Welcome to the Barclays First Quarter 2020 Analyst and Investor Conference Call. I will now hand you over to Jes Staley, Group Chief Executive and Tushar Morzaria, Group Finance Director.

Good morning, everyone and thank you for joining us today. First of all, let me say that I hope you and your loved ones have been keeping safe and well. It feels like the last time we did one of these calls was a long time ago, and in a very different world. Obviously, an event like the COVID-19 pandemic changes priorities, and inevitably makes individuals and companies like ours focus on what’s really important right now. For us, that means, running the bank safely and profitably, helping our customers and clients to the difficulties they face, supporting the UK economy and the communities where we live and work, and taking care of our colleagues around the world. We’ve been able to do that, because of the underlying strength of our business and the resilience of our diversified model. And I’ve been especially proud of the way my colleagues across Barclays have risen to the challenges of this extraordinary time. So want to start today by taking a few minutes to set out how we’ve been responding to the crisis. Our business touches half to the households in the United Kingdom. We know that some of our customers are facing very real and very daunting financial challenges. And this is a worrying time for the vast majority, regardless of their circumstances. We’ve moved quickly to give them the reassurance and support they need. To give you just a couple of examples. So far, we’ve granted repayment holidays on 94,000 mortgages and on over 57,000 personal loans. We’re providing an interest-free buffer on overdrafts for 5.4 million customers and beyond that, we’ve reduced and capped charges until at least July. We’ve waived late payment fees and cash advance fees for 8 million Barclaycard customers and granted some 87,000 payment holidays. 655…

Thanks, Jes. I’ll summarize the results for the first quarter which as Jes mentioned, demonstrate the benefits of our diversified business model. We’re facing a period of great uncertainty which make it particularly difficult to get forward-looking guidance, but whereas possible, I will try to give pointers for the coming quarters. We reported a statutory profit before tax of GBP 0.9 billion, generating GBP 0.35 of earnings per share. Litigation and conduct was immaterial this quarter, but as usual, I’ll reference the numbers excluding litigation and conduct for consistency with prior periods. Profits were down on last year, reflecting a material increase in the impairment charge resulting from the – estimated effects of the COVID-19 pandemic, but the RoTE of 5.1% is underpinned by a strong income performance, which demonstrates our diversification. However, given the uncertainty around the economic downturn and low interest rate environment, we expect 2020 to be challenging. We continue to believe that above 10% RoTE is the right target for Barclays over time, but we need to see how the downturn plays out before giving any medium-term guidance. We grew income 20%, reflecting strong performance in CIB and resilience in the BUK and CCP going into the downturn. Costs are stable year-on-year delivering strong positive jaws. As a result, pre-provision profit increased by GBP 1 billion to GBP 3 billion, however the impairment charge increased by GBP 1.7 billion to GBP 2.1 billion. This increase comprise a GBP 0.4 billion single name charges and GBP 1.35 billion net of IFRS 9 model driven increases, reflecting the effect of running a revised COVID-19 scenario as a basic case estimate and an oil price overlay which I’ll come back to later. The forward-looking nature of IFRS 9 requires that we estimate the expected credit losses. So we have…

[Operator Instructions] The first question on the line comes from Alvaro Serrano of Morgan Stanley. Please go ahead.

Good morning. Thanks for taking my questions. I’ve got a one on provisions and another one on capital. Obviously, the provision taken in the quarter is a very credible and sizeable provision. But I was just asking if for some help about how could we think about the next few quarters about the total provisions we might see this year? I don’t know from here, if you can give us a bit of color of how the payment holidays are evolving, and is this a metric we should look at in terms of as a leading indicator of what provision might look like? Or should we look at unemployment? And also one there on the oil price overlay provision, what oil price are you assuming? And the second question on capital. Obviously, you’ve said that you’re going to dip below 30% in Q2. During the quarter, we’ve had quite a lot of exceptions given by the PRA in markets, RWAs on wild breaches. There’s also the IFRS 9 transitional sort of benefit. Can you help us quantify what the benefits was and when I think about this – the RWAs going forward, is there a risk that some of this mitigation comes back? And is 13.5% still your – and when I think about beyond this year or at your discussions you might have at the end of the year round capital distribution is 13.5% still your – you would want to build and get close as to 13.5% before you distribute capital? Thank you.

Yeah. Thanks, Alvaro. It’s a two-shot here. Why don’t I take both of those questions? So, on provision first and then I’ll come on to capital. I mean, obviously it’s a very uncertain we’re only at sort of a month or so into this crisis. So you know, these are difficult to forecast paths. But I think if we – if our assumptions are correct around the economy, as you’ve seen on one of our Slides, I think Slide 15, if that holds to be true, I think in terms of where we should go from here. I’d first of all start with our current sort of pre-crisis existing run rate of impairments and that was running at about GBP 400 million to GBP 500 million a quarter and think of that as sort of cash losses in any one quarter. You know, we feel sort of IFRS 9 provisions, up sort of a BUK of GBP 1.4 billion. I think that’s a probably a reasonable proxy of additional cash losses that we would expect to have of the remainder of the year, if our forecasts are right. So what does that mean? That means sort of our run rate in provisions would be somewhere, I don’t know, GBP 800 million to GBP 1 billion something in that sort of zip code. Now, I’d caveat that quite heavily. One is, you know, none of us know whether we’ve called the economic forecast correctly. The – we do have governments here acting to provide all sorts of measures of support. And you know, we don’t know sort of the effect of them and how they’ll play out. And of course, there are different programs in the United States and in the UK and across individuals and businesses. So, lots and lots…

Very clear, thank you –

question, Alvaro.

