Barclays PLC (BCS) 2022 Q2 法說會逐字稿

Welcome to the Barclays Half Year 2022 Results Analyst and Investor Conference Call. I will now hand you over to CF Venkatakrishnan, Group Chief Executive; and Anna Cross, Group Finance Director.

Good morning, everyone. I'm pleased to be able to report strong financial results for the first half of 2022 for Barclays. Our profit before tax was GBP 3.7 billion, leading to an attributable profit of GBP 2.5 billion. This came after absorbing a net impact of around GBP 580 million over the half year relating to the over issuance of securities under our U.S. shelf registration statement. The group income was GBP 13.2 billion. Excluding the income benefit from hedging arrangements related to the managing of the impact of the over issuance, the group income was GBP 12.4 billion, which is up 10% year-on-year.

Our statutory group return on tangible equity was 10.1%. We continue to focus on costs, particularly given inflation pressures. We are also focused on the readiness of our balance sheet to withstand macroeconomic challenges. We remain mindful that we need to continue to support customers and clients through what is an evolving and uncertain economic period. We remain well capitalized to the CET1 ratio of 13.6%. This is comfortably within our target range of 13% to 14%.

It remains one of my key priorities to target the return of excess capital to shareholders. I'm pleased to announce a half year dividend of 2.25p per share, as well as an intention to initiate a further share buyback of up to GBP 500 million. This is in addition to the GBP 1 billion share buyback, which we announced at the full year and which we have nearly completed.

Before Anna and I go into more details on earnings, let me provide a brief update with respect to the over issuance of securities under our U.S. shelf statements. We are making good progress to resolve this matter. We have agreed the terms of the rescission offer for affected customers, which we announced on the 25th of July and which will be effective on the 1st of August. We continue to engage positively and constructively with the U.S. Securities and Exchange Commission, and as we have done since we discovered and reported this item to them. In addition to an internal review, I have commissioned a council led external review of this over-issuance matter. This external review will report to the Board shortly. And we will consider all these findings carefully and take appropriate actions in response.

Anna will cover the financial impact in more depth, but we expect the total first half impact net of tax of the over-issuance matter to be around GBP 580 million, and this includes an estimated monetary penalty. We have made considerable progress improving our controls since 2016. So the fact that this over-issuance matter occurred in the first place is particularly disappointing. The necessity of a strong controls culture has never been clearer, and we will strive ceaselessly to improve it.

Returning now to our performance. I would like to mention 1 or 2 highlights from the second quarter. Profitability was strong with the second quarter profit before tax of GBP 1.5 billion. Our return on tangible equity was 8.7%. This includes double-digit returns in our consumer businesses, Barclays UK, and Consumer, Cards, and Payments and returns on the Corporate and Investment Bank were impacted by the elevated litigation and conduct charges this quarter.

I'm particularly pleased that we saw continued income growth across all 3 of our operating businesses. Income in Barclays U.K. was up 6%. In Consumer, Card, and Payments, it was up 29%. And the Corporate and Investment Bank was up 10%, excluding the impact of over-issuance.

The CIB income also included a particularly strong performance in FICC, our fixed income, currency and commodity business, which was up 52% year-on-year in U.S. dollars. Across Barclays, the first half income was up 17% year-on-year. Excluding the income from hedging arrangements related to the over issuance, it was up 10% year-on-year. The drivers of this growth are varied, illustrating how our diversification strategy is working for the group. It operates at all levels, geographically; in terms of customer type, and in the revenue streams within each of our individual businesses. For instance, Barclays U.K. has seen an increase in transaction-based revenue, as well as a tailwind from rising interest rates.

In Consumer, Cards and Payments, we have benefited from balanced growth in our U.S. cards portfolio, as well as a pickup in Payments transaction activities. And in the Corporate and Investment Bank, Global Markets income grew across the half year, offsetting a slower period for banking. This is the result in markets with the investments which we have made in our client offerings and the digitization of our trading platforms, allowing us to support our clients during a period of heightened volatility.

We've also benefited from growing client wallet share in Global Markets, while the interest rate environment has helped the Corporate Bank. As a result of all of these, Barclays has been able to demonstrate steady revenue progress even in an uncertain economic and market environment. Our focus remains on supporting our customers and clients through this period of economic uncertainty. The market remains volatile in interest rates, equity prices and credit spreads. There is anticipation of a change in the real economy, which we have not yet seen. And we remain alert to signs of weakness, although we start from historically low levels of unemployment and credit distress. I'm confident that Barclays' diversification and balance sheet readiness puts the Group in a good position. We are alert to the pressures that the rising cost of living is having on our customers and our colleagues. We have adopted a range of measures to help them, and we will look to do more.

Each month, we assess millions of customer accounts and proactively contact anyone who might be showing signs of financial difficulty. Our frontline staff are trained to support vulnerable customers, including those who are struggling financially. Customers can also use the Barclays App for financial assistance services, including access to an affordability assessment and for more manageable repayment options. We are mindful of the impact on our colleagues as well as of the rising cost of plan. We recently increased space for 35,000 of our U.K.-based staff in customer facing, branch and junior support roles, providing a GBP 1,200 annual increase to their pensionable salaries.

We've taken steps to manage our balance sheet conservatively. Our lending criteria remain careful, and we have recently reviewed and updated our affordability models in light of current circumstances. We are supporting our clients to manage their risk. We are monitoring customer behavior as we keep an eye on inflationary pressures in the market. And as I've outlined already, we also continue to see the benefits of diversification.

Finally, we are maintaining robust credit card coverage ratios as balances rise. Overall, the Group has balance sheet provision of GBP 6 billion, which includes post-model adjustments of GBP 1.3 billion.

At year-end, I outlined 3 strategic priorities for the bank. These were to deliver next-generation consumer finance, sustainably grow our CIB and to capture opportunities as the world transitions to low-carbon. Across the first 6 months of this year, we have continued to invest in these priorities. These include 2 major investments in our consumer franchise, which will deliver higher yielding balances and access to new customers. The first was our acquisition of the Gap U.S. credit card portfolio. This was completed at the end of the second quarter and added 10 million accounts doubling our U.S. footprint. It will help us diversify our U.S. card business into retail from a historic weighting towards travel, and it represents a significant expansion of our online platform.

