Welcome to the Barclays Half Year 2022 Results Fixed Income Conference Call. We will begin shortly. If you do wish to ask a question, please press star followed by one on your telephone keypad at the start of the question- and- answer session. If you change your mind and wish to remove your questions, please press star followed by two. Thank you for your patience. Welcome to the Barclays Half Year 2022 Results Fixed Income Conference Call. I will now hand you over to Anna Cross, Group Finance Director, and Dan Fairclough, Group Treasurer. Good afternoon, everyone, and welcome to the Fixed Income Investor Call for our Half Year 2022 results. I'm joined today by Dan Fairclough, our Group Treasurer, who I will hand over to in a moment after my introductory remarks. This morning, I focus on three key themes, on our continued revenue momentum, our focus on costs, and our readiness for any macroeconomic deterioration. It's on this last point I want to reiterate the point I made given the natural attention to impairment and asset quality received from our fixed income investor base. Let me begin on slide three with a very brief overview of our half year P&L highlights. For H1, our broad-based income growth partially offset the increase in costs, which reflected the elevated level of litigation and conduct charges. Impairment remained low, reflecting the quality of our books and level of provisioning. As a result, we generated a statutory ROTCE for the first half of 10.1%. Let me now return to impairment on slide four. 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 remain stable at low levels, with 30-day arrears in U.K. Card at 1% and in U.S. Card at 1.4%. We continue to track customer and client behavior very carefully, given 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 or MEVs we have used at Q2 for modeled impairment 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 MEVs for the downside one scenario, the implied increase in modeled impairment is GBP 0.5 billion, which is significantly less than the PMA 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 levels in the coming quarters. With that, I'll hand over to Dan for the balance sheet highlights. We ended June with a robust position across all aspects of our balance sheet, as evidenced on the slide. Our CT1 ratio was 13.6%. The spot U.K. leverage ratio ended at 5.1%, and MREL was 30.9% of RWAs. Liquidity continues to be strong with an LCR ratio of 166%. I'll begin with some comments on capital on slide eight. We were pleased to end the quarter with a CT1 ratio of 13.6%, firmly within our target range. This reflects the impact of the overissuance of securities under our U.S. shelf registration that Venkat and Anna explained this morning. Let me walk through the CT1 ratio in Q2 by explaining the major movements, excluding FX and the overissuance matter, which I'll return to. Firstly, the numerator. The main driver for CT1 growth was our GBP 1.4 billion of attributable profit, which contributed 42 basis points of ratio accretion. Fair value moves through reserves decreased CT1 by GBP 600 million, equivalent to 17 basis points, largely caused by the impact of increased interest rates on the value of the bonds in our liquidity pool. Of course, higher interest rates are expected to be a material tailwind for net interest income over time. Secondly, the denominator. RWAs grew by GBP 6.4 billion from investments and business growth, equivalent to 27 basis points, including the Gap acquisition and growth in the CIB, as our FICC business had another standout quarter. Let me now return to the other items. The overissuance had a combined 17 basis points effect on capital from the net loss of GBP 341 million, including a reserve related to a potential SEC resolution and the increase of GBP 1.7 billion in RWAs associated with the hedging arrangements. FX moves had a neutral impact on the CT1 ratio, given our long-standing hedging arrangements, but accounted for large gross movements with GBP 9 billion of RWAs growth offset by a GBP 1.3 billion increase in our currency translation reserve. Hopefully, you will also find helpful the rebased view that we show on the right-hand side of the slide. The GBP 500 million share buyback announced today, the second this year, will be deducted from capital in Q3 and is expected to be broadly offset by the tailwind from the removal of the GBP 4.5 billion of RWAs on the overissuance hedging arrangements. As we've always stated, holding an appropriate headroom above our MDA hurdle is central to our capital plans. As you can see on slide nine, with our CT1 ratio at 13.6%, this gives 270 basis points of headroom above the MDA hurdle, or GBP 9 billion in absolute terms. Our 13% to 14% target range accommodates the changes to the MDA hurdle that we foresee, including the phased reintroduction of the U.K. countercyclical buffer, or CCYB, starting at the end of the year. At the end of this year at 1%, and then 2% in Q3 2023. This translates into a 0.5% and 1% requirement, respectively, for the group. We remain confident that our target provides an appropriate headroom, not least given our capital generative ability. As we previously mentioned, delivering a 10% RoTE corresponds to 150 basis points of CT1 ratio accretion. We know from experience that the CCYB is a regulatory stress buffer, and we would expect the requirement to be reduced or eliminated in the event of a macroeconomic stress, as demonstrated in recent experience of this in 2016 and 2020. It's also worth noting that the MDA hurdle is subject to an at least annual calibration of our Pillar 2A requirement. We indicated to the market earlier in the year that we expect to go into the triennial pension valuation as at 30th of September 2022 in a surplus position, both from an IFRS and a funding point of view, and that the element of our Pillar 2A requirement for pension risk may reduce. Turning to the next slide, which illustrates the structure of our capital stack. Our total capital position