Good morning, everyone. And thank you for joining this 2016 second quarter earnings call. Before I hand over to Tushar to take you through the numbers in depth, I want to provide you with some thoughts on what was a really good quarter for us actually; and one which aptly demonstrates I think, the high quality business at the core of Barclays. We were very encouraged by the progress we made against the strategy laid out on March 1, as we've established for Barclays as a transatlantic consumer, corporate, and investment bank with global reach. Our core businesses, Barclays UK and Barclays corporate and international are performing very well, producing a combined underlying return on tangible equity in the second quarter of 11.0%. This already impressive profitability of these businesses today, businesses which represent the future of Barclays, emphasizes again why our strategy is focusing on delivering to our shareholdings the earnings power of those core franchises free from the drag of non-core, and to do this as quickly as possible. The elimination of non-core continued at pace in the second quarter with a further reduction of £4 billion in risk weighted assets. Second half will include even more progress in non-core rundown as we anticipate closing deals that we have already announced, including the sale of our cards business in Iberia; the sale of our wealth business in Asia; and the sale of indices business; and the sale of our Italian retail network. These are all on pace. These deals, collectively, will deliver a further £3 billion of risk weighted asset reduction, and add about 15 basis points to 20 basis points of improvement to the CET1 ratio in the second half of this year. They will additionally, mean annualized cost reducing by about £250 million, and a headcount…

Thanks, Jes. You have seen our H1 results, which were released earlier this morning. As at Q1 we led with the statutory view of our financial results, since we are close to the end of our restructuring, I'm now going to focus more on the Q2 performance. And we have, again, highlighted the key notable items in the period. When I run through the performance of our businesses, I'll talk on an underlying basis, excluding these items. And, as you know, Barclays Africa is now presented as a discontinue operation, and we have completed the initial stage of our planned sell down in Q2. In this quarter, our core business again delivered a double digit RoTE, as Jes mentioned; 11% on an underlying basis. Barclays UK was at 18.4%, and Barclays corporate and international at 11.9%. Our CET1 ratio strengthened during the quarter from 11.3% to 11.6%, despite the preference share redemption, and the conduct charge that we took. We continued to make good progress in the non-core rundown, and remain on track to close the non-core by the end of 2017, with around 20 million of RWAs, and a significantly lower drag on Group returns. Now, I'll return to the flight path of both RWAs and reduced losses in the non-core later. As you heard from Jes, we are today giving further guidance on a lower cost base for 2017. We also remain on track to hit our core cost target of 12.8 billion for this year, which was based on a U.S. dollar rate of 1.42. We've given a sensitivity of what this would be if converted -- if the £1 were at $1.3 throughout H2. But, as I've said many times, we benefit overall from a strong dollar as we have significant U.S. dollar profits. TNAV increased…

[Operator Instructions] Your first question today is from Jonathan Pierce of Exane BNP Paribas. Please go ahead.

Can I ask a couple, please? The first is on capital and capital plans. And, actually, first part of this question is just to check on the upcoming disposals. Obviously, you've already taken some impairment hits against France, the Italian retail business, I seem to remember, not push the RWA reductions through. So when you talk about the 15 basis points to 20 basis points uplift on equity Tier 1 to come, on slide 17, just to make sure, that's from where we are today, post the charges that have already been taken, right?

Yes. And anchored by the sale of the index business to Bloomberg, sale of the Asian wealth management business, etc. That's principally driving those numbers.

Okay, great. This all seems to suggest that capital build is likely to continue over the course of the next few quarters, at least. And the crux of my question is what can we expect you to be doing with that capital? Obviously, back in May, you called that first of four US dollar equity accounted pref shares. Given what's happened post June 23, is your mind set to wait a little while and see how things pan out before using some additional capital on the other three US dollar pref shares? I appreciate it's difficult to maybe pre-announce these sorts of calls, but clearly, if I look at consensus, and, indeed, your first half number, there's still a £300 million to £400 million post tax drag on Group attributable profit coming from those four bonds. And it seems to me that you could extinguish over half of that at a cost that is less than the pro forma uplift on the second-half disposals. So could you give us just a sense of how you're thinking on capital management over the next few quarters? Thanks.

