Barclays PLC (BARC) Earnings Call Transcript & Summary

Good afternoon. I think I know most of you in this room. But for those that don't, and those who haven't had a chance to say hello to yet this morning given how busy it's been, I'm Jason Goldberg, and I cover the U.S. large-cap bank stocks here at Barclays. On behalf of myself and my global colleagues in research and sales and trading throughout the firm, thank you for attending our 20th Annual Global Financial Services Conference. It was 3 years ago almost to the day that we were last in this room in person. And I can't tell you how great it is to be all back here again together today. The feedback on this morning's presentations and meetings has been phenomenal, and I'm sure the rest or conference will measure up. So thank you all for attending and for your support. I'm very excited we get to showcase Barclays at lunch this year. As you know, Barclays is a British bank with a universal model, offering a range of services globally. It's a large consumer bank, managing an excellent credit card franchise, a leading corporate bank and one of the largest global investment banks. Making his debut on stage at this conference, we're very pleased to have Venkat, Barclays Group Chief Executive Officer since November 2021. Prior to that, he was Head of Global Markets and Co-President of Barclays Bank, and he was Group Chief Risk Officer before that. So you have kind of the perfect business mix with a perfect resume, which should make a very -- for a very fruitful discussion with you today.

Thank you, Jason. Thank you, everybody, for coming. This is the industry-leading financial services conference, of which, Barclays is extremely proud, very proud and pleased in that Jason has been helming us for over 2 decades. He told me it began in a seedy hotel of Times Square 20 years ago. But seriously, we are very happy to have you. We are very grateful to all of you our clients for coming. And it's -- we can feel the life and the energy coming back here after 3 years. And we hope that you learn a lot, get to meet the companies you are interested in that you cover, and that you find how Barclays is trying to add insight into the financial profession and into the analysis of financial firms. And of course, as I'm sure we'll get into, we are at a very, very interesting inflection point in the financial markets and in the industry. So it's a very good time to reassemble. Thank you for coming. I should also say, as a British bank, that we've noted with both the passing of the Queen last week. A lot has been said and there is very little I can add, other than for all of us to note, for somebody to take that leadership position at age 25 and do a great job for 70 years is, any one of us who follows leadership knows, how difficult that is. And so that is the one thing in the world in which we live in, we should note and we should regard and we should admire. So with that, Jason?

Thank you, Venkat. So in the middle of your tables are kind of the clickers that we've been using in the general sessions. If everyone can kind of grab one, we're going to kind of make this a bit more interactive. And if I could have -- we're going to go through 2 questions off the that.

And by tradition, our CFO does not vote.

He didn't say I couldn't vote. But I guess the first one is what would cause you to become more positive in Barclays shares? And we're going to kind of use these answers to kind of help frame the discussion. [Voting]

So positive revenue surprises is one, but not so far is stronger capital and higher dividend payouts. And then let's put up the second question. What would you expect to be the biggest influence on Barclays revenues in the coming 12 months? So that kind of dovetails nicely into the prior question. [Voting]

So rates definitely stands out on front. So we're definitely going to make sure we touch on all those topics.

But maybe the best place to start is just your reflections on Barclays strategy and performance since you became CEO towards the back part of last year. And just kind of what you're focused on and what do you want the bank to be focused on?