The second acquisition was that of a specialist mortgage lender in the U.K. called Kensington Mortgages. This acquisition is subject to regulatory approval. It will give us access to the specialist residential mortgage market in the U.K. As the Barclays mobile app turns 10 years old, it is rewarding to see that more than 10 million customers are now using the app. Last year, we added over 100 features and customer experience enhancements and these help our customers to manage their money in an accessible and easy way. This year will be no different. And we have already introduced a number of new features the app. For instance, our new asynchronous chat function means that we are seeing customers resolve around 40% of their queries through self-service options. We also continue to invest in the Corporate and Investment Bank to maintain our ranking of 6 for both Global Markets and banking.

In Global Markets, our client wallet share continues to increase. Between 2018 and 2021, we grew this share by about 105 basis points, making us a top 5 gainer for the period and the only non-U.S. bank in that group. We expect to continue to see good momentum in leading client revenues in the first half of this year. Finally, we are expanding our sustainable finance product offering. During the half year, we acted as lead manager on Austria's inaugural EUR 4 billion Green Bond, as well as the world's first Green sovereign inflation-linked bond transaction for the French Republic. This continues to cement our position as a leading primary dealer and market maker in European government bonds. We have also completed a further GBP 700 million worth of Green Home Mortgages this year in the U.K., meaning that we have now completed a total of GBP 1.7 billion since 2018.

We've made good progress to advance our ESG agenda in 2022, more detail on which is available in our dedicated presentation online. I'm particularly pleased with the publication of our climate strategy targets and progress, our so called Say on Climate, received support from shareholders at the Annual General Meeting, which we held in May of this year.

So in conclusion, Barclays has had a strong first half of the year. We maintained the double-digit RoTE that was a feature of our performance throughout 2021, and we continue to target a statutory RoTE greater than 10% for 2022. We have seen broad-based income growth across all our main operating businesses, underlying the value of this investment which we are making to grow Barclays, and to deliver attractive returns. And we are continuing to return excess capital to shareholders. I'm pleased to have been able to announce a half year dividend of 2.25p per share and an intention to initiate a further buyback of up to GBP 0.5 billion across our franchise. And this will continue to be a priority for me as Group Chief Executive. While I'm pleased with the performance we have shown, I'm conscious that we live in unusually uncertain times. This drives our conservative approach to managing our balance sheet, our robust provisions and our watchful stance on continued weakness in the economy.

So with that, thank you very much. And let me hand over now to Anna.

Thank you, Venkat, and good morning, everyone. For half one, our broad-based income growth partially offset the increase in costs, which reflected an elevated level of litigation and conduct charges. Impairment remains low, reflecting the quality of our books and level of provisioning.

As a result, we were able to report an EPS of 14.8p and generating a statutory RoTE for the first half of 10.1%. Today, I want to focus on 3 themes: our continued revenue momentum; our focus on costs, given the inflationary pressures; and our readiness for any macroeconomic deterioration. Before I do that, I will give you a short update on our progress on the over issuance of securities under our U.S. shelf registration statement.

We flagged previously that the cost of the rescission offer in relation to the over issuance would be sensitive to equity market movements, but also that we had hedging arrangements in place to mitigate the impact substantially. Whilst the net impact post tax on the Q2 income statement is GBP 176 million, the gross impact on the income and cost lines are significant as markets have fallen sharply in Q2. The hedging income is GBP 758 million and is in equities in CIB and the increase in the estimated cost of rescission is GBP 984 million within litigation and conduct costs.

We have announced that the rescission offer will complete in Q3. Whilst there may be some movement in the final growth effect, we don't expect material changes to the net impact. We have also progressed our discussions with the SEC in relation to a potential monetary penalty, and we've taken a charge of GBP 165 million in Q2 in anticipation of this, giving a total net impact on Q2 of GBP 341 million from the over issuance.

In Q2, we achieved a statutory RoTE of 8.7%. Income was up 24% or 10%, excluding the hedging arrangements while operating costs, which excludes L&C, were up just 3%. So the operating jaws were significantly positive. Total costs reflected both the further over-issuance provisions and a charge of GBP 165 million relating to settlements in principle in respect of industry-wide devices investigations. The CET1 ratio ended the quarter at 13.6%, and that's depressed by 19 basis points temporary effect of holding the hedge RWAs. This remains above the midpoint of our target range, and we are announcing a further share buyback of up to GBP 500 million at a half year dividend of 2.25p per share. TNAV increased 3p in the quarter to 297p per share as the 6.4p of EPS outweighed the net movement in other reserves.

I'm now going to focus on the 3 themes of revenue momentum, cost management, and our readiness for any macroeconomic deterioration before I summarize the Q2 results of the individual businesses. Q2 continued the broad-based income momentum of Q1, and this slide highlights some key drivers.

First, loans and advances have grown year-on-year by 14% overall and matched by deposit growth of 14%. Second, increased economic activity has driven transactional fees across consumer and corporate businesses. Third, whilst the market for primary issuance remains challenging, that same environment has driven high levels of client activity across both financing and trading in the markets businesses. Finally, we have a tailwind from rising interest rates, which impact product margins across our franchises and increase the gross income from the structural hedge. We flagged the later in Q1 and are benefiting from the recent increase in the structural hedge and the role into higher long rates with Q2 gross hedge income of GBP 501 million, an increase of GBP 123 million on Q1.

Q2 income growth was 10%, excluding the over-issuance hedging. In the CIB, our diversification helped to generate 10% growth in income excluding the benefit of the hedging arrangements. The standout performance was markets where income increased 31% in sterling. FICC revenues were up 71%, reflecting increased client flow in credit and macro. Bid/offer spreads remain attractive, and we have managed risk well. As in Q1, we have helped our clients reposition themselves in a volatile rate environment.

Equities revenues were down year-on-year, excluding the over issuance hedging. However, we don't judge success on single quarters. And we are happy with the continued development of our franchise in trading and financing and increases in institutional clients wallet share over recent years. Investment banking fees were down 37% year-on-year, reflecting primary market conditions. Advisory was up 8%, and the deal pipeline remains strong.

Corporate income was up 24%, with strong growth in transaction banking more than offsetting the corporate lending income expense. The latter reflected marks we took on specific leverage finance deals and the cost of macro hedges, as we prudently managed our leveraged finance pipeline.

Income in CCP increased 29%, reflecting growth across all 3 constituent parts. In international cards, income was up 34%, U.S. net balances grew by $6.1 billion year-on-year, including $3.3 billion from the Gap back book and significant organic growth, continuing the momentum in the business. In payments, transaction turnover was up 10% year-on-year, driving income growth of 35%, which was up 10% on Q1.