of 19.9% continues to provide a prudent headroom of 370 basis points above the regulatory requirements. You can see on the slide that we hold 3.6% of RWAs in AT1 format, which is below the 3.9% level we held at the year-end and continues to represent a prudent headroom to the 2.3% regulatory prescribed level. We've consistently communicated the rationale for our AT1 headroom, primarily as a buffer above tier 1 capital requirements as we manage any RWA and FX fluctuations as we've observed over the year already, and with the added benefit that this capital tier also supports total capital and leverage. Given AT1 capital is able to support regulatory metrics across a number of fronts, you'll note on the slide that we show our current preference to run a surplus at the AT1 level rather than for tier 2. We also show on the slide call profile of our AT1s, and we are mindful of potential calls ahead of time as we calibrate our issuance plans. On legacy capital, our position is unchanged. We continue to assess each security on a case-by-case basis, noting that the population of securities has been reducing. Moving on to the wider MREL funding stack. As you can see on slide 11, we have a prudent MREL position and are in excess of regulatory minimums. Despite the narrow issuance windows, we were pleased to have made good progress against our GBP 9 billion MREL 2022 funding plan with senior and AT1 transactions, and we have GBP 5.5 billion remaining. We continue to look for issuance opportunities across senior, tier 2, and AT1 for the remaining plan this year. I want to touch briefly on the Bank of England's Resolvability Assessment Framework, or RAF, published last month, shown on slide 12. We have a robust framework in place. We received the highest score possible with regards to our MREL resolvability capabilities in the RAF. This was helped, not least, by our strong record of proactive MREL issuance since 2013. You can see on that slide that from a treasury perspective, we were also deemed to have no material issues in terms of our funding and resolution capabilities. Overall, we were pleased that the Bank of England assessed that there were no shortcomings, deficiencies, or substantive impediments identified in our resolution capabilities. Let me now turn to slide 13 to talk about our liquidity position in more detail. The liquidity pool of GBP 343 billion and our Pillar 1 LCR ratio of 156% represent a GBP 119 billion surplus above the minimum regulatory requirements. We continue to proactively manage market risk in our liquidity pool and maintained our approach to reduce our rates exposure and increase the already material holdings of inflation-linked bonds. 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 businesses. Our NSFR position continued to be above requirements too, and we've now commenced quarterly disclosures to the PRA. Turning briefly to our deposit profile on the next slide. Deposits continued to grow over the quarter by GBP 22 billion and remain elevated when compared to levels prior to the pandemic. We continue to monitor closely for any signs of changing depositor behavior that could indicate future deposit outflows through our key lenses, including sector, demographic, and account balance size. We particularly track our vulnerable customer base by leveraging our historic data on consumer behavior, but to date, we continue to observe stable dynamics. Clearly, a large driver for the record deposit volumes was the growth in money supply driven by central bank's quantitative easing initiatives. Naturally, we watch closely the Bank of England's comments on quantitative tapering. While market expectations last month appeared to be a moderate volume of gilt sales, we continue to run a prudent liquidity level to cover for alternative deposit flight path scenarios. With the sustained increase in deposit balances, you can see on slide 15 that this led to us identifying further hedged balances. We grew the structural hedge program by GBP 18 billion in Q2 and by GBP 85 billion since the beginning of the pandemic, albeit we maintain prudent levels of unhedged balances as we remain alert to potential signs of reversal of the record deposit volumes. As the balances continue to roll over into higher swap rates, you can see the gross hedge income has grown materially in the last quarter by a third versus Q1. On credit ratings, we show our current position on slide 16. Improving our credit ratings continues to be a key strategic priority, and we maintain an active dialogue with all the agencies. Our main aim is to continue to demonstrate the execution of our strategy in providing a sustained improvement in our profitability, which we believe is key in converting the positive outlooks with S&P and Moody's. Let me finish with an update on our sustainable finance initiatives within Treasury on slide 17. As you know from previous calls, we've been active for a number of years in supporting the CEO's key strategic pillar of aiding the transition to a low carbon economy. We are longstanding investors in green bonds within our liquidity pool portfolio, and we were one of the early issuers of green bonds too. I spoke before about our sustainable impact capital program, which has a mandate to invest up to GBP 175 million of equity capital in sustainably focused startups by 2025. This program is housed in Treasury within the principal investments business, which is where the firm's growth stage equity investing and portfolio management capability fits. With GBP 81 million invested to date, up from GBP 54 million at our last update, we are well on track to deliver and exceed the GBP 175 million target. We've invested in 14 companies across a variety of sectors, but all supporting the transition to a more sustainable environment. For example, energy transition is a key pillar, and we have a number of portfolio companies in this space, such as Protium, which is a pioneering green hydrogen development company, and Energy Dome, which is an innovative