Ladies and gentlemen, welcome to the Barclays Quarter 3 Interim Management Statement Analysts and Investors Conference Call. I will now hand you over to Antony Jenkins, Group Chief Executive. Antony P. Jenkins: Good morning, and thanks for joining the call. I'm here with Chris Lucas, our Finance Director. Before Chris takes you through the detailed numbers, I want to share a few thoughts on our performance. The last 3 months have been difficult ones for Barclays, particularly with the resignation of our Chairman and Chief Executive. Today's results demonstrate that we have not let that distract us, reflecting the strength of our leadership team, as well as the commitment and integrity of all of our colleagues. The numbers we're announcing today show continued momentum despite significant headwinds. They demonstrate that we have remained proactive, for example, in taking action to cut costs. Our universal banking franchise remains strong despite the issues we faced in the quarter. To give you some examples, the Investment Bank was #2 globally for debt and equity issuance in the third quarter and #2 in U.K. M&A, with 28 deals and 21% market share for the year-to-date. In the U.K., we have increased our mortgage lending, with the value of applications up 7% year-on-year. We have also opened 6% more current accounts. The number of Barclays business customers at the end of September was up 2% on a year earlier. And the Corporate Bank was recently ranked #1 for client satisfaction in the U.K. While we have much more to do to restore trust among stakeholders, these trends are encouraging. I am proud of how our colleagues have continued to focus on delivering for our customers and clients throughout this period, and I am grateful to our customers and clients for remaining loyal to Barclays. Adjusted PBT for the first 9 months was GBP 6 billion, up 18% from last year, with improvements in Corporate and Investment Banking, Wealth and Investment Management and Barclaycard. Adjusted income was stable despite the environment. We continue to control costs tightly and are on track to deliver targeted reductions in 2013. Adjusted returns on equity have improved year-on-year though we know we have more work to do here. I'll comment on progress in our strategic TRANSFORM programme in a minute. But first, I'll hand over to Chris to take you through the numbers in more detail. Chris?

Thanks, Antony, and good morning. In general, my comments today compare the first 9 months this year with the first 9 months of last year. And, as usual, we're using adjusted numbers, as they give a better understanding of underlying performance. Adjusted profits increased 18% to GBP 6 billion. Total income was broadly stable at GBP 22.3 billion despite GBP 1 billion of gilt gains from the sale of hedging instruments last year. Impairments improved 7% to GBP 2.7 billion, mainly as a result of favorable trends in our U.K. businesses. This resulted in net income growth of 1% to GBP 19.7 billion. By contrast, costs were down 4% to GBP 13.8 billion. Our capital, liquidity and funding remained strong, with a Core Tier 1 ratio of 11.2% and total capital of 16.9%. We've also continued to reduce our exposure to the Eurozone. Adjustments to statutory numbers include a GBP 4 billion charge on own credit compared to a gain of GBP 3 billion last year and the provision for PPI of GBP 1 billion, which includes GBP 700 million increase in the third quarter. This is in addition to a provision for redress on interest rate hedges and a gain on the sale of own stake in BlackRock that we told you about in the first half. As a result, statutory profits in the 9 months were GBP 712 million. Return on equity was 8.8% compared to 8.4% for the same period last year. There were strong performances in our 3 largest businesses: U.K. Retail and Business Banking delivered returns of 16.9%; Barclaycard achieved 22.7%; and returns in the Investment Bank of 14.2%. Returns by business are in the appendix to the slide pack. Our overall cost-income ratio improved to 62% as we reduced costs. We've also announced the cash dividend for the third quarter of 1p. We are aware of the importance of dividends to our shareholders, and we aim to pursue a progressive dividend policy. We continue to explore options for distributing reserve dividends with regulators to achieve this. Turning now to the individual businesses. In U.K. Retail and Business Banking, profits fell 4% to GBP 1.1 billion. Total income was down 5% to GBP 3.3 billion, reflecting the non-recurrence of the 2011 gilt gains and the decline in the underlying contribution from our structural hedges. Excluding these impacts, net interest income rose slightly year-on-year as a result of higher volumes, especially in mortgages. Impairment charges have almost halved to GBP 198 million due to improvements in the quality of our personal unsecured lending. The loan loss rate halved to 21 basis points, and 90-day arrears on unsecured personal loans improved from 1.8% to 1.4%. Operating expenses, excluding PPI, increased 2% to just under GBP 2 billion. Barclays is participating in the government's Funding for Lending Scheme, and we're passing on all funding cost benefit to our customers. We've already drawn down GBP 1 billion and launched new products, such as Cashback for Business, which provides upfront cash to small businesses taking out a loan of GBP 10,000 or more. In Europe Retail and Business Banking, losses increased to GBP 151 million and income fell 28%. And impairment increased 31% mainly as a result of the deterioration in Spanish and Portuguese home loans. We've taken actions to reduce costs significantly in Europe, and they are down 31%, reflecting restructuring charges in 2011 and the subsequent saving. In Africa Retail and Business Banking, total income was down 12% to GBP 2.4 billion as a result of adverse exchange rates and the non-recurrence of last year's gilt gains. Impairment charges grew 33% as we took further provisions on mortgages in the Absa recovery book during the third quarter. We believe impairment in this book has now peaked. Early arrears are improving across almost all portfolios, including mortgages. Cost decreased 12%. And as a result of these movements, profits were down 41% to GBP 330 million or 34% on a local currency basis. At Barclaycard, profits were up 21% to GBP 1.2 billion. Income was stable at just over GBP 3 billion as growth across