Barclays U.K. grew income by 6%, predominantly in Personal Banking where continued deposit growth and a strong tailwind from rate rises are offsetting very competitive mortgage margins. Barclays card balances were broadly flat year-on-year and marginally up quarter-on-quarter as we manage the income risk trade-off carefully given the economic outlook.

Looking now at costs. We manage our statutory costs including litigation and conduct charges, but the growth impact of the over issuance risks of skewing our underlying cost control. In this inflationary environment, we are particularly focused on operating leverage. To that end, it's helpful to start by looking at the cost/income ratio, excluding the effect of the over issuance charges, which showed positive underlying jaws. Income growth, excluding the hedging arrangements, improved the ratio by 4.4%. Given our dollar profitability, FX also improved the ratio after the reduction in structural cost actions. This gives us the headroom to invest in the business and absorb inflation and other L&C charges. Together, these factors reduced the ratio to 62%, 2 percentage points better year-on-year. The net effect of the over issuance took the ratio back to 69%, but we do view the level of L&C in half one as exceptional and are encouraged by the trend in the underlying cost-income ratio.

We continue to face inflationary pressure, but seek to manage the cost investments with efficiency savings and remember that inflation does have a positive effect on nominal income. Overall, we continue to target a cost income ratio of below 60% over the medium term. We'll look at the cost trajectory in more detail on the next couple of slides. The chart on the left shows that the rise in half-one cost was mainly attributable to the increase in L&C charges, excluding which costs were up just 2%. We reduced structural cost actions significantly whilst increasing investment spend within base costs, which were up by 8%, excluding L&C.

We've shown on the right-hand side, some of the factors behind this increase of GBP 0.5 billion, of which GBP 0.3 billion was the result of inflation and FX movements. However, I would also highlight the deliberate increase in investment spend, which is partly funded by a further increase in efficiency savings. As you would expect, they are closely aligned with the 3 strategic priorities Venkat has highlighted, including Gap and areas of the CIB, where we see sustainable growth opportunities. Of course, it also reflects the business growth we're enjoying already and enhanced technology, cybersecurity and fraud detection. Looking next at our updated cost flight path.

On the left, you can see our cost progression by quarter, split by business. Q2 costs, excluding L&C, were up 3% year-on-year, focused on investments for growth in CCP and CIB. The strength of the dollar, combined with the increased L&C charges are the main factors behind our updated cost guidance. At Q1, our guidance for statutory costs was around GBP 15 billion for the year. This assumed a dollar rate of GBP 1.31 to GBP 1. We were also not anticipating this level of L&C in Q2 although we are pleased to have made progress in resolving these matters.

I would highlight that a strong dollar is a net profit tailwind and that the additional rescission costs are substantially offset in income. Assuming an average dollar rate of 1.23 for the second half, we now expect total operating expenses of around GBP 16.7 billion for 2022. I'm not going to give absolute cost guidance for 2023. We will continue to manage the trade-off between cost efficiencies and investments and we would expect L&C to be materially lower next year. Of course, the full year effect of inflationary pressure will be a headwind in 2023. But I would also remind you that we are investing in future income growth, for example, with the Gap partnership and the proposed Kensington acquisition.

Moving on to impairments. The net charge for the quarter was GBP 200 million compared to a release last year. A lot of factors feed into this net charge, so I want to focus first on our risk experience and the quality of our portfolios. Delinquency rates in the businesses remained stable at low levels with 30 days arrears in U.K. cards up 1% and in U.S. cards at 1.4%. We continue to track customer and client behavior very carefully. Given the heightened concerns over an affordability crisis in order to identify early warning signs, we have not yet seen worrying indicators and payment rates continue to be high as customers have reacted rationally to the economic environment. As a result, card balances in both the U.K. and U.S. are down on pre-pandemic levels on a local currency basis, although the latter has started to grow again this quarter, and we believe that the quality of these books is higher than before the pandemic.

As a result, despite the macroeconomic uncertainty, we are comfortable with our coverage levels with U.K. cards, for example, at 10.9% and U.S. cards at 8.4%. Our total impairment allowance was GBP 6 billion at the end of the quarter, of which GBP 1.3 billion represents post-model adjustments or PMAs, as shown on the next slide. The macroeconomic variables on MEVs, we have used at Q2 for modeled impairments are based on consensus forecasts. However, we are conscious of concerns that there could be further downside credit risk. Therefore, we are retaining significant PMAs, totaling GBP 1.3 billion.

As an illustration, I would also point out that when we model impairment using the mess for the downside one scenario, the implied increase in modeled impairment is GBP 0.5 billion which is significantly less than the PMAs for economic uncertainty we are still holding. Taken together with our coverage ratios, this supports our expectation that we will continue to have quarterly impairment charges below the pre-pandemic level in coming quarters.

The 6% growth in BUK income was accompanied by broadly flat costs, delivering strong positive jaws. The BUK RoTE was 18.4% and we're feeling positive about momentum in the business. Before I go on to Barclays International, a few words on margin expectations for BUK. The NIM for the quarter was 271 basis points, up 9 basis points on Q1, as we saw benefits from rate rises. The expectation for further rises has increased since Q1. So despite the pressure on mortgage margins and the expectation of higher pass-through on later rate rises we're upgrading our guidance for the full year to a range of 280 to 290 basis points, and we're now assuming a base rate of 2.5% by year-end. Costs and income for Barclays International included the elevated L&C charge for the quarter and the income from the hedging arrangements related to the over issuance. Despite the negative net effect from these, strong performance across the businesses delivered a RoTE of 8.4%. I'll go into more detail on the next 2 slides, beginning with the CIB.

Income excluding the hedging arrangements was up 10% and was up 35% on a statutory basis. Excluding L&C, operating costs increased by 15%, driven by investment in talent, systems and technology support income growth initiatives and the impact of inflation. Overall, the CIB generated a RoTE for the quarter of 7.1%. And without the effects of the over issuance, this would have been 11.4%.

Turning now to Consumer Cards and Payments. Income in CCP increased 29%, reflecting growth across international cards, payments and the private bank. Costs increased by 11%, delivering strong positive jaws. The impairment charge was GBP 144 million compared to a small release last year. This reflected an increase in U.S. card balances including the acquisition of the Gap portfolio in late June. The RoTE was 17.8%.

Turning now to head office. The income expense of GBP 132 million included a GBP 42 million loss on sales from the partial disposal of our stake in Absa and the loss before tax for the quarter was GBP 180 million. Before I move on to capital, a quick summary of our liquidity and funding. We remain highly liquid and well-funded with a liquidity coverage ratio of 156% and a loan-to-deposit ratio of 70%.