Thanks, Jonathan. Why don't I take that one? You sort of alluded to it, it's difficult for us to pre-announce anything; you wouldn't expect us to do that. But I would say, we're acutely aware of not only growing our capital base but looking to balance that with growing our earnings base as well. And you've seen us do a little bit of that through debt buybacks, or, indeed, capital buybacks, including one tranche of those dollar preference shares. So, although we won't give any pre-announcement, it's something that we constantly look at to try and balance capital accretion and earnings management. We still have a little bit of a way to go in terms of capital build, probably, another 100 basis points, or so, at a consolidated level. We've got good time to do that. And we've got plenty of levers to pull. So we'll keep you posted as we go through the quarters. But we're looking to balance both that accretion, as well as the need to generate earnings.

It doesn't sound like it's off the table as you wait and see the impact of the vote to leave the EU, though.

No, it's not off the table, Jonathan. But, likewise, as you'd appreciate, we're not going to pre-announce anything, either. I understand where you're going, but the Brexit vote hasn't changed our view, necessarily, of what we would have done anyway.

But your retake, that was good.

Thank you. Can I just ask my second question on the structural hedge? Appreciate the guidance you've given for the second half on margins, etc., but, clearly, the structural hedge is a longer-term issue. Firstly, just to clarify, the £1.4 billion of annualized contribution, that's a net contribution over and above LIBOR, is that correct?

Yes, that's right. The net feeding in to our NIM.

Okay. And can you give us a sense for how big the hedge actually is, the £1.4 billion as a yield, or the total notional size of the hedge, so we can get a sense as to what the at risk earnings are here; and maybe, if I can press you a bit more, how much this hedge is likely to roll each year over the next couple of years? Thank you.

Yes, we, as you, and you're obviously asking because we haven't called it out explicitly. So I won't give you a precise number, but something like think of it as a notional greater than a hundred billion, to give you some sort of size of the scale. In terms of the duration, I've said this before, we tend to hedge the equity duration to about five years. And our product hedges are slightly shorter than that. I won't give you a precise number on the average duration, but it'll be starting off from five years and bring it back in a little bit.

Can we read anything from your NII sensitivity table, that I think you constructed in a slightly different way this time, in, I think it's page 51, or something, of the release? Can we read anything from that in to how the structural hedge contribution may reduce, moving forwards?

Let's make this the last question, Jonathan.

Yes, it's quite hard to see directly in there, Jonathan, how the structural hedge will roll off. We are rolling our hedge, as you'd expect us to do. It's a hedge, so we continue applying it. It really depends on the shape of the curve as the caterpillar rolls down. In terms of the interest rate sensitivity disclosure, you're right, it's one thing, for those that may not have picked up on it yet, and investor relations behind the scenes can spend a bit more time if it's helpful, it does look at obviously, forward rates as they're currently implied from the market. The market's already implying a 25 basis point reduction in short-term rates, so that feeds through in to the forward. So, it's a further shock downwards in forwards from there. So, the 25 and the 50, just shocking it down the first 25 from the already implied rate cut gets you to the zero down quite quickly. But you can't necessarily infer directly from there Jonathan, how the impact of the structural hedge will have in the out years.

Okay, that's pretty useful.

Yes. Thanks, Jonathan. Could we have the next question, operator? And just for the folks on the call, we've got a lot of analysts I know, dialed in and want to ask questions. If you could just keep it to one or two each then we'll try and get around to everybody.

The next question is from Michael Helsby of Bank of America Merrill Lynch. Please go ahead.

