Welcome to the Barclays Half Year 2021 Results Fixed Income Conference Call. I will now hand you over to Tushar Morzaria, Group Finance Director. Good afternoon, everyone, and welcome to the Fixed Income Investor Call for our Half Year 2021 Results. I am joined today by Kathryn McLeland, our Group Treasurer, and Dan Fairclough, our Group Head of Balance Sheet Management. Let me start with slide three and make a few brief comments before handing over to Kathryn. I will start with a summary of our H1 performance before providing further details on impairment. We again saw the benefit of our diversified business model as the strength of the CIB performance continued to offset the effects of the pandemic on our consumer businesses. Overall income decreased 3%, albeit on a constant currency basis, income was up. Our costs increased by GBP 0.6 billion to GBP 7.2 billion, including structural cost reductions of GBP 0.3 billion. After a small impairment charge in Q1, we had a large release in Q2, giving a net release for the half of GBP 742 million. This resulted in a PBT for the half of GBP 5 billion, a significant increase on the GBP 1.3 billion for H1 last year, generating an RoTE of 16.4% for the half. The CET1 ratio ended the half at 15.1%, well above our target range of 13%-14%. Let me provide further color on impairment. There was a net impairment release in each of the businesses in Q2, and the largest release was in BUK, followed by CIB, as you can see from the chart on the left. On the right, we've shown the split of the charge for recent quarters, you can see in Q2 that we've seen a net release of stage 1 and 2 impairment of just over GBP 1 billion, while the stage 3 impairment was GBP 221 million, resulting in the net release of GBP 0.8 billion. The stage 1 and 2 release was driven by the improved macroeconomic variables used in our scenario refresh, summarized on the next slide, and lower unsecured balances. Our coverage ratios remain above pre-pandemic levels. The MEVs used for Q2 modeled impairment are shown on the upper table, you can see the significant improvements in the 2021 and forecasts. There still remains significant uncertainty at levels of default, with the existence of support schemes that will round down. We want to make all [audio distortion] most at risk from the beginning of support. Containing a significant economic uncertainty, PMA, which has increased slightly to GBP 2.1 billion. In the appendix, there is a summary of the coverage ratios across our lending portfolios, and you'll see that they are significantly higher versus pre-pandemic across wholesale and unsecured consumer lending. Let me pause there and hand over to Kathryn to run through the balance sheet highlights. Thanks, Tushar. As you can see on this slide, we finished June with robust balances across all our key metrics. Our CET1 ratio was 15.1%. MREL finished ahead of our end date requirement at 33.7% of RWAs, and our LCR remains at a very strong position of 116%. I'll start with some comments on capital on slide eight. Our reported CET1 ratio increased over the quarter by 50 basis points to 15.1%, which is flat compared to the end of last year, despite our share buyback and other headwinds. The group delivered strong profitability in both quarters this year, which contributed to our capital base. Specifically, in the second quarter, the lower stage 2 impairment balances led to a reduction in the IFRS 9 transitional relief of 30 basis points, resulting in a convergence between the transitional and fully loaded ratios to the pre-pandemic levels of around 40 basis points. RWAs were down around GBP 7 billion over the quarter, adding 30 basis points to the CET1 ratio. The next slide provides what we hope is some useful color on how we see the capital trajectory from here. You'll see on this chart a rebased Q2 CET1 ratio of 14.8%, which takes into account the share buyback and the scheduled pension deficit reduction contribution in Q3. Looking ahead, our prudent capital planning takes into account both the headwinds and tailwinds we foresee. Importantly, overarching all of these plans is our confidence that our diversified business model will continue to generate capital, more than offsetting upcoming headwinds. Given the capacity created by profitability, we expect to continue to return capital to shareholders over time. This reflects the soundness of our capital management, and of course, is a decision taken hand-in-hand with our regulator in the normal course of business now that the temporary guardrails have been lifted. Turning briefly to the anticipated headwinds over the year will continue to highlight the potential for stage 3 impairment migration to impact the amount of transitional IFRS 9 relief. We also anticipate RWAs are likely to increase from the June 30 level. We've listed below the known capital headwinds we see coming next year. Thirdly, the subsidy benefit will be reversed at the start of 2022, as you would have seen in the PRA's Policy Statement 17, published earlier this month. The IFRS 9 transitional relief schedule will continue to amortize through to the end of 2024, and there is a slide in the appendix that provides further details on this. For SA-CCR, which we have flagged in the past, the guidance remains of low single-digit billions of RWAs. Finally, the pension deficit reduction plan is GBP 300 million payments next year, well below the GBP 700 million contribution in 2021. You may have noticed that two items that we had previously highlighted as headwinds are now not