Finishing with capital. The CET1 ratio ended the quarter up 13.6%, comfortably within our target range of 13% to 14%. Our capital generation from underlying profits were strong, contributing 42 basis points. This excludes the effect of the over issuance, which we've called out separately on the bridge. The net reduction from 13.8% in the quarter was the result of a number of factors. Over time, increases in interest rates are a tailwind to profitability. But in the quarter, the effect on reserves caused a headwind of 17 basis points, principally through the fair value effect on bond holdings. The over issuance had an overall impact of 17 basis points in the quarter from a net loss of GBP 341 million including the estimated SEC monetary penalty and the temporary increase in RWAs associated with the hedging arrangements.

Other factors increasing RWAs were GBP 2 billion for the Gap portfolio and investment in business growth, particularly in CIB. There was a GBP 9 billion RWA increase from FX movements. This had a little effect on the ratio due to its positive effects on the currency translation reserve. We've shown on the right-hand side, the effects of a further share buyback, which will come off capital in Q3 and the removal of the RWAs on the over-issuance hedging arrangements, which together would be a small net positive.

Looking at our capital requirements. Our MDA hurdle is 10.9%. So we have comfortable headroom at current levels. The Bank of England expects the introduction of the countercyclical buffer at year-end to be followed by a further increase in July next year. This would take our MDA to 11.9%, assuming no offset from reduction in Pillar 2a requirements. Going forward, we remain confident in the organic capital generation of the group, and our capital ratio target range remains 13% to 14%. Finally, on leverage, our spot leverage ratio was 5.1%, and the average U.K. leverage was 4.7%.

So to summarize, we reported statutory earnings per share of 6.4p for Q2 and generated an 8.7% rating despite elevated litigation and conduct charges in the quarter. We've made considerable progress against resolving the over issuance of securities in the U.S., and we have confidence in the continued revenue momentum across all of our businesses. We are well provisioned in readiness for potential deteriorations in the macroeconomic environment and expect the run rate for impairment to be below pre-pandemic levels in the coming quarters.

We are particularly focused on the cost trajectory given inflationary pressures. Given FX movements and the Q2 L&C charges, we have updated our cost guidance for the year to around GBP 16.7 billion. Overall, the business performance is robust, and we're focused on delivering our target of double-digit RoTE this year and on a sustainable basis going forward. Our capital ratio remains strong, and we're confident of being able to invest for future growth and delivering attractive capital returns to shareholders. As a result, we have announced a half year dividend of 2.25p and a further share buyback of up to GBP 500 million, which we expect to begin shortly following completion of the current buyback of GBP 1 billion.

Thank you. And we will now take your questions. And as usual, I would ask that you limit yourself to 2 per person, so that we get a chance to get around to everyone.

(Operator Instructions) Our first question is from Robin Down from HSBC.

I suspect you're going to get a lot through questions on margins and costs. So I'll kind of leave that to others. But my 2 questions. The first one, you've kind of given us the FX impact on the cost base of around kind of GBP 300 million. I was wondering whether or not you would be prepared to give us the revenue equivalent number or failing that, whether if you could give us some sort of indication as to whether if we use the kind of broad 75% cost income ratio of the international bank, whether that would be a good way of getting a current proxy for the revenue benefit that would match up against that FX cost movement?

And then the second question, just probably taking a bit of a step back and a broader question. You're still going for a greater than 10% RoTE target for this year despite the additional litigation hits coming through in Q2. When I look at consensus, I think it's been around 8.3% for this year. There's a really substantial gap between where you are and where consensus is. So can I just clarify and make sure you're not excluding anything from that 10% kind of RoTE calculation? And secondly, when you look at consensus, are there particular lines that you look at and you think, yes, the analysts have got that completely wrong? Obviously, you're giving us a cost base. So it's not around costs. But whereabouts are you looking? Is it sort of tax? Is it the revenue lines? Is it the impairment line? Or combination of the 3?

So I'll take both of those, then I'll hand to Venkat. You're not the first person to ask us for those FX impacts. I'm not going to throw out a number on this call. It's something that we're very conscious of in the context of the movement in the dollar. So it's something that we'll certainly consider for future quarters. So I hear you, and understand that you would want to understand that point. On your second one, you're right. We continue to guide for greater than 10% for this year and ongoing. The key difference that we see is really around revenue momentum.

So we've seen 10% in the first half, and it's very, very broad-based, Robin. So we're looking at a recovery in our consumer businesses, both in the U.K. and in the U.S. We're also seeing a recovery in our businesses that are actually geared to the nominal economy like transaction banking and payments. And whilst we may see some moderation in volatility, we're pleased with the market share gains that we've made across markets. And if that volatility were to dissipate, then we would expect primary issuance to come back. So it feels like the key difference between ourselves and the outside world is really around revenue. Of course, we also do think that impairment will remain lower than pre-pandemic. And again, that's another piece of guidance that we've given. So from our perspective, we remain confident in that flight path. Venkat?

Yes. I would like to emphasize what Anna just said. We talk about having built a diversified business and continuing to do so. And sometimes what that means is, if something does relatively less well, something else offsets it. In this quarter, unusually, what you're seeing across all of our lines of business is a sense of revenue strength and momentum, which we think for the shorter term will carry forward. So you're seeing this top line growth in markets, and you're seeing a top -- even adjusting for the securities over issuance, you're seeing top line growth in costs and payments, as Anna said, and in our U.K. retail bank. If there's any place where there's been diversification, meaning something offsetting something else is within the corporate and investment bank where the banking numbers have clearly fallen off, but been more than offset by what's going on in markets. So I think you should get a sense of confidence in the way the business has been performing in the first half of this year.

Our next question is from Joseph Dickerson from Societe Generale.

Last time I checked I'm from Jefferies, not Societe Generale, but fair enough.

We love to see you in English. Don't worry.

All right. Well, I'm happy to ask in French, if you want. But anyway, how do you think about -- how are you thinking about the cost trajectory for 2023? Because you've had quite a lot of noise in the 2022 base, whether it was the L&C charges that won't recur, possibly higher investment spend around Gap and so forth because it's interesting on your comments on the broad-based revenue momentum. It seems like you'll have a sustainably higher base going into 2023. And when I look at the 2023 numbers, the consensus pretax looks a little light because it doesn't really embed any revenue growth. I'm just wondering your thoughts around -- you've talked about some of the momentum on the top line, but just how should we think about what drops out of the out of the cost base next year?