I'll just keep it to two then. On CIB, I was wondering if you could tell us what drove the 135 million quarter-on-quarter reduction in costs; and also, if you can help us quantify what you think the cost opportunity is within CIB. I'm conscious that, Jes, you've been there a long time now relatively, so you must have more of an idea in terms of what you want to do, and this is so important in improving the ROE. And then slightly linked to that, but I was wondering if you'd pull out or call out within the Q2 revenue if you think, when you're looking back and you're doing your Q3 numbers, are you going to be saying but, of course, there was an abnormal Brexit revenue in this CIB income line? So, that would be question one. And, if so, how much? And question two is just related to your view on the mortgage market. I'm conscious that you've got an extremely low SCR book. It's only about 2% of your mortgage book. But also, I noticed that you've reduced your pricing post-Brexit. So, I was just wondering if you can talk about your appetite to grow in mortgages; and whether, if you saw any increase, slight increase in arrears, or HPI started to fall, whether you'd look to change or increase your prices, which is something that one of your competitors thinks might happen. Thank you.

First, on the costs, we are encouraged by the CIB costs in the first half of the year and the progression that it's got. Costs in investment bank are basically driven by three factors: people, technology, and real estate. And I would attribute most of the improvement in terms of our people cost. Our headcount in the CIB for the first six months of the year is down roughly 10%. So, we feel good about that, but we know we have a ways to go. As I've said on a couple of occasions, we are looking for 300 basis points or so of improvement of costs on a -- as we go down the line, of which part will come from being much more efficient on our core operations and technology platform; and Paul Compton and team are working very hard on that. The other thing I would say, and we talked about this before, is, given our accounting treatment of our deferrals, we have very little flexibility in the current year to change the performance costs line in CIB. But as I said in the first quarter, we are very attuned to what's going on in the market, and I've seen what's happening to the bonus pools around Wall Street, and we're going to reflect that. So when we actually do the actual accruals for 2016, we realize that to justify the strategy of being a Tier 1 investment bank we've got to improve the profitability over what we demonstrated last year, for sure; and part of getting there will be the performance compensation line. In terms of the revenue on the last I checked, the Brexit vote was three days before the end of the quarter. The second quarter performance by our investment bank was just very much driven by, I think, the focus we have on the business. I think from credit to advisory we did extremely well in the second quarter. And I think on a market-share basis, I think we're in good shape to take the -- with reference to the U.S. investment bank, as Tushar said, on a theologic basis, we're the number one European investment bank now. And let's see how the third quarter goes. We like our pipeline, but, obviously, the nature of the markets will dictate a lot how that top-line revenue is. But we feel very good about the 9.5% performance of CIB in the second quarter, but, obviously, over time, I want to get that number in to double-digits.

Yes, Michael, moving on to your question on mortgages, what we obviously try and do is maximize risk-adjusted net interest income. Our pricing decisions and our credit risk is really driven by that. We tend to have a relatively conservative risk profile, and you can see that in some of the mortgage segments that we operate in. Where we do drop pricing, obviously, when swap rates are lower, that influences our pricing. I would say that where we have dropped pricing it's more in the high volume products, so sometimes it gets probably a bit more publicity than really makes a difference to our business. In terms of arrears, I think everything we're looking at the moment we haven't really seen any stress in our credit books as a consumer retail matter. Yes, it's after the vote, so probably a bit early to see. But we would continue to evaluate maximizing risk adjusted and net interest income; and we're not at all afraid of maintaining pricing, to achieve that objective. So I can't say precisely whether we're going to be pricing up or down, obviously, that will be difficult for me to say. But our objective is to maximize NII on a risk adjusted basis, and we think we've been quite successful at doing that.

Thank you.

Thanks, Michael. Can we have the next question, please, operator?

The next question is from Chris Manners, of Morgan Stanley. Please go ahead.

Two questions, if I may. The first one was on the investment banking revenues. Maybe, if you could help us understand a little bit more on what's going well, and not so well, and some of the mix. Because, I guess, in equities, year on year, it did look like a weak performance; US up; and you commented on the European and Asia parts. Could you just give us a flavor for what percentage of revenue comes from US, Europe, and Asia in equities and so that might help us model that, going forward? And the second question was just on leverage exposure. Looked to be quite a big increase, up 12%, and [indiscernible] a 3.7% common equity Tier 1 leverage ratio. Is there anything funny in there? Or would we expect that to continue to build with the CET1 ratio from here? Thanks.