Yes. So I've said it in a couple of earnings calls, but I don't get tired of saying it, so I hope you don't mind listening to it. I think the fundamental question people asked about Barclays 5 years ago of my predecessor was, should you be in investment banking? And if you were in investment banking, would you be any good at it? And I think we've largely put those 2 questions behind us. Should we be in investment banking? Absolutely. We're the #6 bank in the world. And we were the only U.K. bank that managed to hold its head above water profitability-wise through COVID. And so clearly, it supported the diversification thesis of the bank. And then the second thing is, if you are in it, are you any good at it? And I think, look, we've made substantial progress in proving that we are good at it, both in our rankings, the consistency of our rankings, the market share we have claimed from competition, especially in the markets business in a sustained way over the last few years. So then moving forward, I think the questions then come down to, in addition to the business mix, how much progress are we making in digitizing the bank? That's one of our goals. Continuing to have strong growth in the Corporate and Investment Bank, and steady and strong growth. And then lastly, taking advantage of the move towards a greener economy. Those are the areas in which we are focusing. Those are -- I would not call them grand strategic changes. They are not. What you're seeing is a lot of continuity. And I think when I look at the strategy of the bank and look what we want to do, what we want to do is continue to be very strong in the businesses in which we are, which Jason was kind enough to list at the very beginning, which is not just our Corporate and Investment Bank. It's our retail offering in the U.K. It's our credit cards business in the U.S. It's our corporate banking in the U.K. But beyond that, we have a strong presence in India. We've got a very good trading operation in Hong Kong. We've got a Wealth and Private Banking business. We want to be good at all of these things. Execute steadily, execute consistently, continue to consolidate market share, and then hopefully grow it.

One of the things that has kind of clouded the strong operating performance is the U.S. self-registration issue. Maybe remind us what's going on there?

Yes, yes. I wish this was vodka. The...

I don't want to bring it up, but well.

But you had to bring it up.

The most asked question I got.

Yes. Listen, it -- the people told me that I was going to get something that would happen in my first 12 months as CEO. I hope this is the only thing, I have 2 months left. But it is -- as I said, it's extremely disappointing. It was completely avoidable. It was a mistake that should not have happened. It was particularly disappointing because we had made a lot of progress and have continued to make progress in having very strong controls, in investing in technology, to have as seamlessly as you can, good business operations. But the thing did happen. We are learning our lessons. We are moving on. We are continuing to focus on controls. I would say there are 2 things. One is the bank was in a good position that we could financially absorb the loss. And so that was good. I mean it's still a loss, but we could manage it. The second thing I would say, as we said in our second quarter earnings, that we are very, very far along in discussions with the SEC on resolving all the sort of outstanding issues with that matter, and so it remains. And we will hopefully be able to update you on that in the not-too-distant future. And today is the last date of the recession offer, where we -- it ends to offer where we buy back the excess notes which we issued. And so again, as a financial matter, we hope fairly quickly to be able to give you all the final details. And I will be glad to have it in the rearview mirror.

Shifting gears to a more upbeat thing. Corporate and Investment Bank performance. I'm going to remind you, in case you didn't know, very strong first half. It's also one of your strategic priorities. Just maybe talk about what do you see the biggest opportunities to grow that business?

Yes. So -- well, 2022, as you know, has been sort of a tale of 2 cities in the Corporate and Investment Bank. On the one hand, you've had a correction in the investment banking side, especially in primary market activity over the year. There's been a little bit of pickup in DCM this month, but a correction from what were extremely elevated levels in 2021. The good news is through that we have managed to hold on to ranking and market share, in fact, improved on it. We've done slightly better than our competition in what was a down market. On the other hand, volatility in interest rates, inflation expectations, market levels, idiosyncratic risk in single names has led to a lot of trading activity, activity, people rebalancing their portfolios and responding to the various events in the world, which has been very good for our trading businesses. What I'm happy to say is that these are not things of the moment. They reflect an approach to a business that's been building up over years. So even if you take our investment banking business, for many, many, many years, we've been trying to diversify out of our core strength, which is debt markets and credit markets, which remains a core strength. But we are trying to add to that capability in equity markets as well as M&A and advisory work. And as different parts of the markets see more activity, we hope that, that approach that we've taken will pay off. Those investments will reward us. And we're already seeing signs of it. And then when you go to the trading side, very much the same thing. We have been investing over many, many years in systems, in technology, in people, in trading capabilities and client relationships, with the result that I think we've captured about 105 basis points of share in the markets business over '19 to '21, '22 or '18 to '21. And we hope to hold on to it. And then when you look at the business itself, it has features that allow you to take advantage of areas where there's a lot of activity while you continue to invest in activities where areas where the activity is slower. So for instance, last year, 2021, with very low interest rates, with very little interest rate volatility, the macro business was not making a lot of money. This year, it's been exactly the opposite. With lots of interest rate volatility, with lots of movement in foreign exchange, the macro business has done well. Our equities business, which was a very small part of this franchise, continues to grow from strength to strength and in ranking. And it does so even accounting for the cost that business has taken due to the securities overissuance. And then thirdly, this is not just a trading business. It's a very large financing business. We are a very strong provider of financing for equities in our prime brokerage business, where, again, we are ranked 5 or 6 depending on the day, sometimes 4 as well as in fixed income, where it has been very subdued, but now it's growing with volatility in fixed income. And there, we have a ranking of something like 3, 2 to 3. So we're top 3. Stephen Dainton says #1. So -- but we are a top-performing business there. And so what you see is an investment in the business that is diversified, has many strengths. And I think it's beginning to pay off and has paid off actually. So I'm very confident about how we're doing there.