So you can see what we've done in the first half. So income growth of 2% operating -- sorry, income growth of 10%, operating cost growth of 2%. So hopefully, that helps you understand that our real focus here is operating leverage. And whilst we've guided the costs up in this year, you'll see that the moving parts are actually FX, which are net P&L positive and L&C, which is largely offset in the income line. If I take that into next year, I'm not going to guide you at this point in time, specifically on costs because there are too many moving parts and too many decisions. However, let me help you understand how we think about it. Inflation effects are obviously building.

Those inflation effects, however, also impacts our income line, whether that be through the transactional businesses in payments and corporate or even into the consumer businesses. So that's definitely a headwind. On efficiency, however, you'll see also in the half. We've shown you what we've driven in efficiency. And I would remind you that in our 2021 results, we actually took 2 charges around real estate and around the BUK transformation that we said we believed would start to benefit from the back end of '22 and into '23. FX will be what it will be. At the moment, it's a net benefit to the P&L, but a headwind in the cost line in isolation.

The income momentum though, here is really important because it gives us the opportunity to invest selectively, whether that be in the 3 strategic priorities that Venkat taken us through or alternatively in structural cost actions, which we've done episodically in the past when we do it, we tend to have an eye on returns. But if I just go through business by business, in BUK, we've given you NIM guidance for the current year. That should indicate to you the momentum that we think that business has on the exit.

You can see from the half year that we're controlling costs, and we set off our transformation program last year. And of course, much of the income benefit that's coming through in BUK, is coming from the structural hedge now, which obviously doesn't have a marginal cost associated with it. In CCP, you're right. What we've seen as a cost build ahead of any associated income. That's not just Gap, because obviously, we've had costs for Gap, but the balances came in at the very end of the quarter. So we've not seen that benefit yet. But it's also true of the organic growth in the business, where as we restarted post COVID, there's obviously the J curve effect. And also within CCP, although it's much smaller, don't forget about payments, which is geared to the nominal economy and the marginal cost, again, of extending that business is not significant.

The hard one is the CIB. I said before; markets, we've seen a share of wallet increase, but also buoyed up by volatility, there may be offset with banking if that volatility drops off. But here don't forget the momentum that we've got in our corporate business, particularly on transaction banking, which is geared again to nominal economic activity in the business, and is an accrual franchise business. We will invest selectively in the CIB. And as we do so, you'd expect us to do so in a way that helps us underpin the diversification that Venkat talked about. So hopefully, that's helpful in terms of building blocks, Joe. We're very focused on operating leverage, as you would expect with the income momentum that we have, but also on returns. And just to remind you of that 10%, and we'll use all the levers that we have in order to manage that 10% return for the business. Venkat, would you add anything?

So just one piece of detail within all of that. Of course, I completely agree with the thesis, and strongly endorse the thesis and as laid out, within markets, there is a part of it which comes from trading, which will be -- which is amplified by higher volatility and the volatility goes down, as Anna says, hopefully, the banking market picks up. But also within the markets business, there is a substantial growth we've had over many years in our financing businesses, both in equities and fixed income. And I think as rates are rising and spreads are widening, there is more scope looking forward for revenue gains from fixed income financing where we have a leading market share, and that part of it recovers. So even if volatility dampens at higher levels of rate there are part of the markets business that will continue to do well, I hope.

Our next question is from Omar Keenan from Crédit Suisse.

I've got 2 questions, please. One on capital and one on Consumer Cards and Payments. So if I start off with capital, and I look at the core Tier 1 ratio; so if I take off the 40 bps for Kensington and pensions and add 20 bps for the role of the hedge, then it looks like the ratio is around 13.2% today. And I see the buyback program that was announced they clearly expressed your confidence in the capital position. But I was hoping you could give us your thoughts around the sensitivity of the ratio to rating migration, if we have a weaker economic environment next year, perhaps with lower house prices or corporates that have some rating migration. Then if you could give us an idea of the sensitivity of the ratio to that, that would be really helpful. And my second question is on Consumer Cards and Payments where the result was very strong in the quarter, and understand the drivers behind the NII. But if I look at the net income and annualize that, that seems like quite an interesting number relative to where consensus is. Can you give us any spare about whether all of that figure is recurring and we can take it forward?

Omar, why don't I take that? So you're right, in the sort of lots of quarters of the year, we are expecting a pension headwind. Just to remind you that, that is timing. It's always been in our capital flight path. It's a timing event essentially pulling it forward into the current year. And on Kensington, we expect that to be around 12 basis points and the buyback roughly 15. Going in the opposite direction, of course, we've got the roll off of the hedges associated with the rescission offer, and that's about 20 basis points and more than offset the buyback that we've announced for the half year. And our position as we look at the end ratio of 13.6%, we're very confident in the capital generation of the businesses. And I go back to what I've said before about income momentum, the impact that we've had in the quarter from the rescission offer itself, we would not expect to repeat some of the volatility in the ratio has been -- sorry, some of that drawdown in the ratio has also been driven by volatility in RWAs and also business growth that we're seeing in the income beat.

So we're very comfortable with the ratio at 13.6%, and that's why we've announced the buyback. Just to remind you, generating greater than 10% RoTE is equivalent to 150 basis points of capital generation. We are confident in continuing to do that. And we'll deploy that across maintaining an appropriate ratio, investing in the business, and returning capital to shareholders as we've done in Q2.

Just picking up on your CC&P comments, what we're seeing in CC&P is not only balanced bills, but we're also seeing increased purchase activity in the U.S. That doesn't always translate through to balance bill because customers are being cautious in the current environment, and they're repaying at very high rates. But it does mean that we are generating interchange income, which is what you're seeing coming through there. So to the extent that we see a continuation of that buoyant purchase activity, which in part is driven by nominal economic activity. So inflation is a bit of a tailwind there. We would expect that to continue.

Are there any comments that you can make around the sensitivity-to-rating migration in RWAs if we have a weaker economic environment next year?

Yes. I mean we're very mindful of it, Omar. I wouldn't give you a sensitivity here. At this point in time, we're actually seeing quite the opposite. We're seeing an improvement in book quality. So if you look at our RWA tables, we're actually seeing things drift back the other way. Clearly, if we see a downturn in the economy, then we will see some RWA inflation. But that's not reflected either in the macroeconomic variables that we're using as consensus nor indeed in what we actually experienced in the real effects coming through. So delinquencies are low, the watch lists are very low. So yes, you're right, it could be a factor, but it's not something that we are seeing at this point in time.

Okay. Great. And the GBP 464 million, we can annualize that number that there's nothing exceptional in there?

In terms of the other income?

Yes, exactly.