expected to materialize. The first is the procyclical impact in RWAs that we'd previously anticipated as we'd assumed continued macroeconomic deterioration would lead to higher risk weight density. While we still remain cautious and our internal capital plans continue to be alert to these risks, we acknowledge the now improved and more stable economic outlook in our main markets. We're no longer calling out material procyclicality in our base case. The second item is the mortgage changes from the PRA. The aggregate impact of days past due changes and move to a hybrid through the cycle and point-in- time model and a portfolio level risk weight floor is now expected to be negligible. The previous guidance of an increase of low single-digit billions of RWA next year no longer applies. Taking all of these factors into account, we've continued to target a CET1 ratio of between 13% and 14% over our planning cycles, and I'll spend a moment on this on the next slide. If you can see on slide 10, our buffer to the MDA hurdle of 11.2% is GBP 390 basis point or GBP 12 billion. Holding an appropriate headroom above our MDA hurdle continues to be a critical part of our capital framework. Over the remaining of the year, we expect some decline in the ratio as a result of some RWA increase. We would expect to end the year comfortably at 13%-14%. Continuing to be mindful of the two headwinds that I just talked about on this slide. [audio distortion] take hold and therefore reflect prudence as we navigate the headwinds we see ahead. Turning now to leverage. The leverage ratio of 5% and 4.8% on a spot and average basis respectively, reflects our continued sound leverage profile. As you can see on the slide, we operate well above minimum requirements and our leverage profile has been running at a consistent level for the last four years. We note the consultation paper published by the FPC and PRA last month, which broadly maintains the current U.K. leverage framework, both in terms of calibration and requirements. Therefore, our approach to managing the leverage ratio remains unchanged. Turning to MREL on slide 12, due to the prudent build of MREL-eligible debt over many years, we are now ahead of our 2022 requirements. As you know from earlier calls, we have assumed that the RWA calculation basis will be the most binding and our base case from an MREL planning perspective. This does remain the case given the recent leverage CP, which proposes to keep the U.K. leverage framework with a cash exemption and which we expect will also apply to the MREL framework. Although we will of course wait for final confirmation on the conclusion of the FPC and PRA's leverage review, which remains out for consultation, we do not anticipate a change to our base case. Our MREL issuance plan for the end of the year is consistent with what we guided at the beginning of the year, namely a full year target of around GBP 8 billion. As at June, we have issued GBP 5.3 billion. Since we have been active already this year in Tier 2 transactions, we expect our remaining funding over the year to be in senior and AT1. As you know, we have been active with green issuance in the past, having been the first U.K. bank to issue a Green Bond a few years ago, and I'm pleased that we've released our updated and expanded green issuance framework to enable a broader set of liabilities for future issuance. Turning to now, we illustrate the structure of our total capital position. We continue to target a conservative AT1 headroom. We've noted before that this may temporarily run at an elevated level, given that AT1 also supports leverage, and we see attractive high returning opportunities in parts of our markets business where returns and maturity interests of AT1. Through the cycle, our principles that underpin our AT1 target remain the same. They serve to manage any RWA and FX fluctuations and through possible redemptions and refinancing activity. In the near to medium term, this means improved RWAs I mentioned a moment ago, and planning for possible call dates by AT1 in 2022 and 2023. Any call decisions would of course be subject to regulatory approval. We also manage interest on our Tier 2 capital and so also aim to hold an amount in excess of the 3.2% requirement. With regards to legacy capital securities, we often get asked about the Bank of England CFO letter from last March, and the upcoming end to the original CRR transitional rules in December. I think it's worth providing some detail here. Ultimately, our thinking remains unchanged. It's not an area of concern for us given the modest and short tail of GBP 1.7 billion which could exist beyond 2022. I think you have individual capital security, and it will be a factor in our decisions. The qualifying typically remain in scope for resolution powers. Overall, our analysis will be on a case-by-case basis subject to relevant regulatory considerations, and we will assess each security on its own merits. We are engaged with the Bank of England and the PRA on this topic. Given these securities are listed, I'm mindful of the sensitivities of this topic and do not wish to discuss individual securities. There are two main areas that the Bank of England is looking at. Infection risk and impediments to resolvability. Infection risk relates to legacy capital securities which impact own funds and/or MREL eligibility. In our case, this issue can be solved by the subordination of some internally issued AT1s relative to other securities outstanding. Subject to regulatory approval. We do not see this as a