Got it. Maybe shift gears and talk about the U.K. a bit. Obviously, facing considerable economic uncertainty, undergoing a lot of changes, new Prime Minister. You mentioned the sad passing of Her Majesty, the Queen. Just maybe give us your thoughts on the macro picture in the U.K. and just how you see things?

Yes. So the macro picture in the U.K. is challenging. Inflation is running into the double digits. A lot more of it is energy prices than it is in the U.S. So about 4% to 5% of U.K. inflation, 4% to 5%, not of the total, 4 to 5 percentage points of the 15% or 16% number is inflation, is energy inflation. And then it is not as bad as Europe is, but it is still pretty bad. It's also got the same issues that the U.S. has of a supply shock and labor. So what you've got is very low unemployment, but it's low unemployment because people have either withdrawn from the workforce voluntarily, or Brexit related, there have been people who have left. On top of that, you've obviously had political uncertainty with a change in government and an election process that took about 6 weeks when there was not much happening in the government. So what's the good news? The good news is that starting conditions for the U.K. consumer and U.K. businesses are strong. Unemployment, as I said, is low for those 2 reasons. Consumer balance sheets are strong because of both the support that they received during COVID and because people didn't spend as much on certain sort of high-ticket items, especially related to travel during that period. So unemployment is good. Starting conditions are good. The latest approach by the government to provide energy support is going to be very helpful. Now it is about GBP 2,500 over 2 years -- for 2 years and cap on energy pricing. But what it will do is it will reduce the stated inflation numbers. It will hopefully reduce inflation expectations. It will improve the credit quality of the consumer, so that's beneficial to the system and to banks. And it allows people to go through what is going to be this very tough economic period. That's good news. And I think there's very broad support for this. I think longer term, this government and other governments are going to have to deal with some of the structural issues which the U.K. has. One is the labor situation, which I said. The second is, hopefully, what this energy price [indiscernible] the concerns that many people in the U.K. have about whether their incomes can keep up with the cost of living, right? That remains a concern. But this energy price support will help with that, that will help for some stability in sort of labor and labor supply. And then the third thing is that, as you consider what is called the unworked, unfinished business of Brexit, right? What is the government going to do about financial reform? And there are bills in front of Parliament right now. What does the government going to do about the ease of doing business in the U.K.? This government, I think, wants to take a look at it, take a look with the fresh pair of eyes on these issues. And I think they may take a bigger, bolder step than people might have thought possible. And so there is much anticipation to see where that might go. So I think there's -- there are obviously the difficulties the U.K. faces like most countries face and countries which have energy vulnerabilities. At the same time, they have taken some important steps. They may take more important steps. And the U.K. has invested a lot in renewables, is investing in nuclear, which I think is moving faster to secure their energy supply than many other countries.

Yes. That's a helpful backdrop. Maybe against that landscape, we could delve into Barclays U.K., in terms of what you're experiencing there and just how you balance the desire to grow versus the risks associated with what you talked about?