The only thing I would call out, Omar, is FX. So just be mindful of that. So obviously, the underlying driver is purchase activity, which is obviously driven by the increased number of customers that we have, you should annualize that, but the FX will be what it will be.

Our next question is from Rob Noble from Deutsche Bank.

Can you give us a breakdown of the impairment charge that you took in the quarter? So what's the day 1 impact of the Gap portfolio, the impact of the economic outlook changes and any changes in the PMAs, and what will be the underlying charge actually is? And also, how big was the mark against the leveraged finance portfolio in the CIB? And then secondly, you issued quite a couple of high cost AT1 this quarter. So what's the plan for issuance over the next 18 months from AT1s? And as rates rise, should we expect the Tier 1 cost of your AT1 portfolio to rise as well?

Okay. I'll take both of those, looks like you sneaked in 3 actually, but we'll let that go. So in terms of impairment, we're not going to talk about impairment associated with any particular partner in the U.S. However, what I would say is that the PMAs are completely unchanged from the prior quarter. We've maintained our GBP 1.3 billion. So what you're seeing flowing through is the underlying charge, which is elevated in part by that Gap portfolio. We've disclosed to you the scale of the portfolio. So I'm sure you would be able to put together some estimates around that. In relation to the marks, we haven't disclosed the marks. That's not something that we have done or will do. However, here's how I would think about it. The marks are included in the corporate lending line.

Last quarter, we talked to you about the fact that the impact of the hedges against the syndicate portfolio we've increased those hedges and that the cost of those hedges had also increased. So you saw a step down into Q1 and that's continued to happen in the second quarter. So given the risk in the environment, those hedge costs remain high, and we are hedging a higher proportion of the portfolio. And then the other thing that's going on in there is the marks. So hopefully, that will help you compare the 2 quarter numbers. And just remember, there's 2 things going on in the that the marks plus the increase in the hedge. And then the last point, I would say, around the AT1s. We are a programmatic issuer.

We'd expect to issue around GBP 9 billion in the year. We look across our full stack. We look at AT1 Tier 2 senior, and we'll continue to do that in half two. The 2 that we did in the quarter did have a higher headline rate, but remember that the underlying swap cost or the underlying swap cost is something that we hedge. So what you should be focused on is actually the margin, so net on those transactions, and that is not higher than the portfolio that we're actually carrying as a whole. So I wouldn't think about it as markedly different from what we're already holding.

Our next question is from Jonathan Pierce from Numis.

Just one, please, and it's just to check my math on something. The structural hedge revenue in the second quarter, I think it's Slide 35 or something, shot up even more than I was expecting. It is up about GBP 120 million, I think, on Q1. Historically, you've told us that 60% of that falls into Barclays U.K. So that would be about GBP 70 million, if that's right. But the Barclays U.K. NII only went up GBP 50 million, there or thereabouts. Obviously, you've got more headwinds, but you've obviously got the base rate increases on the unhedged deposits in Barclays U.K. as well. So is that math still right that the 60% mark of the structural hedge is falling into Barclays U.K.? Or is something odd happened in the second quarter where more of it has gone into CIB?

So the structural hedge income did go up significantly. That's not just the ongoing rolling of the hedge, but it's also the fact that we've extended the hedge, Jonathan. So we put on an additional GBP 18 billion in the quarter. And obviously, that's gone straight in at current rates. So it has quite an impact, but an eye-catching impact. We are talking there about the gross income on the hedge. And within Barclays U.K., yes, we do see 60% of the benefit flowing into there. So I'm not quite sure how your math is working, but perhaps we can help you with that offline.

Yes. I mean it was just simply 60% of the 120 improved, would be about GBP 70 million in Barclays U.K. But Barclays U.K. NII didn't go up by GBP 70 million, it went up by GBP 50 million. I mean I guess the new hedges, (inaudible) you've got the swap costs against that, so you're not getting the full 2.5% 5-year rates. You've got an inflating -- you had, but still just very surprised that the NII in Barclays U.K. only went up by 50. I'm just wondering if there's other thing going on there?

Well, I mean, I guess the other thing to think about in Jonathan is the impact of mortgage margins. So it's not just the savings rates and the structural hedge that are going on. You've got mortgage margins, which continue to be extremely competitive. And we're also seeing, I guess, impact on other smaller products, maybe like business banking, cards, et cetera, et cetera. So you're right in isolation, but don't forget about the other product impact.

Our next question is from Martin Leitgeb from Goldman Sachs.

Could I just ask, firstly, on the outlook for credit card balances, both in the U.K. and in the U.S., obviously, a strong progression quarter-on-quarter. And I was just wondering how you think about the kind of opposing outlook in terms of one coming out of dynamic restrictions, which should be supportive of card balance and secondly, obviously, heading into to, I believe on economic slowdown. How do you see the prospect credit card growth, both in the U.S. and the U.K. as we head into 2023? And secondly, I was wondering on mortgages in the U.K. You mentioned pricing remains competitive. Have you noticed any reasonable change over recent months in terms of peer group behavior? Is pricing stabilizing, improving?

Okay. So in terms of U.K. cards, we guided at Q1 that we would expect that to be the low point of U.K. card balances. That's broadly what we've seen. And there are a few behavioral factors in there to consider. Firstly, purchase activity, both in quantum and type is up. So we are seeing the return of the kind of purchases that we were looking for, for example, like travel. But customer repayment rates remain very elevated. That's very rational in the current environment and probably speaks to that offsetting impact from economic uncertainty that you're talking about. We've also seen some growth in promotional balances. So we are participating in the 0% balance transfer market. But we're doing so with a real eye on sustainable returns.

So you won't see it at the top of those tables, we're very conscious on returns as we participate there. And what you will notice in our card income over time, is what we've mentioned before about launching additional products that work -- that are more focused on spend versus lend. So I think what you've seen balances stabilize. The nature of those balances is changing quite considerably. Looking forward, I think we probably expect repayment rates to remain elevated given the uncertainty. And I think that the increase in sort of customer spending is probably going to be more muted than perhaps we might have expected 6 or 9 months ago.

So I think what you're going to see is probably a little bit of muted growth on those card balances in the U.K. As it relates to mortgage pricing, we've seen mortgage pricing continue to pick up as a headline matter in response to rising swaps. There is always a lag, but it has broadly tracked those swap rates with that lag. What really matters, though, is the difference between front book and back book margins. And front book margins, I would say, broadly across the industry are below the portfolio margins. So I would say that front book rates are delivering an attractive return for us. So we're still very pleased with the market. But just the arithmetical effect on the overall portfolio will be net negative between here and the year-end we would expect. And that's all included in our full year NIM guidance, which you'll note that we've upgraded today to be between GBP 280 million and GBP 290 million. So whilst there's a mortgage drag, there is obviously the opposite impact of that in liability margins, and of course the structural hedge.