Thank you.

The next question, please, operator.

The next question comes from Jonathan Pierce of Numis. Please go ahead.

Good morning. I have two questions as well. And actually they’re again on provisions and then risk weighted assets. On provisions, just want to understand this transitional relief or absence of transitional relief in the first quarter, I think the stock at stage 1 and 2 two having fallen below the IFRS 9 add back, then there was a true up as you went through Q1 and that’s why you didn’t get any substantive relief. What’s the additional true up that’s needed before we start seeing any transitional relief coming through whether to be to the stage 1 and 2 builds in the coming quarters? And that’s question one. Question two on risk weighted assets. I guess the equity tier 1 dropping below 13% in the second quarter is probably pointing to, I don’t know, maybe another 4% to 5% increase in risk weighted assets over the next three months or so. You sort of alluded to this in an answer to the previous question, but is that the right sort of ballpark we should be thinking about, so maybe you can talk a bit more about the quantum of credit risk pro-cyclicality, specifically within that? Thanks very much.

Yeah. Thanks, Jonathan. Why don’t I take both of them? The transitional relief for IFRS 9 as you’re probably previously familiar with most, Jonathan. This is a devilishly complicated and calculation. There’s a few things going on here. You know, the – in some ways, we got very little as you rightly pointed out transition relief in Q1. And I set the way to calculation sort of falls for us, and obviously stage 3 as you know, get no transition relief. And then stage 1 and 2, you had two effects going on there. You had the stock of stage 1, 2 provisions, transitional relief falling from 85% to 70%, and then as you pointed out, there’s various thresholds in there. We’re not called out sort of how that may play out in Q2, because you know, there’s such an interplay between the various stages. And actually, it’s sort of more than one threshold as you’re familiar with your FPGA and various other things like that playing around this. So I don’t think I can give you sort of just a single number that will be helpful, Jonathan. But I don’t think we’ll – you know, it sort of depends on the part, but you know, I wouldn’t be expecting a whole load of transitional relief going forward, if that does any help. And in terms of RWA inflation. Again, very, very tricky to glide to this one for the second quarter, simply because it’s such an uncertain path that we’re going through. All I would say though is, we will definitely have some pro-cyclicality flow through into the second quarter. I would say it will be much more modest than we’ve experienced thus far. And of course, the other thing that I think we should also point out is our MDA levels are probably likely to go lower as well, even though our capital ratio is going to dip below 13% you know, over the course of this year, I think you’d expect to see another step down in our MDA. And that’s just as you’ve seen in the Bank of England’s stress testing framework, the MDA levels get recalibrated in times of stress, and I’d expect the same again over the course of this year. So I can’t give you unfortunately, Jonathan, a sort of a precise quantification into Q2, but hopefully it gives you a sense of qualitatively where we should be going.

Yeah, that’s helpful. Thanks, Tushar. Sorry, can I just come back on the first question, or the answer too is, you’re saying this, even if there was a further sizable increase in the stock of stage 1 to provisioning, maybe I don’t know, GBP 1 billion plus, let’s say, over the course of the rest of the year. I mean that’s not your assumption, but were that to happen, we wouldn’t get any transition or related size on that either?

No, that wouldn’t go. No, that definitely wouldn’t be as black and white as that. It’s – it very much depends on the scale of 1, 2 provision builds, stage 1, 2 provision build as well as interplay of various thresholds. So I – it’s not a straight, but if it was a reasonable build, then I do think we would get some transition relief, if that modest builds, probably not so much.

Okay, great. Thanks a lot, Tushar.

Okay. Thanks, Jonathan. We’ll take the next question, please operator.

The next question is from Joseph Dickerson of Jefferies. Your line is now open.

Good morning. It’s Joe. Just a quick question on costs. So you’re analyzing at GBP 13 billion of costs pre-levy in Q1. I guess what are the moving parts around that as we go through the rest of the year? Just trying to dimension where we think you could be at the full year? I mean, you’ve said some limited flexibility outside of variable comp, so just trying to dimension that, but then a very good performance from the card piece. And then just on the regulatory capital ratio, I mean, I suppose given the commentary that you plan to dip below 13% in Q2, that is – should we assume that has troughs in Q2, given you know, you’ve called out in the several areas that you expect the maximum pressure economically to occur in Q2?