Yes. I think it's a good question, Jason. And we are in a particularly important time where you sort of have to look at that risk-return balance. So initial conditions, as I said, are very good for both the consumer and small businesses. We are seeing very, very little signs in our own portfolios of stress. We tend to see people log on to web pages and see what assistance might be available, but they don't click through to actually ask for assistance. That doesn't mean it may not happen. As I said, the energy support will help with that. At the same time, when you look at our portfolio, we continue to have grown in the mortgage market. And I'm fairly comfortable about that. I think there will be a price adjustment that happens to people who went on to fixed rate mortgages of, I mean, 2-year or 3-year fixed a few years back when rates reset. Now in our own credit models, we try to make allowance for those things. So again, I'm fairly comfortable with the credit positioning. Our unsecured book in credit cards is about half of what it was pre-COVID, which is obviously a sort of a problem from the income side. But from a risk management point of view, when we look at what might be a weaker consumer environment, I'm not too worried about it. And I think we will have opportunities to consider the growth of that book once we come out on the other side.

I guess on that -- I guess related topic, maybe switch to U.S. card business. It's another business you talked about growing and investing. Signed some new partnerships of late. Just maybe talk about in terms of what you're seeing on this side of the pond?

Well, let me begin with the credit question. So like in the U.K., we are seeing very little sign of credit stress in our business. Our business has typically been a much higher credit quality business in the U.S., where typically, we had our partners. So it's a business about 20 corporate partners and 20 million customers. Now one of those corporate partners is Gap, who we just onboarded this year, and that's about 10 million of the 20 million customers. The non-Gap part of it is airline and hospitality heavy and it's generally higher credit quality. But we were vulnerable to that during COVID when spending dropped in those segments. Gap is smaller tickets, generally lower credit quality, but we think better return per unit risk. Getting Gap was and integrating it has been very important for our business, because what it does is that, A, it diversifies the credit mix. It broadens the credit mix. Second, it broadens the industry exposure. Third, it allows us to develop a muscle which is to work with those customers of GAP. We work with Gap and the customers of Gap to try to find out what it is that we can do to help them use their credit cards better in a way that builds loyalty to Gap and allows the customers to get the advantage of using an in-store credit card. The important thing about our U.S. business, which is why I like it so much, is we -- our customer is the corporate. We've got 20 million underlying borrowers or people who use credit cards. But we are not really offering them other retail products. So we are not competing with our proximate corporate customer. So if we have American Airlines Credit, which is credit card partner, we are not looking to sell mortgages to those people underlying it because that's not the operation we have in the U.S., which makes it a very good alignment of interest between us and our corporate client and a good alignment of interest actually where we are trying to provide the best benefits to the 20 million customers at the very end.

Maybe -- I want to shift gears to expenses. So let's maybe go to the next ARS question. How do you think Barclays cost development -- how do you think about Barclays cost development versus expectations? [Voting]

Likely to miss expectations versus cost inflation.

Is this where I introduce our CFO?

But I think, clearly, there are inflation pressures out there.

It's real.

So maybe just talk to in terms of how you're managing, how you're counterbalancing those inflation concerns and just how you think about investing in that backdrop?

Yes. So inflation, first of all, the biggest impact of it on our cost side is the wage inflation associated with people who are largely unionized in our U.K. workforce as well as people in India and so on supporting our operations worldwide and in the U.S. For those people, for the U.K. workforce, we actually -- before this latest take up, we agreed on a change of 4% approximately in their annual wages starting in August. So our normal wage negotiations would take place around September, October, with implementation in January. What we did was we implemented it on August 1, but it's a prepayment. In other words, when we do the negotiations now, if the net change for 2023 turns out to be 5%, we're paying 1% more because we've prepaid 4% starting in August. We felt it was important to do that for our employees because what it did was that it addressed a concern of theirs fairly quickly, right, before you let it materialize or even sit in the system. And we think that was important to do. In India, we have been fairly good, fairly aggressive in increasing wages even in the past couple of years. But we will take a look at it as we take everywhere else in our corporate, et cetera. So this is an issue for us. And the other side of this is that the rapid increase in inflation has obviously led to higher interest rates. Those interest rates lead to better revenues for us. That was one of the earlier questions you had in our banking businesses. And then change in inflation is leading to change in business models, not just for us, but companies around the world, which gives us 2 advantages. One is in our Investment Banking business to the degree we help these companies readjust themselves either through acquisition or use of capital markets activities to adjust to a change in inflation. That's good for us. And obviously, in the markets business, it has led to volatility in various ways. So inflation itself or the change in inflation has a cost impact. And that's absolute and that's real. And we have to manage it sensitively, compassionately and prudently, which is what we try to do. But it also has business impact which can be positive elsewhere.