Thanks, Chris. On the IB revenue, obviously, across macro, I think we're in a very good place, so credit rates and currency. On credit, if you look at, for instance, what we've done in the leverage finance space, where I think we're solidly at a 2 or 3 right now, I think we've done very well with response to community. And then, across investment grade high yield our underwriting has been quite good. And so I think our focus on our issuing clients is paying across that space, and so we feel very good about that, and the gains in market share that we have. These are the equities, we've talked about it. Europe and Asia has been, in Asia, we closed our cash equities business as part of the restructuring that we announced on March 1. That clearly had a pretty significant impact; though, we did change some of our product mix after a strategic review of equities, which didn't affect our return on the profitability of that business, but did hit the top line. The only guidance, I think, that we've given vis a vis US versus non US is for the IB overall, where about 60% of revenues come out of the investment Bank in New York versus the IB in Europe and Asia. So, that's a rough split overall for the IB.

Thank you. That's helpful.

And then, Chris, on your question on leverage exposure, we grew our leverage exposure somewhat deliberately as we went in to the referendum vote, running a much greater liquidity position, so held a lot more cash on our balance sheet, to make sure we were very well protected there. And that worked out very well for us. So quite happy to, if you like, increase leverage exposure for those reasons. Also, there's the currency effect in there. And we hedge our CET1 ratio, broadly, for currency moves. You can either hedge a leverage exposure, your book values, tangible book value, or your RWAs. We tend to try and manage our RWAs, so, therefore, leverage ratios can be vulnerable to foreign exchange moves. And then finally, of course, it sort of comes back to Michael's question earlier, there was a flurry of activity in the last week, post the vote, so increasing settlement balances and related trading activity. So your real question, I guess from here, yes, over time we should just expect it to be dragged up alongside CET1. We're not near any minimums, or anything like that. It's a quite comfortable leverage ratio at these levels, but you should expect to see it climb over time.

Okay, so the leverage ratio should improve? Should we be expecting the total assets to come down? Because I guess, half on half, plus 21% total assets, 1.4 trillion looks optically, quite big. Is that something we should expect to come back down again?

Yes, there was -- again, it was a combination of these factors. Again, currency rates probably means difficult to compare, given the big sell off in sterling; and also, probably higher than you would expect settlement type balances in trading inventory just because of a flurry of activity. So I think generally yes, but subject to things like currency rates, which we don't predict.

Fantastic. That's fair. Thank you.

Thanks, we will have a next question please operator.

The next question is from Manus Costello from Autonomous.

I'll take my two questions, please. Firstly, I'm intrigued by this trend in the CIB, where your RWAs seem to be going up, but your average allocated equity seems to be going down. Versus the end of the year, you're up 7% in RWAs, but down 2% in terms of allocated equity. Can you just explain what's going on, because obviously, when you're talking about returns that has some impact? And my second question is about U.S. cards. You talked about that business, but I note in the asset quality section you say there's been an increase in charge-off rates due to a change in product mix. I wondered if you could talk a bit about that, please.

Yes, Manus, why don't I have a go at both of them? In terms of RWAs in the CIB, that was really just currency moves that moved that up. And it doesn't affect our capital allocation because as I say, we manage that on a matched-currency basis. There are also other things [multiple speakers].

If it's also on a matched-currency basis, Tushar, wouldn't the capital go up as well?

Yes, that's right, I was coming on to that. There are, of course, other things that go in to the capital calculation of deductions against the capital base as well that do move around as well. So it's combination of RWA moves and capital deductions. And we haven't changed our capital allocation methodology all year. What we tend to do is just increase the amount of capital we hold against that division, in line with consolidated capital ratios, when it sort of moved up. And we tend to do that once a year. So it's the same as it has been for the last couple of quarters. On the U.S. cards, that business has had a really good run at the moment. In terms of impairment levels, and impairment run rates, I think that was -- I didn't jot down the four. Was that part of your question, Manus?