company aimed at solving the long duration energy storage problem. We know that the transition to net zero is an important part of the investment decision making process for our stakeholders, and we look forward to continuing this dialogue as the ESG landscape evolves. To summarize, we were pleased to deliver strong and stable metrics across our balance sheet, and we continue to support the group's execution of our strategy as we navigate a challenging macroeconomic backdrop. With that, I'll hand back to Anna. Thank you, Dan. We would now like to open the call up to questions, and I hope you found this call helpful. Operator, please go ahead. If you wish to ask a question, please press star followed by one on your telephone keypad. If you change your mind and wish to remove your question, please press star followed by two. When preparing to ask your question, please ensure that your phone is unmuted locally. To confirm, that's star followed by one to ask a question. Our first question today comes from Lee Street of Citigroup. Please go ahead, Lee. Your line is open. Hello, both. Thank you for doing the call, and thank you for taking my questions. I have a couple, please. Firstly, as it relates to the U.S. and shelf registration issue, do you presently face any sort of impediments or restrictions in terms of what you might wish to do, either in, you know, secondary market making or anything you might wish to do in the primary sort of issuance markets, you know, across any currency, any product? That's question one. Question two, please. As it relates to risk-weighted assets, I note the share of CIB as a proportion of group RWAs has been increasing. I suppose we've got two questions linked to that. One, is there sort of an upper bound of what you'd be comfortable seeing sort of CIB as a share of overall group risk-weighted assets hitting? And secondly, remind me, do you split out the proportion of those CIB RWAs that relate to markets anywhere, or can you give us any indication as to what they might be? They would be my questions. Thank you. Hey, Lee. It's Dan here. Thanks for your questions. On the first one, in relation to the issuance program. We have the full set of programs up and available to us, with the exception of the U.S. structured notes program, which we're not currently issuing from, given that we've announced the rescission offer. All the other programs are up and available to us, and there's no further specific restrictions on our activities in relation to the capital markets. Hi, Lee, it's Anna. Why don't I take the questions on RWAs? We don't have specific targets about how we deploy RWAs around the group. What you're seeing is us essentially reacting to market opportunities, and we think that's a really important part of being a diversified group. It would somewhat undermine that diversification if we had sort of strict absolute limits. Having said that, some of the growth that you are seeing across the half overall does relate to some of the regulatory changes that we had on the first of January, as opposed to, you know, business deployment. If you're looking for sort of the helpful disclosure around RWAs, I mean, we don't split out markets specifically, but if you look at sort of pages 61 of the RA, you can see the split there of counterparty credit risk, and you can see that in Barclays International. There is one other table that I'm just looking for. Yes. That's also on page 61, where you'll see CCR and market risk split out. That might be helpful to you. All right. I'll take a look. Thank you both for your answers. Thanks. Thank you. Should we take the next question, please? The next question comes from Robert Smalley of UBS. Please go ahead. Hi. Thanks very much. A couple of topics. First, on page or slide 28 in the back of the deck, you quite helpfully break out U.K. versus U.S. cards, credit experience and coverage. There are some differences between U.K. cards and U.S. cards in terms of impairment allowance development and where they stand, stage one, stage two, stage three. My first question is, could you talk a little bit about that and what the differences are that you're seeing market to market in terms of consumer behavior? That's the first question. Second, on this slide, could you also talk about German exposure, what you're seeing there, and if this is going. If the forecasts for the German economy pan out the way they are, particularly around energy issues, whether you're gonna have to make a much bigger allowance here. Okay. Thank you, Robert. Why don't I take those questions? There are quite big differences between the U.S. cards and the U.K. cards businesses. The U.S. cards business is a partner cards business. It's much younger in its derivation, if you like. We're very focused on pursuing those partner programs where we have strong relationships with the institutional clients, whether that be Gap, JetBlue, et cetera. Typically what we see within that book is very high FICO scores. It's a very high quality credit book, dominated really by sort of airline relationships. We would see it as towards the premium end. Clearly we've onboarded Gap in the current quarter. Gap is a retail portfolio. They tend to be different in nature, smaller ticket items, normally a slightly different risk profile. Gap as a book is very high risk quality. If you look at what's happened to the portfolio FICO post that integration, you'll see that it's not really moved, which tells you how high quality it is. That's the U.S. cards market. I guess what we're seeing there is good purchase growth, but very high repayments, and some balance growth. In the U.S., I guess because the rewards programs are very generous, we do see customers using their cards probably more so than we do in the U.K. In the U.K., card balances have dropped sharply during COVID. That's left us with a smaller book, but a book which is better in terms of its risk profile. The U.K. cards book, given our market share in the U.K., is much more of a representation