Got it. Maybe we'll put the next ARS question. What are you most concerned about at Barclays in the current macro environment? [Voting]

4 is a good answer.

Credit quality, #1. So let's go there next. And clearly, I think there's right concern among investors about recession risks and the impact on banks. Although look at the credit metrics, and just very, very little signs of duration that we could see. I guess, kind of what are your expectations? What are you most concerned about? How do you think this kind of credit cycle plays out?

It's a very, very unusual credit cycle, because it's the first time, at least as far as I remember and what I have read, that you see a credit cycle starting with such excellent initial conditions, right? Where companies and individuals are highly liquid, have strong balance sheet, and employment is at a high, unemployment is at a low. In my opinion, first of all, when it comes to Barclays, we have been very prudent in our provision for credit losses through this entire period, starting with COVID, where we moved aggressively to take provisions and we didn't release those provisions and add back again as some others have done. So we've held on to the provisions, proportionate, of course, to our asset exposure. So I feel comfortable about the level of provisioning and the level of credit due diligence that we are doing and the watchfulness that we have for our exposures. I think coming back, as I said, there's a real question about how this could play out, because you've not seen a credit cycle begin with such strong initial conditions in both balance sheet and employment. There is a chance, not a high one, I don't know what number to put it at, that what we see when we come out on the other side is a financial clearing up of asset prices. It's already happened, right, where -- in certain -- in parts of the equity markets and parts of the credit market. So a repricing of financial risk, but without a real consumer recession as we've seen it, as we've experienced in the past. There's a chance that, that happens. Now why might that not happen? It might not happen because the initial conditions, however good they are, are not strong enough to prevent us from experiencing stress. And there is a hidden form of risk, which is people who have elected to be out of the jobs market, having done so on certain assumptions of how long they can last on the money they have find that inflation has been a shock to them and they need to reenter the workforce. And there is not then the capacity to absorb them, which would then see both measured employment rates or measured unemployment rates rising, and which could itself cause an issue with expectations and with credit appetite. So those are the risks. But I think the initial conditions are going to go a long way in protecting us. And especially in the U.K., the actions the government has taken to provide support for customers and for consumers is quite aggressive and unusual.

Got you. We'll see if your first scenario plays out. That sounds good to me. I guess, earlier, you kind of talked about your strategic priorities. You kind of touched on ESG and just capturing opportunities as you see the transition to a low carbon economy. Maybe expand on what you mean by this and just give some examples where you're making progress?

There are 2 sides of this low carbon economy. One is what we would call the supply side, which is for banks investing in those who produce greener energy, not lending as much to those who produce greenhouse gases. And that is the path of transition. Then there is the demand side, which, especially for a large retail bank, is to try to lend and assist consumers with changing their behavior so that they become more energy efficient. These are both very difficult and long journeys. That's why when people talk on the first side, on the supply side, about trying to be net 0, it is a 20-, 30-year target time frame. So we've committed -- we've got the ambition to be net 0 by 2050. We have moved aggressively over the last few years to lay out transition pathways and how we want to transition our lending and financing to activities which produce greenhouse gases, especially in the energy and power sectors. And we're going to broaden that to include other sectors. And we have an industry-leading franchise in financing the transition to greener technologies, so -- both in green bonds, in investing in companies and helping them find investment. On the demand side, we are at the very start of that journey. So Barclays has one of the strongest green mortgage portfolios in the U.K. What that means is if you've got a highly rated energy-efficient house in the U.K., which not many people do, but we'll come back to that. But if you do, you can get a mortgage from Barclays at approximately a 10 basis point discount. And by the way, Barclays can issue green bonds and finance ourselves more cheaply because we are using those proceeds to fund those mortgages. So that's a win-win. What we need to do is to have more green mortgages. But there's a chicken and egg problem because people need to have the money to improve the energy efficiency of their houses. And the U.K. housing stock is notoriously drafty and notoriously old. And what we are trying to do is to find ways to help people with that. And that's one of the things our consumer bank is particularly focused on. And we hope to announce in the coming weeks and months ways in which we can help people with that. I think it's a good business for us. And I think it's also good for the economy and it's good for consumers. And now more than ever, we need to find ways to sort of save on energy usage without freezing. So there's a lot to be done. But when you think about the role of both investment banking, consumer finance and overall banking technology, right, this is one of the greatest things we can do. And we just have to bring it together and be innovative and join those in technology and in industry who are trying to develop these innovations and bring them to market.