Yeah, okay. Thanks. So, why don't I start with the question on capital, then I'll say a little bit on cost. And I think Jes to let him comment on costs as well. On the capital ratio, Joe, it is – you know, it is difficult to forecast simply, because of the uncertainty around the economic path that where we may or may not be embarking, and also sort of, you know, the way in which impairments will play through as well. But anyway, on the assumption that we’ve sort of called it absolutely correctly, then I think it’s a reasonable assumption to assume that, you know, the – once we get to whatever capital ratio we get to in Q2, you know, we should be hovering around about those levels and perhaps even building up again over the rest of the year. But I’ve put lots of caveats around that. It really does depend on so many factors. On costs, there’s various sort of puts and takes. Look, I think, first and foremost, you’d expect us to be as responsible as we can in terms of helping everybody get through very difficult circumstances. So, you know, to the extent we were going to make future redundancies and sort of workforce changes, we will obviously delay that. We would expect ourselves to have lower attrition levels. I think some operating costs will increase, I’m sure Jes will talk about this. But you know, you guys will be very familiar with this. But keeping sophisticated financial institution running and virtually everybody’s working at home from consumer-facing customer outreach to you know, just even capital markets activity when we’re trying to do a capital markets raises and actually sales force’s traders and investors all over them. It’s incredibly complicated. So that probably has a degree of cost associated with. Now on the flip side, we’re not travelling obviously, we’re not going to be marketing as much. So I think there’s various put some takes. So at the moment look I don’t think there’s anything new to sort of say on cost from perhaps where we are. But Jes is there any more comment you want to add on to that?

Just you know, obviously in the first quarter we landed the cost income ratio of 52%. So that should underscore a certain degree of prudence you know, well below where we were last year. But I think that the one thing I would repeat is, we took a decision not to reduce our headcount, even though we had the opportunity to do that. I just don’t think at the stage in this current environment, we should be running down, putting people out of work just to drive your cost down. So I think you should look at a roughly flattish number for the year.

Thanks, Jes.

Thank you. So we have the next question, please operator.

We have a question from Rohith Chandra-Rajan of Bank of America. Please go ahead.

Hi, good morning. I wondered if I could ask a couple around the cards and payments business, and particularly in relation to the travel industry. So I guess firstly, US cards. A lot of the co-branding is with airlines, which you talked about in the past, I was wondering if you remind us how much of the US cards business balances with is with airlines? And also a comment on what you’re seeing in terms of volumes in the volume outlook and credit quality there? And then the second was really on the acquiring side. So a lot of travel firms and airlines are now for cancellations are now offering re-bookings or vouchers rather than refunds. And anecdotally, customers are now looking to get charge backs on their credit cards as a result to recoup the cash rather than taking the voucher. So just wondering what you’re seeing there in terms of that sort of anecdotal evidence? And what the impact is, I guess particularly from an acquiring perspective?

Yeah. So on the travel side in our US card, you’re right, we’re you know, we’ve got very strong co-brand relationships with American Airlines and JetBlue and Hawaiian Air and whatnot. So clearly, you’ve got the issue of the consumers spending dramatically less money, our receivables going down and we are connected to the airline industry. It does however these programs continue to be extremely important for the airlines. So on that side, you know the – we are as a partner is elevated. Also you may have seen you know it’s because of the race with the airline industry that we do GBP 1 billion equity raised for United last week. very involved in the delta financing as well. But you’re to point out, I think the US card it’s in a struggle. The flip side, because we had that concentration in the airline industry that gave us – one of the highest average FICO scores of any credit card company in the US. So I think the sort of a balance, I think we will be less hurt on the impairment side that probably more hurt on the revenue side.

Yeah. I’d just add to that, Rohith just to spot on that and see the FICO scores or the book, you know, we saw that I think the standard definition of prime in the US is 660 and you know, 84% of our book is greater than a 665 code. So although it’s going to be really tough times in the economy that scores compelled to. The other thing I’ll say is, you know, credit metrics, of course are evolving all the time as we go through the crisis. And we have seen a pickup in delinquencies, both in UK and US cards quite modest about 10 basis points in UK card delinquencies and 20 basis points in US cards, but towards the back end of April, we’ve seen that level off. So again, remains to be seen, but although it’s ticked off and it’s leveled off already. Again, I don’t want to sort of say that that’s what’s going to be the case for the rest of the quarter, we just don't know, but hopefully that’s at least some additional color –

Maybe at 70% unemployment rate through three quarters, you know that’s, can’t get much more conservative than that and taking that provision in the first quarter, we shouldn’t lose sight of that.

Thank you. And on the sorry, on the acquiring side. The chance of the risk from charge backs.

Yeah, on the acquiring side, I don’t think there’s anything specifically to call out on charge backs. There’s nothing sort of is coming through in our metrics that that stands out as anything particularly unusual. Obviously, current volumes are obviously dramatically down the GDP numbers sort of give you a good sense for that. But in terms of other risks outside just lower volumes, this is nothing that I call out.