concern. In the other area of focus, namely impediments to resolvability, we have no externally issued legacy capital securities outstanding from our group resolution entity, Barclays PLC. Furthermore, the vast majority of our legacy capital securities that do exist continue to qualify for own funds in some capacity to 2025 or beyond. From the end of this year, they will also not be included when meeting our MREL commitments of the issuing entity, Barclays Bank PLC, or the group. For these reasons, we are comfortable with our position. We will continue to engage with the Bank of England and the PRA on this topic, including as part of our Resolvability Assessment Framework submission, which is due in October. Turning now to liquidity, which you can see on slide 14. The liquidity pool of GBP 291 billion and our LCR pillar 1 ratio of 162% represent a surplus above 100% regulatory requirement of GBP 180 billion. You'll see that the LCR position has been stable throughout this year, maintaining a prudent balance between holding a healthy excess and deploying the liquidity to our business to enable them to capitalize on prevailing market opportunities. Let me now turn briefly to our own funding profile and loan to deposit ratio on the next slide. We continue to see an elevated level of deposits across the market driven by government and central bank policy, with the money supply growth unprecedented levels. By May this year, it had grown by 17% versus the end of 2019. As you can see, even before the pandemic, we were running at a conservative LDR of 82% as at the end of 2019, and today it stands at 70%, with deposits across the group up by 20% since the end of 2019. We have conservative assumptions in our funding plan, being mindful of potential pressures on the deposit book. As you heard from Tushar on this morning's call, we do feel much of the deposit growth will be on our balance sheet for some time. Turning now briefly to our main subsidiaries, which you can see on slide 15. We continue to manage the regulatory requirements of all of our subsidiaries prudently, and you can see here the reported metrics for both Barclays Bank PLC and Barclays Bank UK PLC. In the second quarter, the U.S. IHC passed its most recent CCAR exercise, with our capital metrics either in the top or second quartile amongst all participating banks, providing further evidence for our ability to manage capital appropriately across our subsidiaries. Turning now to our holding company and subsidiary credit ratings, which you can see on slide 17. Improving our credit ratings profile continues to be a strategic priority for the group. It was particularly pleasing to see our outlook with Standard & Poor's undergo a double revision in the space of four months, from negative to stable in February and stable to positive in June. These were actions in recognition of strengths specific to our credit profile. Most importantly for them was the stable strategy that has been underpinning our financial performance. There were also sector-wide revisions to outlook for European banks. Fitch recently revised all Barclays outlook from negative to stable, and Moody's also stabilized the U.K.'s outlook. All outlooks for all our entities are now either on stable or positive outlooks, and our credit rating position is in a better place than immediately prior to the pandemic. To wrap up, we continue to manage through an uncertain time with a strong balance sheet, a prudently managed CET1 ratio, and a robust liquidity metric. Our diversified business model continues to deliver meaningful capital generation. As we look ahead, we're in a strong position to support the economy, serve our customers, and look after the interests of colleagues and other stakeholders. With that, I'll hand back to Tushar. Thank you, Kathryn. We'd now like to open up the call to your questions. I hope you found this call helpful. Operator, please go ahead. Your first telephone question today is from Lee Street of Citigroup. Your line is now open. Please go ahead. Hello. Thanks. T hree quick questions. I have two questions for you, please. First one, a bit broad. You've got a lot of excess capital. You've got quite a big provision bill, even after your reversal today. My question is, what keeps you awake at night? What can go wrong from here? Obviously, everything looks like it's relatively well set at the moment, eyes on the horizon. My second question, you touched on the legacy securities and saying that you could leave them outstanding beyond the year end. As it relates to LIBOR, what's the sort of regulation, the FCA's expectation there? Is it sufficient that you offer people a consent and if they choose not to accept it, then they're okay. You don't have to think within your control to try and address that, and therefore, they'll not have an issue leaving that outstanding. Anything you can, again, talk around that would be much appreciated. Thank you. Yeah, thanks, Lee. It's Tushar here. Why don't I have a go at your first question, and Kathryn want to add, then I'll ask Kathryn to cover your question on LIBOR. What keeps us awake at night? I agree with you that we feel our capital position is reasonably prudent, and we think our provisioning levels are also reasonably prudent. I think that the real unknown with all of this is, you've got government schemes, support schemes that are being unwound. It's the first time we're going to experience what the real life consequences of that are, both actually here in the U.K. and to some extent in the United States as well