Got you. Why don't we put up the next ARS question? How do you see Barclays position on capital and capital returns? [Voting]

So upside surprise from better earnings in the future, the #1 response, interesting. I guess in that vein, you're in your target CET1 ratio range, buying back some stock, announced increased capital returns. What should shareholders expect go forward?

I'll tell you what the management team in the bank -- of the bank and my colleagues and I are trying to deliver for you, the shareholders. As I said, we are investing in our businesses. All of our businesses are operating in double-digit RoTEs. We've got our capital at the right target level. We expect that the capital which we generate will go towards 3 things. One is, obviously, investment in our businesses. Second is whatever we have to do to adjust the shifting regulatory requirements, which we hope are small. And third and most importantly is returning capital to our shareholders. So capital and capital return -- capital generation and capital returns are right on top of our list of objectives. In order to achieve that, what you've got to do is to build a highly capable, good quality, resilient bank. So where you have businesses which are a good mix of businesses to have, which not all will do well at all times, but you have enough of them that do well that lifts up the whole bank. And second is be in businesses where you have a chance and an ambition and the ability to be really, really good. So you've got to choose those businesses, invest in them and not have hobbies. And that disciplined approach of business selection, business investment, business execution is what my colleagues on the management team and I aim to do. And with that, we hope to give you item #1.

You mentioned double-digit RoTE. And I think you've said you expect it to deliver for the full year for the firm. I guess are you still confident in that statement? And maybe just talk to the puts and takes of delivering on that?

Yes. I am relatively confident in that statement. We are close to the end of the third quarter. We've got a quarter to go. There are always surprises that could happen externally. We think we've managed our trading market risk fairly well over this entire period. We'll continue to manage it prudently. I think on the credit side, again, shocks could happen. But to see them manifest themselves in the books within 3 months is a little hard. It's always possible. And I think there are areas, especially in interest rates, in NIM, where upside is possible. So that gives -- that's what gives us the confidence.

Great. We are going to open up to the audience for questions. Why don't we put up the last ARS question while you guys think of what you may want to ask and get your hands raised? But as you're getting ready to ask your questions, what do you think would be the highest positive valuation driver for Barclays over the medium term? [Voting]

Consistent earnings delivery, #1, propped by macroeconomic improvement. So a lot of control over the first one, not so much control over the second. Questions from the audience? I think this is the most people that have been in one room for a sell-side financials conference since COVID. There have to be some questions. I see one stage left and one stage right.

I just had a question. You mentioned that potentially financial regulation and Brexit could depart further than maybe most of us expect. I think that message is clear on the insurance side with Solvency II and so forth. But I'm just curious, what do you imagine changing potentially on the banking side, if anything?

So I think on the banking side, right now, all banking regulation in the U.K. follows Europe. And they're beginning to look at where it is that they want to depart. It could be capital rules. It could be the way they want to regulate banking activities in the U.K. It's early to say what it could be, but the debate and discussion has begun, and that was my point.

I thought there was a question back there? Yes.

I have a question about unemployment. Can you speak to the fact that -- your starting point is to say essentially that unemployment levels are low today, and that should give us, on a forward basis, some confidence about your ability to deal with asset quality deterioration. But isn't the point that unemployment [ notes ] need to increase from here and the sacrifice ratio that we should expect in terms of unemployment means that the direction of travel is the deterioration? And that deterioration affecting consumer book affects probably your business book over time as well, your corporate book over time as well?