Yes. There's a statement on page 47, saying higher charge-off rates were driven by a change in the product mix; and I wonder what's going on there.

Yes, it's just we have two types of businesses there. We have our open market business, which is under a brand called Arrivals. And that's very similar to our UK business, so it's of course, much smaller than our UK business. But that will typically have a slightly higher charge-off rate than our partnership business, things like the new deal we've just done with American, or [indiscernible] in the past, which are much more transactor businesses. So as we grow our arrivals business, you'll see that our charge-off rates would have mirrored that growth. They're both good businesses for us.

So we should see a structurally higher level of charge-off and impairment, going forward, given that product mix?

Yes, but with appropriate returns. So look at it on a cost of risk adjusted basis.

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

Two questions, please. The first is I just wanted to come to slide 19, the non-core income guidance. There, you've booked at 162 million negative once you strip out the business disposals in ESHLA in the first half. Your full-year 2016 guidance is still from minus 800 million to minus 900 million. I know you say that the -- as the business sales complete the business contribution will fade away. But even if you had put zero in there, if you look at the run rate in the first, you're still looking at 540 million, versus the implied guidance of substantially higher than that, or slightly higher than that. So just trying to square the circle, as it were, trying to work out where you expect the additional income losses to come through in the second half. So that would be my first question. The second question was on passporting. Thank you for the useful color you provided there, particularly with regard to the investment bank. But I just want to ask, is there any issue with respect to some of the Barclaycard franchises, for example, Barclaycard Germany that you mentioned; also, the merchant acquiring business; and some of the corporate lending book that sits within Europe? I believe you branch in for most of that business, so would you have to potentially set up separate legal entities on the ground there, as well? Thank you.

With respect to the second question, Andrew, the general credit card business is fine as it is, and it's not impacted by the passporting issue. The merchant acquiring business is actually done through our subsidiary in Ireland, so that also is not impacted by the passporting issue. So, on the consumer side, across Europe, I think we're fine with the current legal structure that we've got, so no impact there.

Andrew, on the non-core income, the bulk of the spend from here will be focused around derivatives. Now, it's an estimate on our part of what we think we can do on a capital-neutral to capital-accretive basis. We're quite happy to spend as much as we can, quite frankly, as long as we can do it on a capital-neutral to a capital-accretive basis. So, we have the capacity to do that. The book is actually pretty well managed, though, in terms of market risk. We're not forced sellers in any way. And the derivatives market has -- actually, it behaves quite orderly, even post the Brexit vote. It's quite volatile, but in a very orderly way. And it's probably gone back to normal now, I would say. So it's really the plans that we've had all year, and we're just working through those; and you'll see us make progress quarter-by-quarter on that.

Okay, that's very clear. And just on the corporate lending book, how much of that now relates to Europe?

We don't split that out specifically, Andrew. But again, I don't think corporate lending will be significantly impacted by passporting. A lot of the lending is actually done by branching in to these countries. And you heard on my remarks, there's a number of alternatives that we can explore for passporting. It could be commissioning the branches; it could be through existing subsidiaries that we have; could be through third-party or third-country access arrangements; or it may be a combination of all three. The only thing I would say is that we also should just contextualize the size of passporting business. The bulk of our CIB doesn't require passporting, so it's just a part of what we do. And I wouldn't exaggerate the amount that's affected by it.

But as a strategic matter, being able to have a global platform is very important to us.

Okay, very good.

The next question is from Joseph Dickerson, of Jefferies. Please go ahead.

I just have a couple of quick questions. Firstly, in recent quarters you've provided some color around trading conditions, post the calendar close. I was wondering if you could give us a sense of how trading has fared since the end of the quarter, firstly? And then secondly, can you just give us some flavor on what drives the model updates in cards for impairments, so we can contextualize that for our models? Thanks so much.

I'll take the first. The trading, it's been reasonably in line, and so we're not going to make any real predictions beyond that. And so, I'll pass to Tushar on the cards.