Okay, thank you.

Thanks, Rohith. We have the next question, please then, operator.

Of course. The next question comes from Guy Stebbings of Exane BNP Paribas. Please go ahead.

Thanks for taking my questions. The first one was just on thoughts that UK and the new NIM guidance. You’ve obviously given a lot of color on the different headwinds to get there. But could you give us a sense of the phasing? I mean it sounds like quite a lot will get coming in Q2 given the actions taken to support consumers and obviously the timing of the base rate move rather than sort of a steady decline. Is that fair? And I don’t know if you could give us a sense of how much that decline is coming from those consumer actions which hopefully should reverse next year, perhaps? That’s the first question. And then secondly, I just want to ask on the COVID business interruption scheme and some of the economics, in particular, the sort of risk rates on average you might have against those loans on either the 80% guaranteed or the 100% guaranteed loan scheme. And from a leverage standpoint, presumably you have to recognize all the exposure, but if you could just kind of find that’d be great? Thanks.

Yeah, thanks Guy. Yeah, in the UK, I would say you’ll start seeing the full effect of all sort of, I guess, three possibly four components of revenue headwinds come through in the second quarter. We’ve got obviously, the impact of rates coming through. So what happens there is, our assets reprice pretty much immediately, the deposits weren’t repriced until I think from memory July and just the standard protocols we have in the UK of writing to customers and giving them advanced notice. So in actual fact, you’ll probably see NIM if most in Q2 and the recovery again in Q3 and Q4, everything else being equal. We are spending, if you like, discretionary amounts for ourselves, just to help customers through difficult periods. We think that’s about GBP 100 million for this year, and then over and above that, as along with many other banks waiving various fees and charges, we think that’s about another GBP 150 million. I think in terms of next year, again it remains to be seen as a sort of a brief call on, you know how the world will look next year, which is a quite hard thing to forecast when you’re amounting to this one. But, you know, there is a, I guess, a view you could take which is the temporary suspension of fees and charges will not apply next year as well as some of the more discretionary things that we’ll do. But in terms of just for your own models, I hope you came through my scripted comments, but just in case, not, you know, we would expect NIM in Q2 probably to dip again quite sharply simply because of the right actions and then to recover again over Q3 and Q4, probably for a blended average over the full year our NIM rate of something like 26 – sorry, 250 to 260 basis points is probably about the level to be thinking about. On CBILS, I’ll hand over to Jes.

You know on the COVID-19, whether it’s the 80% guarantee program or 100% guarantee program, there’s a lot of discussion going back and forth and I must say that the British Government I think is really trying, you know, they’re doing virtually they can to make these two programs successful as are we. And I think everyone realizes that you know that guarantee is real and therefore the calculation of risk against that component of these loans are extended sort of in the PRA is looking at that, but I think you should consider that it’ll have a very, very low risk weighted assets to it.

Could you clarify from a leverage point of view, as generally following up would you still have an offset for leverage?

Yeah, I mean the numbers here are quite modest if I say. If you think about how much we’ve extended through the CBILS program, I think Jes will probably have literally the real time number, but it’s something like –

Around GBP 737 million.

There you go. So GBP 737 million. So it’s pretty modest in terms of scale on the balance sheet. I mean, these are obviously relatively small individual loans. I think it’s like 4,000 SMEs that these have gone out to. And for the larger corporate, where numbers can get much bigger. We’ve been very active in getting people to the commercial paper program run by both the UK and the US government. And I don’t think we’re allowed to give precise stats, but we’re comfortably the largest participant in that program. And I don’t know what’s the latest government published stats are, but you know, we’re going to be the largest –

I think we were very active in opening the investment grade capital markets from the $19 billion bond issued by for the T-Mobile-Sprint merger to 8 billion for the World Bank, et cetera, et cetera. And all these big capital market trades are also decreasing, because it’s much cheaper borrowing that going to your revolver. So and one of the issues that you would want to look at in terms of our leverage, et cetera, is how much are revolvers being used and with the opening of the capital markets as robustly and we saw last month, some of the most highest levels of issuance that we’ve seen in decades, if not ever, that’s taken a lot of pressure off to draw on our revolvers which was pretty much been flat lined and so that will also take pressure off our risk weighted assets.

Okay, very helpful. Thank you.

Thanks, Guy. Could we have the next question please operator.

Your next question comes from Edward Firth of KBW. Your line is now open.

Good morning, everybody. I just had two questions. The first one was just bringing you back to the CIB performance and in particular, the FICC revenue. And I guess, just tried to compare and contrast the revenue and the cost performance. And I know you said in the call, you felt it adequately accrued compensation related to that revenue. But the revenue was absolutely startling. I mean, even if you compare it against peers, nobody produced anything like that in terms of revenue performance. So I just wondered if you could talk a little bit more about, you know, what was driving that? And perhaps, you know others one-offs in there? Is there a reason that you don’t have to pay the people who delivered this revenue? And perhaps how we can imagine that might be going forward? And then I had a second question, so I’ll go straight ahead with that.