as unemployment benefit and extensions of them come to an end as well. As well as some of the support schemes around SMEs and corporates. Hence the level of provision that we're carrying, and we have a management overlay to ensure that we're prudently provided against that. I guess that's a little bit of voyage of the unknown. We don't exactly know how that will work out. It could be a much more orderly adjustment than people anticipated. Could be a bit more rockier. I guess that coupled with, albeit economies are opening up and case loads, at least in the U.K., seem to be dropping. There's still a little bit of unknown as to whether this is the end and the final wave or whether as you get into the winter months things may change again. It's just being a little bit cautious and prudent. For no more than that, I think, we're through all of that and we're back to, if you like, a proper post-pandemic environment. We'll probably run everything a little bit prudently. Kathryn, you want to add to that? I think the only other subject that everyone has read about is the prospect of inflation at some point. Obviously the uncertainty that Tushar talked about in terms of government support schemes. There's obviously a degree of discussion around central bank policy response, tapering QE hiking rates. Just I think being mindful, whilst it might be a lower probability risk, just thinking around the balance sheet and thinking about prospects of inflation, albeit certainly is not our base case, but that's obviously had a fair degree of commentary. I think that's the only other thing I'd mention, Lee. Just on the prospect of inflation, I guess it's an interim. I'm jumping a little way ahead. How many rate hikes do you think we could possibly see before it actually starts to really bite in terms of credit quality? Obviously historically rate hikes do impact credit quality. I'm believing the first couple will probably be, it doesn't have that much impact and actually supports you from a margin perspective. Is there any indicator of what would be the parting point that would start to worry you? It's a tricky one, Lee. I guess we would probably need something like three hikes before we get back to base rates, in the U.K. pre-pandemic. Even that you'd be sort of 75 basis points or so. My sense is it'll take some time. I guess the environment of rate hikes, if it's purely a sort of anti-inflationary and a sort of stagnating economy, that's obviously a bit more credit problematic if it's on the back of an economy that's growing above trend and it's just good monetary policy in the backdrop of that's probably not so much of a problem. I'm not sure where, as Kathryn says, I guess it's a remote possibility that you get a sort of an unraveling of inflation that could be difficult. We've probably got that in the low probability camp. It's probably less so are the ones that keep us awake at night. It's just one of the things we've got in the back of our minds to make sure we don't get caught out by if it does happen. I think it'll be a number of rate hikes before we really feel we'd want to reconsider our credit stance. Okay. Answering your question on LIBOR. Obviously from our perspective, what we've been doing is obviously a huge amount of work happening internally. Very mindful of what's happening with the official sector news externally. Obviously Q2 saw us starting to much more clearly actively track new LIBOR products. Obviously very mindful of what's allowed there. We saw the development from the Fed with the legislative change regarding dollars securities. In terms of the U.K. regulator, in terms of any existing LIBOR securities that we have after the consent solicitation that we did at the end of last year, which you'll remember, we're essentially still waiting for some guidance and the final outcome around the definition of tough legacy and what that means for synthetic LIBOR. Of course, as you know, there are ultimately fallback provisions as well. We're essentially in a wait and see mode, waiting for further guidance around that tough legacy. Okay. Fair enough. Thank you very much for those answers. Thanks very much, Lee. Can we have the next question please, Operator? The next question is from Paul Fenner of Societe Generale. Your line is now open. Please go ahead. Hello, team. Just checking that you can hear me all right. Yeah. Loud and clear, Paul. Yeah. Perfect. Lovely. It's really an asset quality question, but I guess it subdivides into a couple of separate questions. If I look at just your stage migration, it looks as if the portfolio is really behaving extremely well and probably counterintuitively. Nominal stage 3s have dropped quite a significant amount in the last six months. The ratio is now 2.2% having come down fairly consistently over the last couple of quarters. My question is on stage 3, have we seen the peak as a proportion of your book? If we haven't, when do you think that peak is, and how far away are we? I'm not looking for a specific ratio, but just the sort of trend lines, just to get a sense. I get asked that question all the time, and I can never really answer it very well. While we're at it, on asset quality, on Stage 2, I would also like to know what normal looks like. Right now you've got something like 11% of your portfolio. I think that's right, 11% or 12% of your portfolio is in Stage 3, which is kind of down as well. What does normal look like as you look into end of 2021, 2022? I forget what it looked like pre-crisis, I'd love to get a sense. The other thing I found