil prices now are much better versus your Q1 in your wholesale exposure, what areas of the portfolio you are more concerned about? Would you say retail is now the major concern? And then how do you see the reserve building up in the wholesale in the second half and not just in the second half, but medium term again from a qualitative point of view? Thanks.

Yes, thanks Alvaro, why don't I take both of them. In terms of the balance reductions, I don't characterize it as a vertical slice. We didn't see a particular skew towards more riskier or less riskier credits both in the U.S. and the UK. I think the reduction in balances was as much driven by just people spending less and that finding its way into lower balances rather than those extra 40 [ph] because it is paying off their cards and those that couldn't – were leaving their balances running, we didn't really see that at all. What we did see at a very marginal level was on payment holidays, those that are if you like more riskier credits, having a higher propensity to take payment holidays. But looking at the numbers now, I'd say that’s sort of behind us and leave us sort of in the back in the box if you like, rather than in the sort of a special payment holiday categories you can see in our disclosures. For example, you'll see our FICO scores in the U.S. broadly speaking, what they were sort of before the pandemic. So we haven't really deteriorated there either. In terms of – the other thing I would say just in terms of – just asking everybody to take a look at coverage ratios because provisioning is something that is difficult given that we're sort of making sort of quite long range estimates based on uncertainty around the economics, uncertainty around governance support schemes, customer behaviors, or whatever. What we've tried to do is to be as prudent as is appropriate and have what I would consider strong coverage ratios and some of them are more riskiest parts of the book. So on the retail side, UK cards were at 16% provision rates and U.S. cards at 14%. I mean, these are pretty high by any historical measure – if for those of you that will have this data. The last financial crisis, our UK card business that NPLs, cumulative NPL was 6.9%. So we feel appropriately provided, given the credit profile of the books there. Your other question on wholesale, the areas we’re most focused on we called out on our slide, it's about £20 billion of exposure. And it's in the sectors that you would expect transportation, retail, hospitality, et cetera. We’re 4% covered there. Now, you've got to remember, most of that, again, is non-defaulted for these sort of book classified [ph] provisions. We do see quite a bit of hedging there. We’re 25% synthetically hedged across those sectors. We obviously have collateral levels. Covenant triggers we're insiders to the company and these are much more of a sort of if you like bottoms up name by name assessment of what's the right provision level. So you'll have the numbers there in the slide, but we think we're well provided and relatively modest in terms of exposure to us. So, hopefully, that will give you the qualitative commentary.

Thanks.

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

The next question on the line comes from Rohith Chandra-Rajan of Bank of America. Please go ahead.

Hi, good morning. It’s Rohith.

Hi, Rohit.

Just to follow up question on Alvaro’s question on just in terms of sort of behavioral activities that might give us some indication of credit quality going forward. I think the comments on the cards book and the payment holidays were helpful. Are you able to expand that at all in terms of I guess the corporate business? You referred earlier to what your sort of acquiring businesses is telling you about SMEs opens for business? Is it much there on activity levels? What type of activities for SMEs? And then presumably on the large corporates the fact that primary market – capital markets have been opened, presumably is helpful in those large corporates being able to refinance. Sort of first one just in terms of any lead indicators on credit quality? And then the second one was just to be UK NIM sort of guidance reiterated for the 250 to 260 NIMs for the year as a whole. It looks like a spread of 230 to 250 in the second half, just wondering what the uncertainties are that will drive that sort of 20 basis point range in that margin for the second half, please?

I mean, I can start and give some color on your first question and Tushar will pick up on the second one. And on the consumer side, I think what was a little bit of a surprise to us on receivables was – I think historically going into an economic downturn, you see consumers and small businesses actually increase their reliance on short-term credit in order to maintain a lifestyle or to keep a business functioning. And then as you come out of recession, they more normalized. In this event, what clearly was driving consumer and small business behavior was fear. And so people who have good credit quality and even those businesses that stayed open, use of short-term credit declined and they wanted to get their balance sheets in shape less worried about their own personal income statement. And you also see that in this - in the payment holidays, you see this very interesting move where we've done hundreds of thousands of payment holidays. In the mortgage payment holiday portfolio, we're actually seeing a slight uptick and requests for extensions of payment holidays as the holiday periods come to an end. In the card side as we showed, people are not asking to expand or roll their payment holidays. So the consumer is acting rationally in terms of – okay I will roll my debt which has got a very low interest rate number to it, like a mortgage, but I'm not going to continue the payment holiday on something that's got an interest rate in the high teens. So they're acting rationally and I think it is – it's resulting in a book which is maintaining its overall credit quality and we’ll expect the thing to come back as we see spend numbers come back now. And…

And your question on NIM, Rohith, I mean, that's the trickiest thing to gauge there of course is balances, I mean just how quickly recover and it is quite early on in sort of post lockdown environment and quarantines and what else, but they are – I think we've seen a plateauing, we’ve seen – of balances that is we're seeing a fairly decent recovering spend levels. I think if those spend levels stay anywhere where they are at the moment, let alone continue to recover, you ought to see balances that have come after – growing shortly thereafter, but there is some uncertainty there. We don't have much to model this stuff off – only a small number of weeks post lockdown and applied over sort of a broad-ish range.