Yeah. Do you want to ask both of them? And we’ll –

Yeah, sure. Just back on the CBIL question, but you know ant not just that you know, both programs and the micro one. If I compare what’s happening in the UK with, say, or particularly the US, but also in Europe, that the take up has just been incredibly low, and incredibly slow. And I can’t imagine it’s because our small businesses or our business communities finding that any easier say than the US or anywhere else. And obviously you guys have been taking it, but you know not you personally, but the fact has been a little bit of incoming about delayed approvals and being difficult. Well what’s your steer on how that’s going now? And perhaps, you know, the GBP 330 billion total is the sort of top line number? I mean, are you imagining that over time we will get to something like that? Or are we really going to be talking about something the scheme is going to be GBP 10 billion and most for the sector we could broadly ignore it?

I guess I said, why don’t I quickly say something on CBILS and then I think Jes can add some more comments on that and talk about FICC performance –

Sure.

And I think we’ll have to correct your statement about, we don’t intend to pay the people that we’re generating that performance that I’d like to go through that. On CBILS, I – the only comment I’d make is, you know, first and foremost, I’d say, you know, the banks that speak for ourselves, I’m sure I’m speaking for the banks though, are a 100% committed to make these programs work. We are doing everything we can to help extend credit, even in advance or sort of sometimes going through, you know, the full plethora of checks and balances and consumers’ credit act provisions and content, you know, these are very complicated programs to administer. And it will feel a lot of pressure on the government to once we’ve approved an application for them to turn it around as well. So, first of all, I’d really stress that, we are over a 100% committed. We have people processing these things non-stop talking to clients. And remember, you know, we’re not in our headquarter building anymore, everybody’s doing this in a distributed way, in different parts of the country with compliance officers were moved away from bankers that are doing the underwriting from risk management that are approving the loans, et cetera, et cetera, et cetera. No doubt there’s been, you know, some glitches in the operational efficiency of getting these done, but I think you’re seeing the pace of program really picks up and it’s getting quicker and quicker and quicker. Final thing I’ll say then I’ll hand over to Jes, is the GBP 330 billion sort of headline number, I don’t think is just because I understand it’s just people’s I mean, it’s a full sort of suite of what with the commercial paper program we’re building and you know, furlough schemes and various other things like that. And, you know, one thing that we’re very instrumental as in terms of making those payments on behalf of HMT for furloughed workers and all that, actually that the Barclays we’re the bank for HMT on that. So that’s actually working remarkably well in terms of administering those payments. But why don’t I hand over to Jes to finish that and talk about FICC.

Yeah. There’s a tremendous amount of dialogue you know, between myself and the chancellor and Head of the Bank of England that are going through. How do we evolve these programs to make them more and more effective and more and more efficient and this is a very new frontier? So it takes us a while to get there. GBP 330 billion and I don’t think – a first stated indicative number, but I think it’s pretty clear if you read what the British Government is up to, they’re willing to go well beyond that. So that Tushar is right, you know, we’re all in this all of us together and we shouldn’t underestimate the economic commitment that the government is making and we need to partner with that. These will be –

There just – sorry, just to clarify that on the CBILS, say, in the context of the UK economy, you would expect that those sort of three guarantee programs to end up being material in the context of the total UK economy?

Yeah, but I don’t ignore that commercial paper program as well, which will be sizable and you know, that’s not to give that number out, but that’ll be a sizable number. Yeah, I think this will make a material impact on the economy should run for good times. But as Tushar said, don’t underestimate the economic impact of the furlough program, the economic impact of giving money to local municipalities to deal with the leisure sector and the – so you know, as I said in the press call this morning, what we’re seeing is two tsunamis hitting yourself at one time, you get the tsunami of extraordinary economic contraction with a tsunami of an extraordinary government response.

Okay.

And then vis-a-vis FICC, you know I’ve – we’ve talked about that a lot this morning. I was very pleased with our – with how the team did, our numbers are not a function of going in with one position or not, is very much driven by how we stay very much engaged across all the asset classes with all of our clients. Obviously, you know, what happened for a period of time around our liquidity and what that did with the most liquid markets from US rates to currencies was extraordinary to them and the liquidity response from the governments and how that led to the buy side rebalancing their portfolios, it’s again led to an opening in the capital markets. And as I said, you’ve had some historically high numbers and we’ve said also that, you know, the first three weeks of April, we’ve continued quite a strong trend versus last year. But I always say, you know, everyone here is committed to make sure that this bank is a firewall as we go through this economic crisis and that we’ll look back in time and be very proud of what we’ve done. And you know the bank – you know bankers do things and not just for compensation. So and we’ll deal with that issue at the end of the year.

Thanks, Ed.

Thanks very much –

We have the question – we have the next question, please, operator.

The next question is from Chris Cant of Autonomous. Please go ahead.