quite interesting is that the drop in Stage 2 was just as big in retail as it was in corporate, and I thought it was corporate that was the most sensitive to your macro outlook. A little bit of color around that would be very helpful. The very last question is on supply. Kathryn, I think you said that the remaining, sort of whatever it is, GBP 3 billion, GBP 2.5 billion is between AT1 and Senior Holdco. I just wanted to check that I heard you right, because I was expecting you to do an AT1 and it hasn't happened yet. Thank you. Thanks, Paul. Why don't I start on your questions on asset quality, and then as Kathryn supplied, I presume you may want to add some comments on asset quality as well. The first part of your question, I think, was the sort of the peak or the development of Stage 3 balances. When is it going to happen, and where will we have been? Where could it settle down? The honest answer is we don't know. Our view is, having said that the management overlay that we're carrying is really there to guard against an increase in defaults as we go through the removal of government support schemes. Now, these are all estimates, and we've done our own modeling, but of course, there's no sort of historical precedent we can calibrate our models or anything to. There is definitely a high degree of judgment here. Our view is that there ought to be a pick-up in defaults and credit stress, but within the level of provision that we're carrying, and that's what that overlay is specifically designed for. If we don't see that, if it's a very orderly adjustment and the government support schemes have worked perfectly in the sense that they've reached everybody to their job or the company reopening again and it can sustain itself, then obviously that management overlay won't need to be digested against defaults, and will just sort of be released back through P&L and ultimately back into capital. I guess, Paul, you would expect the peak in Stage 3 to be in front of us, but not that far in front of us. I think both sides of the Atlantic now are beginning to sort of taper their schemes. Over the next handful of quarters. In terms of the run rate on Stage 3 from that point on, if you look at the loan loss rate, let's say on the more riskier parts of our business, say credit cards. Roughly about 3% loan loss rate on either side of the Atlantic. I'd probably say that the books ought to be probably a bit higher quality compared to pre-pandemic. Obviously, that was quite a long cycle. One of the things about having a cycle is you sort of flush out the weaker credits one way or the other. On top of that, you've also got, generally speaking, those remaining consumers will be in decent financial positions. You see our deposits ticked up again quite materially even in the second quarter in our consumer, both in the U.S. and in the U.K. The de-leveraging of consumers, the amount of cash on balance sheets will be very supportive. Also, as we're originating, you're sort of early in a credit cycle, new originations ought to be relatively lower risk. I would say probably all things being equal, you should have probably a lower loan loss rate on the riskier parts of our book once a year, if you like, in a proper post-pandemic world. Stage 2. There's a couple of questions there about the sensitivity to macro across corporate and consumer, and also sort of what the normal level of Stage 2. One thing I would say on that is that it's quite hard to answer that question precisely in the way you indicated yourself. What I'd probably say, though, is if I look at coverage levels pre-pandemic, if you look at our cards business, we were at 8.1% loan loss provisions to balance sheet, and we're currently over 10%. We're still quite prudently covered relative to pre-pandemic levels. I think when it's all said and done, and we've gone through the government support schemes and things are sort of normalized out, and we accept the premise that the books ought to be on a like-for-like basis of debt quality. You'd probably expect the coverage levels to be at least back to pre-pandemic levels or if not, a touch lower. That will either be effectively utilizing those provisions against defaults as we're expecting them, or those provisions will be released into P&L. To answer your question about Stage 2, it's a combination of Stage 1 and 2, principally. That probably gives you a sense of it. It probably ought to be a bit lower than pre-pandemic, all other things being equal. In terms of the macro sensitivity, that's really tricky because these models are devilishly complicated. The reason why it's also complicated, you've got multiple scenarios and you've got various different parameters that impact consumers and wholesale credit in quite different ways. Workforce engagement, for example, impacts wholesale in a way that's slightly different to general population unemployment, which does impact our models for consumer. It's hard for me to give you a straight answer on that. Yeah, unfortunately, that's a tough one. It depends on the scenario weighting, the span of scenarios, and exactly how far out the peaks and troughs are. It's unfortunately not an easy answer to give. Hopefully it gives you a little bit of context anyway. Kathryn, anything more you want to add to that? I know nothing more. Okay. That's great. I'll let you carry on then. I was just going to answer your question on funding. Our needs haven't changed at all since the full year. You're right, we've done just over GBP 5 billion, almost GBP 5.5 billion in the first half. We