Okay, so it's really about loan mix in terms of – in terms of the BUK NIM uncertainty. So I guess you – I guess you have a – so you have a clear understanding of what the deposit impact is, but it's the asset side of the balance sheet, which is the uncertainty.

Right. Yes, and you'll probably see mortgages continue to grow and but it is the unsecured card balances how quickly they come back is a little bit harder to pull off. It's good signs, but when you see that momentum continue.

Okay, thank you very clear on both. Thank you.

Okay, can we have the next question please, operator.

Our next question comes from Guy Stebbings, Exane BNP Paribas. Please go ahead, guy.

Good morning. Thanks for taking my questions. First, actually just a quick follow up on the UK and then a question on CC&P. And I just wanted to check on the Barclays partner finance move, weather that was then captured in the Barclays consumer line if that's the case and balanced through the income line, how can the next line change from 30.60 [ph] at the first quarter. So underlying declining balances are roughly sort of double the industry level. So then the call out there, which obviously feeds into the prior question on the NIM outlook? And then on CC&P revenues, you talked to gradual recovery and some of the better spending trends in the U.S. more recently. So I'm just trying to gauge what your expected gradual recovery will look like and how we achieved some pretty sight here today, having delivered just £1.7 billion or just at £1.8 billion in the first half. If we add back the Visa headwinds, and the balance is down to 33, then we need to see quite a strong recovery to get back to market expectations for the £3.9 billion this year, and north of £4 billion thereafter. So should we assume a fundamentally different outlook to find market expectations given the environment or whatnot, what sorts of revenue margin expansion and balanced growth are you targeting? Thanks.

Yes, thanks Guy. Let me tell you the second one first and I'll come back to your first question on the UK. Yes, we – there are three things on CCP that I think will be tailwinds into the second half of the year. I talked about net interest margin on the liability side, you know, talked about sort of 50 basis points margin pickup towards the back end of the quarter on our liability balances and we may drop deposit rates again, so that is a tailwind. You know, quite obviously very different from where we were in Q2. Second thing is payments. The transmission effect on payments is relatively quick. You've got mostly in our acquiring business, now has been the bulk of those businesses are actually open and you've seen spend level especially in the UK where acquiring businesses is most important almost back to pre-COVID levels that quickly transmits back into sort of fees. And in the U.S. for the interchange fees, it's still quite attractive the spend recovering the U.S. which will sort of translate back into fees there pretty fast as well. And then the harder one to gauge is balances really, particularly on U.S. cards. If spend levels continue, then balances will follow, but there is a delay effect there. And I think that's a little bit dependent on obviously, how the economy has perform in a post-lockdown period, did they continue as they are at the moment. And you know, in all intents and purposes, even though there is a lot of concern around infection rates and whatever, we're not really seeing any tail off in consumer strength at the moment, at which point we would expect to see balances and card openings increase. So look, I can't give you numbers on that. It's a bit too early in the quarter to start extrapolating. But those are meaningful sort of tailwinds that we'll have from this point on. And we've talked about a sort of a steady recovery, we'll see how strong that is, as we go further into the quarter. Just to answer your first question, just to help with the geography. Yes, the Barclays partner finance business is recording the first in banking line. And if you want to sort of just make sure you know, where we're calling what outwear then it creates [indiscernible] behind the scenes, has been since over the time just to point you into the right places into the disclosures that we've got.

Okay, perfect. And if I could just push you a little bit on the CC&P revenues, if those three items all talk, do come through and the balance I appreciate it's hard to gauge, but if that was to come through nicely, over the course of the half year, are you hopeful we can get back to a £1 billion type quarterly run rate revenue?

Yes, look I know you're keen on sort of trying to get me to get to a range. And I'm reluctant to do that, only because it's quite a fair old extrapolation. All I would say is, we would be disappointed if there isn't, a pretty recovery into the third quarter that has momentum into the fourth quarter and beyond, it's a momentum business. So once things start moving in the right direction, they'll be sort of follow through. Is that - how strong that follow through is, we're pretty okay at the moment, spender rules are improving, margins are improving on the liability side, if that will continue, then I think we're cautiously optimistic, but it's just early days in a post-lockdown economy to give you too much precise guidance.

Okay, great. Thank you.

Thanks Guy. Can we ask the next question, please, operator.

The last question we have time for today comes from Edward Firth of KBW. Please go ahead.

Yes, good morning everybody.

Good morning.

Hi, can I start you or bring you back to cost, because if I look at your - I think it was your second slide Tushar, you're talking about income up 8%, and cost down 4%. And I guess, I followed around banks for a while, I mean that those numbers are almost unbelievable. And I guess looking at the share price reaction today, I'm not alone in that concern. So, and if I look into the second half consensus, you're looking - I mean, consensus seems to be looking at revenue falling something like £2 billion and yet costs actually going up a little bit. So it only felt there is a complete disconnect between what is happening to your costs and what is happening to your revenue. So could you help me a bit with that? And in particular, I'm not asking for a number, but I mean, if the revenue environment stays very benign, should we expect costs at the current level, should they grow quite substantially from here, and also if we see a big fall off in investment banking revenues, have you got flexibility could that minus 4 be minus 6 or minus 8 to the full year. So, I mean, what are the sort of levers you can pull and what sort of comp up can you give us on that?