of the customer demographic as a whole. The reason that we've seen that fall away is that simply in the U.K., the rewards programs are well, they're simply not as generous. People tend to use the card more as a borrowing mechanism, rather than just a spending mechanism. Therefore, you know, our spending behavior has changed through COVID, so we've seen those balances fall. You'll see on, both books, fairly high, levels of coverage. They, the one that I particularly look at is stage two coverage. Those are customers who, you know, we may have, seen a degree of, change in their behavior. It may not be, for example, a concern around that behavior. If, for example, you start spending more on your card, your probability of default will go up just because you're spending more. We're very focused on that cohort, and you can see that, you know, the coverage levels on those two in particular are very high, 26% in the U.K. and 33% in the U.S. Hopefully that gives you a bit of background. In terms of Germany, it's a very mature portfolio. We feel that we have provided for it adequately. There are no concerning signs in the customer behavior at this point in time. You know, the story is not really any different to the U.K. or the U.S. in terms of customer behavior. There's nothing specifically I would call out, but, you know, I do recognize the sort of deeper economic potential stress that there is in Germany and therefore, you know, we're very watchful. That's great. Thanks for taking my questions. Okay. Thank you. Can we go to the next question, please? As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypads now. The next question on the line comes from Daniel David of Autonomous. Please go ahead. Hi. Good afternoon. Thanks for taking my questions. I've got three. The first one's a bit more broad. Just looking at your CIB loan book, you've seen particularly strong growth there. I'm just wondering if you can give us a bit of background, any specific drivers, growth, certain sectors or geographies, just what might be making you stand out versus some of your peers. Then the other two are just more focused on capital. With regard to your capital target of 13% to 14%, looking longer term, should we add the 1% CCYB to that? The reason why I ask, I guess, is that the lower end of that looks quite skinny against the minimum requirement compared to peers. Secondly, just focusing on AT1 in a bit more detail. Looking ahead to your calls next year, I think you've got another sterling call coming up. Is it right to assume that you look to refi if you choose to refi and call in sterling? Would you stick with the currencies at which they're issued? I hear your comments on the Tier 1 excess. I guess I'm interested, could you reduce that Tier 1 headroom to facilitate a call if primary markets remain challenging in the short term? Thanks. Okay. Thanks, Daniel. I'll take the first part of that question and then Dan Fairclough will pick up from there. There's really two parts to the answer there. The first is GBP 26 billion up overall in that wholesale lending. Actually, GBP 14 billion of that 26 over the last six months relates to debt securities in the liquidity pool. It's just the way we present these things. It's probably a little difficult to disentangle that, but we can help you do that, I'm sure, in the disclosures. Of the 26, there's 14 that's essentially our own liquidity pool actions. The remaining balance is true client lending, I would say. That's concentrated on IB clients. It's investment-grade clients drawing down on existing facilities. You know, it's not a massively significant number given the scale of our balance sheet overall, but we took that as a positive sign actually of, you know, positive economic activity. Given the quality of those clients, we didn't have any concerns about it. Dan, do you want to take this one as well? Yeah. In terms of the comment around the capital ratio. The 30%-40% range was developed in contemplation of a normalization of the CCYB buffer. We won't be changing that range in respect of the CCYB announcements. Obviously, the MDA formulaically will go up to 11.9%, which is obviously in the slides. That would give us a headroom of 110 to 210 basis points, which we're comfortable with. I'll probably reiterate two points that we made in the script. Firstly, we think that there is an element of stress buffers in that stack. In the event that there was a general market downturn, we would expect the Bank of England and the PRA to take action on the CCYB. Secondly, I just highlight the capital generative nature of the franchise and reiterate obviously the capital generation from this quarter in terms of AP and also the fact that a 10% ROTE is 150 basis points of capital generation. Yeah, we are comfortable with the stated capital target range. In terms of your comments on AT1, I don't think you should link directly issuance to calls, and in particular, there's no particular need for us to refinance with sterling. It is nice to have a component of sterling AT1, and particularly that's helpful for BUK. We definitely look at it on a portfolio basis rather than specific instrument-to-instrument matching. You know, yes, broadly you're right. You know, we could reduce the 81%, if we needed to, and obviously that is one of the reasons why we run a buffer. We saw that play out this quarter, given the FX movement. It did bring down that ratio as a result of the dollar strength. No, we wouldn't be necessarily wedded to it, but it's broadly what we target. Thank you very much. Okay. Thank you. Operator, are there any more questions in the queue? We currently have no further questions. Okay. Well, if that's the case, then I'm sure we look forward to seeing many of you on the road over the coming weeks. We'd be happy to take any questions at that point or before. Thank you very much for attending the call, and we'll see you soon. Thank you. That concludes today's conference call. Thank you all for joining. You may now disconnect.