have done two benchmark Tier 2 transactions. In the second half of the year, that GBP 8 billion, the remainder of that will be most likely in the form of senior and AT1. That's very consistent with exactly the same as what we indicated earlier in the year. As you know, we've also talked in the past about being a programmatic issuer of AT1 securities. Yes, it does remain part of the funding plan for the second half of the year. Thank you. Thanks, Paul. Could we have the next question please, operator? The next question is from Robert Smalley of UBS. Your line is now open. Please go ahead. Hi. Thanks, thanks for taking my questions. A lot has been asked and answered, a couple of follow-ups. I appreciate the intricacy of model changes, particularly given the peculiarity of this economic environment. Maybe you could talk a little bit about differences in credit card, U.K. versus U.S. Far they've numerically performed roughly the same way. Do you see any divergence there? Any things that you would look at different for behavior, one versus the other in your modeling? That's my first question. Second, you had mentioned that possibility of going below pre-pandemic level on reserves. I guess from your comments that'll take a few quarters at least to get there. You're pretty close on card already. Would that come from SMEs and other corporate lending? Where would you see that? Given the headwinds that you outlined for capital, is there an impetus to do that sooner than later? Even though you had also mentioned you wanted to be prudent holding the reserves. Finally, on funding, may be early days, but you have your negative issuer in 2021. Do you have any visibility to 2022? Do you think you'd also be a negative issuer then? Thanks. Yeah, thanks. Thanks, Rob. Why don't I tackle the questions on provisioning and hand over to Kathryn on funding. U.S. and U.K. cards, yeah, they have behaved remarkably similarly. Although I would expect a divergence prospectively. I think we would expect to see a build in U.S. card balances, just as revolving credit balances sooner in the U.S. than we would in the U.K. I think there's a couple of reasons for that. One is just that the U.S. economy sort of opened up earlier than the U.K., so it's sort of further ahead in its recovery. You're into a period of time, summer vacation, back to school, Thanksgiving, Christmas, where you get more discretionary spend behavior, and that tends to stimulate revolving credit balance growth. Aided and abetted by, specifically to our business, we'll be adding the American Airlines, it's not American Airlines, American Retirees card partnership in the third quarter. We've got some well-known retailers or one well-known retailer that we're adding into next year alongside organic growth. I think you'll see balance and therefore provision build much sooner in U.S. card than U.K. card. U.K. card, our sense is even though both sides of the Atlantic spending, at least on our data, is back to pre-pandemic levels. The level of discretionary spend that's taking place on card, it still takes some time before that translates into balance growth. Yeah, I think you will see a divergence, and that's simply just where they each are in their own respective cycles with respect to recovery. The final thing I'll say on U.K. and U.S. cards, in U.S. cards, we're certainly adding more. The nature of the business is you're adding more customers, and we're spending money on opening new accounts, stimulating card spend. The FICO scores in the U.S., again, it's relatively high quality stuff. Part of it is just the nature of because we're sort of biased towards airlines and things like that in our portfolio. It's sort of, arguably the lower end of margin, but lower end of risk with respect to sort of U.S. card business. In terms of provisioning levels and sort of getting back to pre-pandemic or better, where is that going to come from? I think actually you say we're sort of not so far away from cards, but the bulk of our provisions are actually from the cards business, a disproportionate amount. Coverage levels pre and post on an average basis on cards, we're still over 10% covered and pre-pandemic we were just about 8%. That's like a 20% reduction in coverage. That's a big old number given that most of our balances are provisions are against card balances. There is some in corporate and SME issues. There is certainly not so much actually, that's relatively small. Most of the lending in SME tends to be secured. In corporate credit, yeah, there are some vulnerable sectors. In terms of the pace at which these things sort of, if you like, normalize away, I think it's a number of quarters. It's very difficult to put a time on it, but I think our approach has been to build reserves quickly and to release them quite slowly until we're absolutely certain that the necessity for holding those provisions is behind us. We will be pretty cautious in releasing them. I would say even after today's release, our coverage levels are materially above where they were pre-pandemic. By the way, the credit indicators that we have in front of us are, there's no real signs of stress in our books as we see it. We will be continuing to be quite cautious. Kathryn, you want to pick up from there? In terms of the issuance versus redemptions, which as you said, this year was a net GBP 1 billion. That obviously was supported by, on the redemption side, meaningful amount coming from our OpCo. It is, as you know, too early for us to guide on issuance for next year. I'll hand over to