No. You're absolutely right, which is the preponderance of risk, if not the entirety of it, is that unemployment rates will rise. My point is that the starting point is extremely low compared to previous recessions. Now that starting point is flattered and could default because people have elected not to work, right? And if you bring those people back in, maybe the unemployment rate is more normal. So that's the risk to what I'm saying. But I'm saying the starting point is very low. So it's a question about starting point. And why that matters is many, many models of consumer loss are based on either levels or on changes, but they have a starting point assumption. And that is a very different assumption today. I mean that's -- the reality is much better than those models might assume. That's just my point.

Great. I saw a question stage right.

Can I just ask a quick question on how you think about the lag effects of policymaking through to the real economy? I think every financial institution that we see right now tells us that the book is fine, the consumer is fine, there's no issue of credit quality. But how do you think about the lag effects from mortgage rates having doubled and financial conditions having tied as much as they have? What -- how should we think about that lag effect?

So I think in most prior cycles, that lag effect would have been 9 to 12 months. I think right now, the initial conditions may make those lag effects longer. So it may -- what may have been 9 to 12 might be 15 to 18. And that's the basic point about it. I think the lag effects are longer. And because of that, if there is a chance that the economy corrects itself or the energy price shocks disappear, then you may end up in a situation where the economy improves, demand improves before you actually have the real impact into the economy. So it's not that the lag effects have gone. I mean they're there. They're just a bit longer.

A couple of capital-related questions. One is a bit of a follow-on of the prior question, as to the interaction between U.S. and U.K. capital rules, and with both of them being somewhat up in the air at this point, any insights? Somewhat separately, with the recent weakness of the pound sterling, in a business that has a large dollar component to it, how resilient is the capital base to any further deterioration in the exchange rate of the pound?

Yes. Let me take the second question first. This is actually beneficial to the income of the bank, a weaker sterling, because we have a dollar cost and a dollar revenue. But if we are having revenues -- positive jaws and revenues growing faster than cost, then what we are having is accretion to our income line in dollars, which is worth more in pounds. So that is helpful to us. Coming back to your first question, which is divergence of capital rules between the U.K. and the U.S. I'm just going to broaden it to include Europe. Where we are right now is, let us say, at the starting point of Basel IV. And there have been important -- the biggest important set of rules are around market risk and what is called the fundamental review of the trading book, which has been talked about since 2012, 2013, not yet been implemented. It looks like the U.S. may not implement it. The U.K. might be considering it, as is Europe. And then related to that, there are positive aspects of credit risk modeling. And then there are countercyclical buffer questions in the U.K. where the PRA said that they might impose them, less so in the U.S. It's difficult to say with all of these things when they will come into play, and whether in the case of a countercyclical buffer, if things get really bad, whether they'll want it to come into play. So in our business, what we have to do is try our best to be prepared to implement the changes that they want us to make, to make our planning flexible so that we could adjust to it, and to represent to you, our shareholders, what our best guess is of the impact. So coming into this year, we made some adjustments. And we will continue to study it from time to time. But I think the period of that activity, as the economy weakens, of that risk may be slower right now and it will probably pick up again in a year or 2. Yes, other question? Yes.

My question is from the credit side. How would you characterize your progress towards higher rating from the rating agencies?

We strive very, very hard. We think the underlying quality of our credit books continue to improve. And our credit risk management performance is extremely strong. I was Chief Risk Officer for 5 years engaging in that debate and trying to win them over. I'm sure I'll be successful sooner than later.

We have time for one last question. We can go over here and let's - this gentleman right here.

I think the BoE will be the first western central bank to attempt to actually sell government sovereign securities purchased in QE. Do you have a view on how that may impact Barclays or England? And it seems like a differential step to QT we've experienced in the past?

It's a good question. I'm not sure that there's going to be a substantial impact at first, because I think it will be a little bit of withdrawal of liquidity from the banking system. But the banking system is extremely, extremely liquid. It will be a bit of supply into the sterling and the gilt market, which I think is actually quite good. The gilt market has been feeling the effects of some uncertainty, and I think some good 2-way supply would be good for it. But I think I'm not worried about the impact in the near term of that.

With that, please join me in thanking Venkat for his time today.

Thank you.