Good morning, both. Thank you for taking my questions too, please. If I could just round out the discussion on the Barclays UK piece, just crunching through some numbers very simplistically here, your 250 to 260 inclines for the full year, if I apply that to your 1Q average in Sterling assets in the UK that points to a NII number of about GBP 5 billion, which is obviously down very material last year. Can I just confirm that that’s the number that you’re looking for there? And if I’m trying to round things out, you’ve given us these numbers in terms of the different impacts from regulatory change and rates and things like this, I guess some of that is into fee line. How much revenue pressure do you expect to see in other incomes, specifically in the UK, please, I’m just trying to get a sense of how much further that GBP 6.9 billion consensus revenue number needs to come down? And then if I could follow-up the previous brief discussion on leverage, please. You’ve talked about being comfortable to run below your previous CET1 target. And in the past, Tushar you’ve talked about expecting to run with something like a 5% UK leverage ratio, I think in some of the analyst meetings. So you just printed 4.5% that you’re concerned or you consent for that to fall further? How low are you willing to go there, please? Thank you.

Yes, thanks, Chris. Why don’t I take both of those questions? In some way I – I’d let you sort of, and everybody else do the math as, however your models are set up in terms of projecting just the split between NII and other fees. I – I’ll give you the building blocks for that which hopefully according the script, but you know, just in case others may not have. I think you’re probably a little bit low in the way you’re doing that arithmetic. I think and I would be a little higher than GBP 5 billion, but let me give you the building blocks that’s probably more direct. The way we think about it is that for the rest of this year, assuming the rate curve is where it is, we’d expect about another GBP 250 million of headwind on the top line just coming from rates. We’d expect about another GBP 150 million headwind coming from, if you like, the temporary suspension of overdraft fees, charges, business banking fees you know, penalties for taking out cash from fixed deposits, all that kind of stuff. And then probably another GBP 100 million coming from other discretionary things that we’re doing for our customers. So I think you know, in terms of the NIM’s shape as I mentioned, the fee probably at the low point in NIM, probably in the second quarter and recovering again in Q3 and Q4 as deposits reprice. Hopefully that’s helpful, but I think the way you get to GBP 5 billion is probably a bit lower than I would sort of guide you to probably be a bit slightly above that. But –

Just in terms of the GBP 5 billion, I’m just taking your GBP 195 billion of average customer assets for three months and applying you 255 or 250 to 260 NIM guidance. Am I misunderstanding something there in terms of how you calculate the NIM?

Yeah, Chris, I won’t go through the arithmetic in how you’re doing it, but hopefully by giving you all the individual components of, I think the income headwinds and letting you know, that I think NII itself would be a little above GBP 5 billion is of enough help there. On leverage, Chris your other question. Yeah, you’re right. I think and if you like, in normal circumstances, somewhere around a 5% UK leverage ratio sort of felt right to me, you know – approximating to – sorry, accompanied with a 13.5% or so CET1 ratio. And as you pointed out, we’re running at about 4.5% now on a daily average basis, the same as we were in Q4. So our leverage ratio actually is on a daily average UK basis has been pretty stable, both Q4 and Q1 of the CET1 ratio has gone backwards. I think you don’t suffer as you’re more than familiar with, but you don’t suffer the level of pro-cyclicality as you do in CET1 as you’re doing leverage, obviously, our balance sheet has got larger, but a lot of that’s just a function of things like low rates rather than, you know, sort of asset inflation in a more traditional sense. And so I think somewhere around four half - 4.5% probably is the level that we’ll continue to run. Again, I put huge caveat on that, you know, we are living in a difficult forecast sort of path. So it may bounce around that. You’re probably also familiar that there is probably an accelerated change coming through the UK leverage ratio with respect to settlement balances that will improve the ratio marginally on a like-for-like basis in Q1 and will be helpful for us in Q2.

Okay, thank you.

Thanks, Chris. Can we have the next question, please, operator.

Of course. The next question comes from Andrew Coombs of Citi. Your line is now even.

Hi. Good morning. Two questions, please. And the first in your opening remarks on payment holidays, I think that 94,000 for mortgages, 57,000 on personal loans. Could you just give us an idea of what proportion of the book that is? And also to what extent those customers were up-to-date with payments prime prior to taking the holiday, I’d assuming the vast majority that if you could just confirm? And then second, a broader question on strategy. You’ve always talked about the benefit of business diversification different parts of the banks performing differently in different parts of the cycle. So do you think with current corporate indicate your argument and you remain happy with the size and shape of the respective divisions? Thank you.