Our next question is from Chris Cant from Autonomous.

Could you give us an update on the payments opportunity that you talked about at 1Q '21, please? At that point, you said you saw a GBP 900 million opportunity there on a 3-year view and just conscious of the very strong year-over-year growth you've seen in CC&P payments. So how much of that GBP 900 million is now in the run rate? And has the assessment of that GBP 900 million changed at all up or down? And then if I could ask on FX. So I mean, you declined to answer an earlier question on this.

You got several questions at the 1Q Analyst Meeting on FX. What is the reason you feel unable to give some proper color on FX splits across your P&L to help us understand this better? Are you -- is there some competitive concern that prevents you from trying to help the market understand this? Or are you worried perhaps that we're going to be able to pick apart the performance of the group more clearly if we have the currency split? I'm genuinely confused as to why you want to provide some color or disclosure here given that FX is something that the market is obviously trying to factor into numbers and you've given us the answer for the cost line. And presumably, you want us to be able to factor FX into the revenue line. But we're not really getting much information to help us model that out. So what is the reason you feel unable to give that kind of color, please?

Okay. I'll take those questions. So in terms of the payments opportunity, we're pleased with the progress. We're broadly on track with that target, Chris, we very frequently talk about the acquiring business. That's the one we tend to focus on. but we're also really happy with the progress of the 2 other parts of that business. So don't forget in there, there's the corporate issuing business, which is also geared to sort of economic nominal activity through T&E, et cetera. So that's growing nicely. And I'd also call out the sort of third strand, which is more around the value-added services that we provide through payments. So for example, the e-commerce gateway that we launched in Q4, and obviously, benefit from broader trends in terms of payments moving online.

So the sort of unified payment element is obviously performing well. And then obviously, the other part of it is what we see going through, for example, transactional banking, which is also performing well as corporates continue to, if you like, reemerge from COVID, we're seeing strong nominal growth, which is underpinning FX payments, trade finance, et cetera, et cetera, it's all flowing through in that line.

And on FX, I hear you, I completely understand. Hopefully, you've taken or you've seen today that we've made a step towards what you would like to see in that we are not just talking about FX in our costs, but actually the impact on the cost-income ratio. So we will come back to. I have no doubt that you are able to analyze the individual parts of our business. And of course, we'd like to help you do that. So just bear with us. But hopefully, the CIR guidance that we've given on FX is also helpful to you.

Our next question is from Edward Firth from KBW.

I just had 2 questions. The first one on the BUK margin guidance. I mean, if I look at the bottom end of your range, I'm just, I guess, partly checking math, but it looks like we're talking about a sort of mid-290s margin for the second half, which seems to imply that your margin is picking up in the second half or the rate of growth is picking up in the second half. And I guess that's a surprise because a lot of the other banks are giving messages about how they expect things like deposit betas to be higher as interest rates go higher, the market for savings to be more competitive. And therefore, we should expect to see the rate of acceleration slow. So I guess my first question is why -- what is it about your book that means that the margin should be accelerating in the second half, not slowing, if I've got my math right? So that would be question number one.

And then I've got a second question for Venkat. Really, it's about the Barclays U.K. cost income ratio because it's over 60%, which is probably a good 10% higher than any of your peers really any sort of retail and commercial bank that I can find in the U.K. And it's really difficult externally to see why that is because you have this sort of central charging structure, which should have just dump the lower costs of them. So I guess my question for Venkat is, now you've had a bit of time to look at it. Are you happy with the cost income ratio at Barclays U.K.? And what's your assessment as to why it's so much higher than peers? And what do you think might be possible in terms of actually getting that more in line with everybody else?

Okay. So why don't I take the first one. So we've guided up to GBP 270 million to -- sorry, we've guided up from GBP 270 to GBP 280 million, now GBP 280 million to GBP 290 million. So you're right, we are expecting some momentum from here. There are 3 factors in there. Obviously, Ed, I can't comment on the mechanics within anyone else's book, but I can tell you how we see it. In mortgages, as I said, it's competitive. The front book rates are lower than the back book rates we think we're getting a good absolute return. So you should expect us to continue growing that. That is a net headwind. But on the other side, we've obviously got margin widening on liabilities. Those 2 nets are positive to the margin. We would expect pass-through to increase from here.

We've called that out before simply because the pathway from 1% to 2% is quite different from the pathway from 0% to 1%. So that's absolutely included within our guidance. I think the other -- and the third very important factor for us is obviously the structural hedge momentum. So we've extended the hedge. And what we are seeing happening in that hedge is every single month, you've got 160th rolling off, broadly 5 years ago rate. So think 2016, 2017 type rates and now refixing on the current curve. That is considerable momentum to the NIM as we see it. So it's bringing those 3 things together that gave us the confidence to guide up to between GBP 280 million to GBP 290 million.

And is it possible to -- and I know this is sort of slightly fatuous question, but everybody goes on about deposit betas. I mean is it -- can you give us some sort of sense as to what you might -- what the sort of shift might be that you're assuming for the second half? I was just trying to see whether you're making similar assumptions to other people or making market different ones. I guess that's where I'm coming from. I mean, people talk about 50%, above and below 50% pass-through into the second half. Can you give some sense as to where you might be in that spectrum?

Yes. We wouldn't give that guidance. And the reason I say that is it's very nuanced. So it varies by business. So as we're making those decisions, we're making them across retail and different products within retail. We're making them across the private bank, business banking, corporate banking. So it's very difficult to drill it back to a single number, given the nature of our business. And we'll have an eye to our own liquidity in the competitive environment. And actually, we wouldn't talk about those things. We wouldn't think that, that was appropriate as a competitive matter to call out our commercial intentions on a call like this. So that's why we wouldn't do it. But the thing you should focus on is that overall upgrade to NIM guidance. That's the most important thing because we're taking all of our thinking, and we're wrapping it into that number.