Yes, thanks, Jes. On the model updates, I try and let you guys know one quarter or so in advance, whenever I can. This one's just, the way the work was being conducted, I wasn't able to do that. There's nothing individually significant about it. We refine our methods periodically, and we recalibrate our models periodically, and this was really driven by a regular update. What it wasn't, and I think you probably got this from the slides and comments, it's not an increase in underlying impairment level. So it's just a onetime update to our models, rather than a run rate effect. But there will be other stuff that we'll put through for the rest of the year; it won't be significant, it will be of the same quantum that you've seen here as well. And don't forget, the step change in impairment for this one quarter, there was really two things driving it. There was a refinement to our model, though that was a debt this time last year which is a credit, in effect. So, remember, it was both of those effects.

So I trust that you find that investable. Can we take our next question?

The next question is from Martin Leitgeb, of Goldman Sachs. Please go ehead.

My first question is on the US after your proposal with the first deadline having obviously elapsed on July 1, and the requirement now to having well capitalized subsidiary in the US. I was just wondering if you could give us a couple of key data on that subsidiary; for example, how much capital you transferred or you converted from debt to equity, and what the balance sheet size of risk weighted assets are there. And the second question is in relation to your mortgage book, and how much of that is London. And specifically within London, if you could give us a little bit more color on the loan to value dispersion on your exposure graded in 1 million there. Thank you.

Thanks, Martin. Why don't I have a go at them? On the intermediate holding company that we incorporated and took up on July 1, you will see financial information that will get published, I think it will be in the fourth quarter, effectively, as we start filing with the Fed. We haven't disclosed anything yet, so I'll refrain from sharing on this call; that wouldn't be appropriate. But, to be honest, you can already see financial information for our bank in Delaware; and you can also see it for Barclays Capital Incorporated. And those are the two material entities in the US for us. So I know, Martin, you've been having a close look at these in the past. So I don't think you're going to learn something that's significantly different from just looking at those two entities for now. In terms of mortgages in London, we are certainly geographically, more biased towards the south east of the UK rather than London itself. We haven't split out here a loan to value of properties over a million. But I would say that the loan-to-value -- and I'd just remind, you guys already know this, but there's many ways in which you can look at the if you like amount of equity in the mortgages that we write. And loan-to-value is a more conservative way of doing that; there are other ways of reporting it, slightly different ways. But on a loan-to-value basis, our average is 47%. And the properties we have in London would be actually, even lower than that. So there's an awful lot of collateral available, and relatively low risk in that book, from our perspective.

The next question is from Fiona Swaffield of Royal Bank of Canada. Please go ahead.

Two questions, also. Firstly, you indicated RWAs longer term, could reach low 300 billion. I was just wondering, one of the moving parts is, obviously, organic growth and would you have changed your view on loan growth, post Brexit, or organic growth within the core in general? And the second question, just a number question on Barclaycard Consumer UK and the step down in revenue Q2, Q1 whether there's anything unusual in there that we should think about, because it's rather large swing. Thank you.

On the first question, in terms of the 300 million change RWA, no, we haven't changed our view of where we're directed in our RWAs because of Brexit. I think it's way too early to get a sense of what the Brexit impact is going to be. We said on a earlier call that, generally, you have an economic downturn caused by a curtailment in the supply of credit. What we've seen, thus far post Brexit is clearly a pause, both in the UK consumer, as well as some of the corporates in terms of their demand for credit. So applications for mortgages for instance, were up a fair amount. But let's see how NLPs, you saw the PMI number. So I think the banks and particularly Barclays, went in to the Brexit vote with a very strong capital position, very strong liquidity. We are open for business. We did, following earlier applications £2 billion of mortgages in the UK post the Brexit vote; that's an 8% increase year-over-year last year. So we're still open for business so the supply of credit is there. And let's see how the UK economy ultimately rolls out, post the referendum vote. And on the card business, Tushar?