Dan, who can talk a little bit more about the funding profile that we have. Next year we've got about GBP 10 billion as maturities and calls across B and BB PLC. Quite a significant redemption profile again. That's a little bit higher than the GBP 9 billion that we had this year. If you take our sort of average run rate of issuance in historic years, which is GBP 10 billion, I think there's a decent chance that we would continue to be a net negative issuer. As Kathryn said, we'll update more at the full year on the issuance plan. Okay. That's all very helpful. Again, thanks. Thanks very much, Rob. Could we have the next question please, operator? The next question is from Daniel David of Autonomous. Your line is now open. Please go ahead. Thanks. Congratulations on the results and thanks for taking my questions. I've just got a couple. The first one just touched on legacy and meeting with the comments that opened with and the mitigations you mentioned on infection risk. Quick question, just in the recent AT1 monitoring report, the EBA raised concerns over a multilayer Tier 2 structure, and they were referring to cascading Tier 1s, which I think is a flip flop to the way that you plan to treat your Tier 1s. You mentioned concerns about No Creditor Worse Off than BRRD and the conflicts that lie. Is that something you're thinking about? Is that a concern that we should be thinking about with your legacy stack? The second one's just on ESG. In the recent MREL consultation paper, I noted there was a comment that firms may wish to structure their MREL instruments to include ESG linked features. I thought it was quite interesting. I am just interested to hear your take on whether that could mean we see a different type of ESG issuance, maybe linked to certain other ESG targets. Thanks. Thanks, Daniel. Dan, why don't you take the first part of that question and then maybe come to me on ESG? Yeah. To some extent, the multilayer Tier 2 arguably already exists today with the old AT1 and the lower Tier 2s. It's not something we're hugely concerned about. I think for us, the key point on the infection risk is the fact that we will want qualifying AT1 securities to be the most junior form of instrument outstanding. We think that's going to be the key point for the Bank of England. As Kathryn alluded to in the speech, that's a relatively easy thing for us to achieve just by amending the subordination language of our downstream AT1. Overall, we don't think that's a huge risk in terms of the Bank of England. Dan, in terms of the question around green MREL. Yes, we did see that in the CP. Certainly you heard this morning, and this afternoon rather, as we've updated our green bond framework. What we've done is align it to our sustainable finance framework, which covers overall the group's plan to hit our quite ambitious targets that we have, net zero, and really focusing very much on the asset side. Now we have our liability funding programs linked to the asset side and have the flexibility now to issue different forms of liabilities. We can do CP structured notes and covered bonds. I do think that there will be probably some innovation in this area as obviously we have COP26 coming up and U.K. banks look at their own ambitions on the green agenda, and perhaps there's some interesting developments in the green space. Obviously, we've also seen securities amongst our international peers link to other ESG criteria and targets the banks have. There could be some interesting developments in this space. I would just caution, I suppose, a little bit that many banks are very well funded. We've talked about the very liquid balance sheet for the deposit. While obviously we're very well advanced on the general plan, so it will be obviously within the overall funding needs of the U.K. banking sector. Thanks. Thanks for your question. Are there any other questions, operator? We have just had a question registered. Our question is from Jakub Lichwa of Goldman Sachs. Your line is now open. Please go ahead. Hi there. Thanks for holding the call, and apologies in advance for yet another question on legacy securities. Can I just go back to the comment about the impediment to resolvability and how you are actually seeing that? Just again, as I just didn't catch that in the context of the legacy security being issued out of the operating company, please. Yeah. I think there are two aspects to consider here. The first one is infection risk. Have we got a structure that contaminates regulatory capital eligibility? The point that I was making there is that as long as our internal AT1 is the most junior form of capital at the operating company, which can be achieved through a simple internal restructure, we don't think that is an impediment in any way. The second group is obviously the outstanding legacy securities that we have. As Kathryn said in the main speech, we've got a very short tail of those securities, and we have none of those legacy securities issued at BB PLC. We feel generally in a good place. Does that answer the question? Sort of. I suppose what I was trying to get out of it is that, are you implying that having a small stock of security at the OpCo level is not actually an impediment to resolvability? I understand also the point around infection risk and restructuring internal agreement. Just more on the second point, how the fact that they are OpCo is actually being addressed. I don't get that part. Well, look, from our perspective, these securities become particularly problematic when they lose regulatory