All right. And on the question on the BUK cost-income ratio. So the answer is yes, I am comfortable, and there are a few reasons for it. First of all, obviously, the cost-income ratio has 2 parts, cost and income. On the cost side, we are going through a multiyear transformation of our business, greater amount of digitization, more product simplification. So that investment will pay off in the future and that investment is elevating the cost income ratio in the short term. On the income side, obviously, there's a question of product mix. I think the point I would broadly make on that is that we have been for -- even since pre-COVID and post-Brexit, a little bit more on the careful side in terms of part of unsecured credit and lending, which will have an income effect on us. But given the broader credit risk return trade-off, I feel extremely, extremely comfortable. And you would notice that the BUK RoTE in the first half has come to 17%, which is sort of the nature of what is normally inhabits, the region it inhabits during normal times. So it's recovered back to quite nicely to where it used to be.

Okay. When you say a multiyear investment program, what should we be thinking about then? So is your expectation that, that will end at some point, and we will see the cost income ratio improve then? .

Yes. I mean I think it goes into 2023, so this year and next year, and it should improve. I mean, the other part of income, which is improving for us, but improves for everybody else is, of course, the effect of interest rates and so on.

Our next question is from Guy Stebbings from BNP Paribas Exane.

I had 2 questions. So firstly, was on going back to costs. I appreciate there's lots of moving parts and headwinds from FX and inflation of revenue benefits. So I think it's really important or certainly very helpful if we get some sense of the absolute cost figure for next year, except in some of the variables may change. If we start from the GBP 16.7 billion guidance, then annualized fully for the current FX, I guess, it would be more like GBP 16.8 billion, maybe GBP 16.9 billion. If one then adjusts for the elevated litigation in Q2 and Q1 of circa 1.8%, you end up with a clean run rate around GBP 15 billion heading into 2023.

If I look at Slide 20 and the other sort of ups and downs, on the bottom right hand side, you've got the efficiency savings as a benefit, but then business growth, selected investment spend, inflation, all in the other direction, I presume those headwinds are greater than the benefit from the efficiency gains. So are we talking about under those scenarios under current FX, et cetera, that costs next year, probably north of GBP 15 billion, presumably must be absent FX reversals? Or am I missing something or underestimating the efficiency gains? The second question was then just on BUK volumes, which went back within the quarter. I guess, looking forward, the mortgage market is slowing a little bit. Consumer spending outlook is it's quite uncertain, business banking activity was weak in Q2. I don't know if that was particularly impacted by bounce back loan drag, which perhaps is less painful in future quarters. But how should we think about future quarters on total volume growth in BUK, is Q2 a bit of an outlier? Or is flat to down, actually something we should be sort of used to?

Okay. As I said before, I'm not going to -- I'm not going to guide to specific cost numbers for next year, nor income. There's a huge amount of potential outcomes here in terms of inflation. Obviously, inflation effects will build, but I would remind you that inflation is also positive to our income line. We did set efficiency in train from '21 and '22 which you would expect we would continue and would be additive to the numbers that we've already shown you. However, because of the income momentum that we have, you should expect that we will lean into growth, but we will be very selective as we do that. So as I say, given the uncertainty in the environment, I'm not going to guide now, but if you just consider those factors, that's probably the best guidance I could give you.

But just don't forget about the impact of either the investments or inflation on the income line as well as the cost line. In terms of BUK volumes, I guess, your focus on the mortgage volumes. As we grow our mortgage book, we are balancing 3 things. We're balancing returns. We're balancing how we feel about our franchise, and we're also balancing operational capacity.

So you'll see us participate pretty much consistently in the market, but we will flex in and out as we're trying to manage those 3 things. We're pleased with our growth. I would say I would expect net growth across the industry to be lower simply because this is a market more dominated by remortgage than house purchase. So we've definitely seen a switch there. And that's a business that we like very much where we tend to take a higher-than-normal market share for that market that you might see effect start flowing through. We have seen bounce-back loans decline a little. That's what we would expect. That's obviously positive for margin as well. And then the final thing I would say is, don't forget about ESHLA, which can create somewhat noisy impact in the BUK asset line simply because of the way we present it. But no concerns in terms of the momentum either in mortgages, cards I've talked about, we expect to be a bit more cautious there. And obviously, we still continue to see liability balances grow.

Okay. That's really helpful. Can I just check on the business, that's loan (inaudible) slow in terms of the drop quarter-on-quarter from here, would you expect?

Well, as customers repay, we'd expect those balances to fall away as we say, reduce balances, but they are fairly tight margins.

Our next question is from Rohith Chandra-Rajan from Bank of America.

Just on capital really, and how you think about and manage it? You've got a number of growth initiatives like U.S. cards, payments, KMC and maintaining the investment bank rank. So how do you prioritize those investments in growth versus capital distributions? And then also, you're now in the middle of that CET1 target range. Are you comfortable operating and doing share buybacks anywhere within that range? Or is there a particular level that you're more focused on?

Okay. As we think about managing our capital, we are balancing off maintaining ourselves in that target range with growth in the business and returning capital to shareholders. I mean the good news is that each one of our businesses is delivering above cost of capital in terms of its returns. So they are generating organic capital business-by-business. And therefore, we're not having to sort of artificially move our capital around for organic growth, if you like. As it relates to those specific opportunities, what's really guiding us there is the 3 strategic priorities that we have. So the 2 that we've announced so far speak to the first of those strategic priorities, which is next-generation consumer, which is why we are -- we've invested in Gap already and our intention to invest in Kensington.

So I guess we're looking to follow the strategy. You'll equally see organic investment within the CIB, which is around underpinning the sustainable growth in that CIB. You don't see called out with a headline because it's organic and not inorganic. But we are balancing that investment. And in terms of your specific about operating in the range, we closed at 13.6. We feel good about the organic capital generation of the business, which is what's given us the confidence in order to announce that buyback today. You'll note that whilst we've announced that buyback, it is largely offset by the rollback of those RWAs from the rescission hedge, which would actually nudge up the capital ratio of the cost. So I'm not going to guide specifically within that range, but the evidence from Q2 should tell you that we are happy balancing shareholder return with proactive investment in the business, either organic or inorganic. Venkat, anything you would add?

Yes. Look, I think I'll continue to emphasize that very final point that Anna made. We've got good top line growth across the businesses, as we said, producing a 10% RoTE gives us 150 basis points of capital accretion. We think that, that is sufficient to invest in the business, to -- and to deal with any regulatory drift, which we might have in terms of capital rules and to -- obviously, to return capital to shareholders. We've demonstrated that even in this first half, and that's the aim of the way the business is operating. So I would really emphasize that getting the top line growth which you've seen across the businesses, you've seen strong performance relative to others in many segments, including in the fixed income markets and then using that to sort of reward our 3 constituents, if you'd like.

So on that, thank you very much, everybody.

Yes. Thank you, everybody. We'll see many of you next week at the breakfast, until then take care.