Fiona, on the UK card business, there's a couple of things going on there. The most material one is see the effect of interchange fee; that brings revenues down. There is one other item that did flow through there this quarter. I didn't call it out it was not that big, but perhaps just to help you explain what's going on. There was one item that relates to the Consumer Credit Act that was a form of re-dressing effect that go through the income line; and that explains the other delta, if we're going non-recurring thing. But the most significant is really, the impact of the interchange fees.

Thank you.

The next question is from Chirantan Barua of Sanford Bernstein. Please go ahead.

Just a quick one. I think Martin's already asked you a question on the intermediate holding Company. Just a very quick one, do you know, has the Fed advised you on the level of capital that they expect you to have against the balance sheet in the intermediate holding Company? And can you give any color at this stage whether you are okay with capital there, undercapitalized, overcapitalized?

Chira, quite simply, the intermediate holding company needs to comply with all, effectively, U.S. bank holding company regulations, and the solvency, and liquidity and any other credential matters; and that's what we, of course, will do. So, they don't advise specifically. Obviously, beyond that there are fee cards, you'll be familiar with that as well. We have private fee card next year, and a public one the year after. That's obviously informative as well in terms of the numerical amount of capital that we need to hold. So, nothing I can share with you now. But we'll comply with the bank holding company regulations in good time.

Just a quick follow up on that. Will the PRA allow double leverage in terms of you issuing something out of the Group and using it as capital back in the U.S.?

Yes, I think that's something that the PRA are considering. There's a comfortable exercise going on, and we fed in to that, so we'll hear back from them. And, obviously, we'll be making our own plans on -- we've been reasonably straightforward in terms of the amount of holding company issues, and how we've down-streamed it thus far. It's been a like-for-like down-streaming. So we've been reasonably transparent what we've been doing with that up 'til now, and will continue to be so.

The next question is from Fahed Kunwar of Redburn Partners. Please go ahead.

Just a couple of questions, the first is on the convergence of the Group RoTE and the core RoTE. You've obviously got costs and income, but a drag from income and costs coming down quite a lot in 2016 to 2017. But even then, the drag is going to be 600 million, 700 million, I suppose. I'm just wondering, what is the moving part getting that number down in 2018, so when it wraps back in to the core the Group RoTE is comparable to that core, not at that Group number at the moment? Follow consensus has it coming down anyway, so I was wondering what do you see in that number in 2017? How, actually, does it mechanically go down in 2018? And my second question was just on the discount rate on the pensions. Your discount at the moment is 3.9%. I think your sensitivity is around for a 50 bps move downwards in the discount rate it affects your plan or your liabilities by about 2 billion. So what is the chance that you follow European banks and have a hit to your core Tier 1 later on in the year as you have to re-evaluate your discount rate? Thanks.

Fahed, why don't I have a go at both of them? On the RoTE convergence, you're looking at these things on a calendar basis. When we look at, for example, we've guided to cost of GBP400 million to GBP500 million on a calendar basis in non-core, we would expect our exit costs in 2017 to be tracking at a much lower level. So, in some ways, it's what you would expect; it's momentum going through from year to year, just trending at a lower and lower level through the passage of time. We expect -- we won't have a non-core in the way we do today in 2018, but whatever remnants of it are still around in 2018 will be substantially lower than they would have been even in 2017.

And the idea is, as we get to GBP20 billion of RWA in noncore by the end of 2017, essentially, you've got the ability to close down the business.

That's right.

What kind of drag are you looking at, though, on the RoTE in 2018? Obviously, it'll be something, I assume.

Yes, we're not giving out specific returns, numerical guidance. You know that we've been setting ourselves the objective of having a double digit or above return in the core on an increasing capital base, and been doing that reasonably successfully over the last couple of years; and that's what we'd like to continue doing, and converge the Group to that.

Okay.