Yes, so why don’t I start and Jes may want to add a few key comments. And but I think, first of all, the backdrop I'd start with is just, because just look at the trend over the last two or three years. We have been reducing our cost base in absolute terms regardless of size, shape, the company and the economy we're operating in. So cost discipline is very important to us and that's something that's the constant focus of this management team. And I'd like to think that we've got a track record of every year reducing our costs year-on-year. This year, obviously much more complicated because, as Jes sort of mentioned earlier on in the call, when we went into lockdown, plans that we had in place, we put on ice. Like for example, we were very public that we wouldn't lay anybody off until at least September. People that we did lay off actually, before we went into lockdown, we actually gave them even though we had this is completely discretionary on our part, but just to try and do the right thing for people, gave them the same terms as those that were on government furlough schemes, but paid for by ourselves. So now that comes at a cost on attrition levels fall quite meaningfully, job market sort of then dries up. So we got a higher headcount and both levels, lower attrition and sort of staff reduction programs that we didn't implement. And then of course, just the cost of keeping businesses open with social distancing requirements and deep cleaning and all the various other things that go alongside that. So, it is an unusual cost shape, but I think as we go into - if you like normalized operating environment, whatever that is…

Again, putting in rank order the sort of priorities we focused on in this unprecedented medical crisis, leading to pretty much an unprecedented economic crisis leading to an unprecedented government and central bank response, first and foremost is the financial integrity of the bank. So tracking the liquidity profile of the bank, tracking the capital level of the bank, and making sure if at all possible to remain profitable each quarter, which and we think accomplished all three of those in the first half of the year, record level of capital, record level of liquidity and profitable through each quarter, and then that profitability story, there is a 27% improvement in pre-provision earnings year-over-year. Now, we take a hard look at that and we are encouraged by the sort of move forward led by the CIB. But then the next thing you look at is what can we do to give back to our communities and now we have 85,000 employees, we can move that employment number up and down as we – when we got here four and a half years ago, we were about 120,000 employees. So we will make the moves when we need to make it. We used to have when we got here, 1400 branches, now we're running 800 branches. So can manage our costs, but we're going to do it with a focus on the challenges that particularly the UK is going through, and we're going to be there with payment holidays and overdraft fee waivers and banks fee waivers and keeping people employed. So you're going to have for sure distortions in an environment like this, which will settle down I think. As the economy starts to settle down, we hope to see that in the third and fourth quarter. So, yes, big positive job movement led very much by a markets business, which hit all sorts of records, but we have our pulse on what is going on in the bank. We're serving the communities and the consumers that we need to. We're partnering with our regulators and the central bank and governments. I think the bank is in a good place and so I guess that would be my comment.

Sure. Could I just come back quickly on that, and I know I'm running out of time, but a lot of the things you highlighted from the first half are things that I would have thought have increased your cost not decreased them, you're stopping redundancy, relocating people et cetera, et cetera. And so, it's still a struggle to me to see why people seem to be expecting a big fall off in revenue in the second half, but actually costs to beat it up slightly. And I'm just trying to think is that a sensible type of forecast? Is that, do you feel that that's the right way of looking at it or what?

Yes, the only thing I'll say is, we had - we were on a declining cost trajectory as we came into 2020. You've seen the momentum in the first half. That momentum will be frozen a little bit by deliberate actions that Jes called out and we've done, so don't have the same momentum going for second half. That's just the way it is for all of the good reasons we talked about. But there are new ways of working and new ways of doing things that none of us thought were - was that possible. That's really interesting opportunities that we'll start examining and see what that means. So it's probably more a 2021 conversation. Income wise, look, we'll see where the CIB goes like, you know, you talked about expecting the consumer businesses to start recovering. You know, so there'll be some different trends in the different businesses there.

Just two anecdotes. The technology spend of moving 60,000 people to work from their kitchen tables where we have compliance, where we have controls, where we have insights into what our systems are, that dispersed around the world. You know, that's a lot of money to set all that up and track it. And, we gave pretty much [indiscernible] to our technology people to allow us to work as remotely as we have. Now the flip side of that, are a whole lot of people jumping on air planes right now. So our travel and leisure expense absolutely collapsed in the first half of the year. It was incumbent upon Tushar and myself as the economy begins to normalize, we look at the spend and technology and ops and as we bring people back into offices, is that decrease, and do we think about rationalizing the real estate footprint. And on the flip side, we'll probably start to let people to go out and visit a client every now and then. So I think – and we will keep our hand on those cost levers to ensure the financial integrity of the bank, the profitability of the bank, and the capital strength of the bank.

Great, Thanks so much.

Thanks, we've gone past our allotted time. So sorry to keep you on a bit longer, but hopefully we'll see you virtually in some way or another over the next few days and weeks. With that, we'll close the meeting here. Thank you very much.

Ladies and gentlemen, this does conclude today's call. Thank you for joining. You may now disconnect your lines.