capital eligibility. We've got a very small number outstanding, and they retain capital eligibility significantly through the transition profile. We actually think that the problem here is extremely modest. Obviously, we've completed our submission to the Bank of England on that, and ultimately, we'll hear more from them when they publish their resolvability assessment. From our perspective, we really do think this is a relatively small issue. Got it. I agree. It's a small issue like that for sure. All right. Thank you for that. Thanks, Jakub. Operator, are there any other questions? Next question is from James Hyde of PGIM. Your line is now open. Please go ahead. Hi, Tushar. Hi, Kathryn. I have a question on actually the outlook statements. Hey, James, you're a little bit faint. Do you mind? Okay. How's this? Yeah. Much better. Yeah. Sorry. Yeah. I have one question on the whole revenue outlook, because you've given cost guidance, you've given provisions guidance. On revenues, a lot of the guidance on this morning's call was about NIM and the U.K. and also the card volumes. I just got the feeling, looking at multiple slides and what's happened in capital markets, that it looks like you're saying for you guys, the whole capital markets piece, this is as good as it gets. When you've got an RoTE of 16% group and you promise 10%, we will deliver on that. To me, it sort of reads that from here, the only way for CIB is down. Am I misinterpreting that? Because you've had, obviously, these four or five years of idiosyncratic market share gains. Should we read that that's kind of over for you? That's the first question. The second one is the old chestnut of Basel III final stage, Basel IV. Any sort of feel for guidance? Thanks. Yeah. Thanks, James. Why don't I cover the outlook for income, and I'll hand over to Kathryn to talk a bit more about Basel III or Basel IV. In terms of CIB, I'm not sure we've seen the best of it yet. I think there is some potential there. I think in capital markets and advisory, so I'm talking here debt capital markets, equity capital markets, M&A, et cetera. Our deal pipeline is actually higher than it was in Q1. Markets are still pretty constructive, and there's a lot of money looking to find assets. I think there is definitely scope for that to be a very good environment, and we'll see how we do with that. We've made great progress. We've been a very strong debt house over a number of years, but our ECM and M&A practice, both have had terrific quarters for where we are, at least. I think that probably builds still a very constructive environment. I think on the sales and trading side, equities, again, we've done pretty well. We had record prime balances at the end of the second quarter. Those are very stable, repeatable revenues, depending on obviously where financing spreads and what have you are, and you get the halo effect of more execution business as you prime more clients. The equity story for us is quite good. On the fixed income side, that's definitely softened from the dizzy heights of last year. I do think that we had a question earlier that, is there going to be an inflation shock and things like that. Those kind of things can all of a sudden catalyze sales and trading to spurts of activity that are way above normal expected levels. I think it's a fair comment to say, how can the industry continue to post record quarter after record quarter? I think this is absolutely a fair point that's unlikely to happen. I also don't necessarily see that there couldn't be very strong quarters in the future or indeed even new records posted. You may get intermittent spells of heightened volatility that can be quite profitable. We are pretty constructive on CIB top line. Jes Staley, our CEO, always makes the point that if you look at the world of just financial assets, the absolute explosive growth in financial assets over the last number of years and being an intermediary in whether it's secondary or primary markets is, on a secular basis, is a good place to be. Now, there'll be ups and downs within the micro cycles, but we believe that there's a very strong secular case to be made in that business. Anyway, that's our thoughts on it. Let me hand over to Kathryn on Basel. I think you've seen that we've given quite a detailed guidance around some of the near and medium-term capital headwinds around obviously the software intangibles, SA-CCR, IFRS 9, pension contributions. Certainly, we do always know that it's helpful to provide guidance to the market around some of these reg impacts that are coming down the pipe. Just at the moment, it probably would not be helpful. It's a little bit too early. As you know, the PRA certainly needs to consider their own timetable for implementation, their approach to some of the different components of the rules. Obviously, the implementation is also out to potentially 2028 once you think about some of the phasing of some of these changes in. Certainly, when there's a little bit more clarity, we absolutely always do try and provide you with guidance around these impacts, but it's just probably still a little bit too early. Thanks. That's fair enough. Thank you. Yeah. Thanks for your question, James. Operator, are there any other final questions? We have no further questions. Okay. Well, thank you all for joining us. Hope you found this helpful, I'm sure many of the team here, Kathryn and team, will get a chance to speak to you on the road as well. With that, I'll close the call. Thanks, everybody. Thank you. That's today's conference call.