In terms of the pensions, if you're looking at the deficit or, stroke, surplus as a capital matter, we were in a slight surplus at the end of the second quarter; and, of course, that reflected the big gap-down in UK interest rates. You can see that the surplus that we had in the first quarter has come down quite a bit, as a result of that. There are a lot of assumptions that go in to the accounting base deficit. You've obviously got the movement in AA spreads; you've got inflation assumption; actually, the volatility of inflation assumptions as well, which is quite sensitive; as well as the asset side. So it's not just completely dominated by long-term rates. I'd caution you just to look at that as the only proxy for how the pension moves.

Maybe on final comment about the 2018, which is, remember, our strategy and our objectives is to generate a double-digit return in our core franchises, which we are clearly doing now. And the strategy is to converge core with the Group results at some time in 2017, 2018. By getting to that convergence, we're not taking away our objective of delivering a double-digit return on tangible equity.

Okay, that's helpful. Thank you.

The next question is from Vivek Raja, from Mediobanca. Please go ahead.

A couple of questions from me as well, please. I think you've sort of partly answered some already, but I just wanted to check. The RWA direction that you talked about, the low 300 million, I think you'd previously said, I think Q1 you were talking about more like 330 million. So I know that maybe I'm being pedantic here, but I just want to check you haven't changed emphasis even subtly on that. And the second question, what I wanted to know about was, I appreciate that you've gone through some product reviews in Europe, and I just wondered, within the cash equities franchise, what the market share was tracking at in Q2; how that compared with previous quarters; and, if you've lost a bit of momentum, how long you think it will take to get back there relative to the market? Thank you.

In terms of RWAs, there's no change in the direction that we gave previously.

There are no subliminal messages there. On the equities, on the market share, if anything, our US equities business actually grew. And the simplification of products that we made was really based around Europe. I'm not sure I would say, or I'd necessarily conclude we've lost any market share; it's just a re-basing to probably a slightly different run rate. And we continue to build from there.

The year-on-year equities print, when I'd assumed you would have had a strong week after Brexit in European cash equities that hasn't really come through. I'm assuming there is some disruption specifically to the European franchise. I appreciate the U.S. franchise is going strongly. I'm just wondering whether that disruption could persist, and how long that could persist for.

The Brexit vote was on June 23, so I think, in terms of our investment banking results, the Brexit vote had virtually no impact at all in the second quarter number either equities, credit, macro, currency, whatnot; it just didn't move the needle.

Okay. Thank you.

Your final question is from Peter Toeman of HSBC. Please go ahead.

I wanted to ask you, you had that comment about mortgage market competition, I think it's on slide 11, and attenuating mortgage spreads. On slide 37, there's a slide on the mortgage book that you've given before, which shows 2% of mortgage book on SVR. I would have thought that if you had 2% SVR on a mortgage book it would be pretty immune from spread pressure, because there'd be no significant high yield back book, so I'm just wondering what's going on there.

I'm not sure I fully understand your question, sorry, Peter. You're right in the sense that the SVR book isn't as sensitive to immediate changes in interest rates. But I'm probably not getting the point of your question.

It's just that the SVR book is already very low, therefore presumably, there can't be much remortgaging away from SVR in to lower return front-end products, because the SVR book is only 2%. But attenuation of mortgage spread is a feature, or mortgage margin competition is a feature, that you highlight for Barclays UK. I would have thought that not having an SVR back book would have been helpful in preserving mortgage spreads.

Yes, it is. But don't forget, there's a lot of trackery, so you've got a lot of people that are refinancing, not just because they've got SVR books, but taking advantage of better fixed rate products and other mortgage products out there. What is interesting that we've seen, I guess, the fixed rate mortgage, the short term, two, three year, fixed mortgage product is probably the most popular product out there at the moment. And there's fixed rates lower then there is an attraction for people to refinance in to those fixed rate products. There's a bit of that that goes on.

Peter, as a broad comment, one thing I feel really good about coming in to this quarter is the prudence that Ashok and his team took in terms of the credit quality of our mortgage book. There's been a lot of pressure over the last couple of years by the challenger banks and whatnot, and we held on to our strict underwriting standards. Consequently, I think we have a very, very conservative and well founded mortgage portfolio going in to the third quarter.

Thank you.

We have no further questions from the phone line.