Yeah. Thanks, Andy. Why don’t I cover payment holidays and I’ll ask Jes to talk about the diversification and whether, you know, the current quarter of indication as you put it on the strategy. Just in direct response to your first one, for mortgages, payment holidays represents about 10% the vast majority of those were paying customers. So I think you’ve just seen a just a big rush forward for people just to take a three month holiday. And we’re not overly concerned on that one yet. And you know, I mean, I don’t be too sanguine about these things, but that one I don’t feel so nervous about. On cards, which is perhaps a slightly more sensitive one. It’s about 3% on cards which may be helpful. I mean, the reason why I’m sort of a little bit more sanguine on mortgages is of course, our – the amount of sort of over collateral in our mortgage which is very substantial. So, you know, we’ll see where house prices go. But you know, any forecast that we’re seeing at the moment will be substantially over collateralized on our mortgage book and part of it slightly different. Jes, do you want to talk about diversification and –

You know, Andrew, I think having many of us have lived through a number of economic cycles, at least what we witnessed before that there is a certain kind of cyclicality between a consumer business and a wholesale business and we talked about that in March 2016, when we rolled out the universal banking model that we wanted Barclays to pursue, and we’ve been a defender of that ever since. What you’re sort of seeing here is you’re seeing a radical economic cycle happened in about a month. But who knows? I mean, there’s a lot, you know, there's a lot of in front of us. But yeah, well I think we very much are happy that we have this diversification. And I do believe that the wholesale business will continue to offset to a certain degree, but we’re probably going to face in our consumer business for the rest of the year.

Yeah, I think Jes is right and to just remind people, you know, in Chris’s question earlier you know, there are definitely income headwinds on the consumer businesses that I called out and you know, on the sales and trading top line, at least, you know, we think or we state – we stated in our formal outlook, that April’s running at a level much better than Q2 last year. So I think you’re seeing sort of the offsetting effects going on there, at least for the moment.

Thank you –

Thank you, Andy. Could we have the next question please, operator.

Your next question comes from Robin Down of HSBC. Please go ahead.

Good morning. I think it’s still good to get around. Two questions please. Can I come back to the RWA question? I think you said this more pro-cyclicality in Q2. But I guess just looking further out to the second half, I’ve seen that we’re not anticipating greatly on loan – greatly loan books might even shrink. And I assume that the market volatility which bring the ease in the second half of the year. So are you kind of anticipating that risk weighted assets might peak in Q2 for this year? That we could sort of finish at lower level at the end of the year? And then the second question, just apologies if I’ve missed this somewhere in the statement but I couldn’t obviously see it. From the oil perspective if I think back to your disclosures in your ESG report, you have a relatively modest drawn exposure for the fairly substantial undrawn exposure to well, and until you’ve had some quite big draw downs at the end of March. So I just wondered if you could give us the kind of updated picture as to what the actual drawn oil exposure was at the end of the quarter? And if I could – sneak in the third one. Likewise, the leverage loan positions, I think you said you took a GBP 320 million have marked there. Could you just give us the size of the leverage loan positions?

Yeah. And so why don’t I answer those ones, Robin. In terms of pro-cyclicality of RWAs and yeah, we will see some follow through into Q2, many of the models are sort of based on a rolling average. So as much as you’ll see some follow through from Q1 into Q2, you know, it doesn’t necessarily sort of reverse back very quickly as well. It will vary much depend on, you know where markets go in the second half of the year. So I don’t think I would sort of say there’ll be an immediate sort of a deflation of RWAs in the back half of the year. But I don’t think you’ll also see, if you like, in inverted commas, “the excessive pro-cyclicality” that we picked up in Q1, I think would be much, much more modest into Q1. And, you know, we’ll see where we go in the back half of the year, but I don’t expect –

But I was speaking more in terms – of it might start to shrink –

Yeah, I think –

Pro-cyclicality of them.

Yeah, look I – it’s very hard to guide on that, Robin. I know the temptation is to think you know, everything will go back to normal and the averaging will sort of you know, start unwinding. It’s quite hard to go just you know, so far away from that, and because it’s – there’s so many different components to this and the averaging sometimes is actually not just on a sort of rolling three months, some of these are 12 month averages and what have you. So it’s quite hard to guide on that. But what I would say is that, the amount of pro-cyclicality you’ve seen in Q1, I can’t – I’d be surprised if you see anything like that coming through, certainly not in Q2, I’m not expecting or even beyond that. So I think we’ve seen that the bulk of it, because it flows back maybe, but I think it’s a bit too early to guide to that. The one thing I would say though, actually, is the, you know – we’ve seen it on our bridge, revolving credit facilities did build up quite rapidly about 33 basis points, if anything we’re seeing sort of net – negative revolving credit, we’ve seen then in a marginal pay downs actually in April. So you know, I think that gives you some comfort that at least that component won’t be there. In terms of oil, we actually have something in the appendix, we have a slide on our drawn and undrawn oil exposures were GBP 3 billion drawn and we’ve got some commentary as to where that’s coming from. And most of that’s with oil majors investment grade and of course, some of the – and such a decent amount of the drawn exposure is also secured against various assets as well. And of course, we’ve taken, you know, an overlay in our IFRS 9 provisions assuming a likelihood of a $20 oil price. So like we feel reasonably well provided that. Leverage loans, we haven’t given a slide on that, but you’re, that we took you know, GBP 300 odd million of marks and almost entirely offset by hedges that performed well. So again, if anything, when I look at April, and Jes you may want to comment on this, the leveraged loan market has probably calmed down quite a quite a bit and capital markets are certainly much more functional than they were, when we were closing the books at the end of March. So I’d say the risks are probably subsiding rather than increasing there and, in our books, well contained.

And you see, the high yield market has reopened quite comfortably and the equity markets have reopened. And so I think the risk of the leverage loan markets that we may have seen about a month ago that has definitely subsided and we feel very comfortable with where – with the book that we have.

We have the next question, please, operator.

The next question on the line comes from Martin Leitgeb of Goldman Sachs. Please go ahead.

Yes, yes. Good morning. I was just wondering one broader question, if you could comment how severe a credit cycle you would expect to unfold from here, just looking at your assumptions in terms of the COVID overlay of GDP contraction that seems more severe compared to prior cycles we had, on the other hand, the recovery seems to be faster and the holidays government guarantees the schemes in place and support schemes in place. If you take all of this into consideration, how severe a credit cycle would you expect?

Martin, that’s a difficult one to answer. I mean we’ve tried to give you our, you know, what we’ve used to our own forecast in terms of GDP and unemployment and what have you. You know, that’s what we’ve assumed. It’s out there on one of our slides. You know, whether that’s what it turns out to be, you know, it’s only one month into this. So we’ll see. I would say that reason why, but it’s so hard to sort of really accurately forecast this as Jes mentioned, we’ve seen an enormous amount of government actions stepping into do everything they can to backstop what they can and, you know, we’ll see how successful they are. I think you’ve got to believe that you know, if there’s a will, there’s a way when governments are involved so you know, we’ll see if that plays out. But it’s not much more I think we can add then other than say, the data that we’re basing our assumptions off. And so thanks for your question, Martin. Operator can we take one more question, and I think we’ll wrap up the call then. And so it’s the final question, please, operator.

The last question we have time for today comes from [Fahad Kumar] [ph] of [Red Bank] [ph]. Please go ahead.

Hi, Tushar. Hi, Jes, thanks for taking the question. Just a couple of points of clarifications question. And on clarification, Tushar you said you’re looking at kind of GBP 800 million to GBP 1 billion run rate for impairment so important I know how extremely hard that to forecast but so is that kind of on that number a GBP 5 billion impairment number based on all the uncertainties that are around right now is that how to read that? And the second question of clarification was on costs. I think Jes you made a point saying costs were flat. And is that flat on the Q1 run rate or if that’s [technical difficulty] [13.6] [ph] been extra levy. Is that an okay number we should be thinking about? Or was it more in Q1 run rate? So I think it’s kind of low 30s. And then the question I had was on the US credit cards, I think everything you said on the UK credit card. On the UK credit cards facility and are they being used substantially and should we be quite optimistic that all you’ve said in the corporate side and the credit card books are being used that much, I thought we’ll use a lot more or is it too early to be in a particularly optimistic on this, because of the level of government support we have right now? Thank you.

It’s on the costs number. What I say is, I would look – well I was speaking to as flattish more towards 19, but make sure you take the FX adjustment to it.

What is the FX adjustment that of interest, sorry?

Well –

You know we have –

You know, but those are just were to retranslate on a constant currency basis, but you know brought it into the last year, you know, and we’ll update guidance as we go along. But you know, it’s still early on. And, you know, we’ll see how this plays out. We’ll keep you posted. And on the impairments. Yeah look, I mean, it’s so hard to forecast. But, you know, I think, you know, if you add on the GBP 2 billion plus what I guided to, you’re getting into that sort of GBP 5 billion zip code. You know, we’ll keep you posted, but that arithmetic sort of works. And in UK cards, yeah, it’s the same thing. We have seen a meaningful drop off in spend. I mean, that’s no real big secret that you’ve seen in payments data or around payment data, but also in sort of GDP type revisions. What’s more interesting is, we have seen a drop off in card balances that is adding further down and down, you know, but in income good for our impairment and that’s sort of somewhere in the income guidance that I gave earlier. But obviously got for impairment does that rebound? In some ways, we sort of hope it does rebound, but we hope it does rebound as the economy recovers, because then sort of gets back to more of a normal environment. But I think it’s very early to forecast that, and you know, we haven’t even come out of this particular lockdown and how consumers behave. And you know, how everybody gets back to work, I think is very unclear at the moment.

Yeah fair enough so it’s kind of a good cost to rebound, a bad cost to rebound, so to speak. That makes sense.

Yeah. And we’ll you know, we’ll know more. I think we’ll know a lot more in future obviously. Okay. Thank you very much Fahad –

Thank you very much, Jes –

Fahad. Thanks for everybody for joining us. Appreciate it. And there’s a lot going on. And although we won’t be able to get to meet in person over the next few days and weeks, hopefully we’ll a chance to speak again. But I’ll close the call now. Thanks again.

Ladies and gentlemen, this does conclude today’s call. Thank you for joining. You may now disconnect your lines.