the businesses, including income from last year's acquisitions, were offset by higher funding costs and last year's gilt gains. Impairment decreased 28% as a result of lower delinquencies in the U.S. and European card portfolios. The loan loss rate was 291 basis points compared to 423 last year. Operating expenses, excluding PPI, increased 3% as we continued to invest in the business for growth. Turning to the Investment Bank. Profits grew 19% to GBP 3.2 billion. Total income grew 7% to GBP 9.1 billion compared to the first 9 months of 2011. Fixed Income, Currencies and Commodities increased 11% to GBP 5.9 billion. Equities and Prime Services were up 4% to GBP 1.5 billion, and Investment Banking was broadly stable at GBP 1.5 billion. There were impairment charges of GBP 346 million compared to GBP 3 million in the same period last year. This includes a charge relating to legacy CDO assets, as well as a corporate default in France. There was also a one-off release of GBP 223 million in 2011. We've reduced costs by 4% to GBP 5.6 billion. Performance costs were lower despite an increase in charges related to deferrals from prior years. Nonperformance costs were down 1% despite absorbing GBP 193 million of the LIBOR settlement. Excluding LIBOR, the reduction was 5%. The cost to net operating income ratio came down from 68% to 64%, and the compensation to income ratio reduced from 46% to 39%. Comparing the third quarter with the strong second quarter in our Investment Bank, total income was down 13% to GBP 2.6 billion. In general, our flow business model is designed to protect us from downside risk. As a result, we may outperform in weak markets and underperform in strong markets. Fixed Income, Currencies and Commodities were down 20% in markets with tightening spreads but low secondary trading volumes. On the other hand, Equities and Prime Services were up 26% as we grew share in all regions despite low market volumes. Investment Banking was stable. As a result, profits were down 6% from the second quarter to GBP 937 million. We continue to reduce our legacy assets. The credit market exposure has decreased by GBP 2.7 billion to GBP 10 billion since the half year. We exited these positions at or above our marks, and reducing these further remains an area of focus. Profits in Corporate Banking grew to GBP 444 million compared to GBP 167 million last year. Within this, U.K. was up 15% to GBP 681 million, losses in Europe decreased 33% to GBP 290 million and profits in other regions grew to GBP 53 million. Impairment reduced 29% to GBP 635 million with a substantial improvement in Spain as a result of reduced exposure to the property and construction sector. Impairment in Spain decreased 35% to GBP 271 million. Costs fell 15% to GBP 1.1 billion. In Wealth and Investment Management, profits grew 31% to GBP 200 million. Income grew 3% to GBP 1.3 billion, driven by the High Net Worth business. Costs were held flat. Moving on now to capital liquidity and funding. Our Core Tier 1 ratio increased to 11.2% on a Basel 2.5 basis, with total capital of 16.9% and risk-weighted assets down to GBP 379 billion. Our liquidity position remained strong with the pool of GBP 160 billion, which compares to the wholesale funding maturing in the next 12 months of GBP 113 billion. 88% of the pool was held in cash, highly liquid government bonds and deposits with central banks. We've met our funding needs for the year, and any further debt issuance will prefund our 2013 requirement. Our maturities in 2013 of GBP 18 billion are much lower than this year. As you know, our Retail Banking, Corporate Banking and Wealth businesses are largely funded by customer deposits and customer loan-to-deposit ratio for these businesses was 104%, down from 106% at the end of June. We've shared our thinking on the implementation of Basel III with you at the half year. Although the timing remains uncertain, we've updated our pro forma ratios, assuming implementation in January 2013. Our capital flight path is broadly unchanged, with a pro forma Basel III Core Tier 1 ratio of 10.4% at the end of 2013, which is broadly in line with the 10.3% reported at the time of our half year results. We estimate that our fully loaded Basel III Core Tier 1 ratio would have been 8% as at the end of September. We do expect some increase in Basel 2.5 RWAs in the fourth quarter following the third quarter reduction as we implement regulatory change and bring in prudent operational risk assessments. The focus of our capital management is not just on Core Tier 1 but also the size and shape of our overall capital structure. We agree with the financial policy committee that contingent capital will play an important role, especially in respect to the increased loss absorbency. And we've made significant progress with the FSA regarding the capital value to be attributed to these instruments. Now that we have a greater clarity, we'll be engaging with investors in the next few weeks to solicit their views. We continue to believe that we're well capitalized. Turning now to costs. We've reduced overall cost by 4% to GBP 13.8 billion. Overall performance costs were down 9% to just under 3 -- sorry, just under GBP 2 billion. In the Investment Bank, performance costs reduced 11% while profits grew 19%. Nonperformance costs for the group were reduced 3% to GBP 11.8 billion. We continue to operate with the cost run rate required to achieve our targeted cost savings, and this should result in nonperformance costs in the region of GBP 15.5 billion in 2013. Moving on to margins, which I look at in 2 parts: customer margins, which drive the vast majority of our net interest income; and then the secondary margin derived from our structural hedges. I'll start by talking about hedging. Across the group as a whole, the total contribution from structural hedges fell from GBP 2.8 billion to GBP 1.3 billion as expected. This was mainly due to the GBP 1 billion of gilt gains last year. The businesses which contribute to our margin analysis are Retail and Business Banking, Corporate Banking and Wealth. Margins from these businesses fell 23 basis points to 186, 19 points of this decline from our reduced hedging contribution, highlighting the relative stability of our customer margin. Increased customer volumes, mainly on the liability side, broadly offset this margin contraction. So the net interest income generated from customers was stable at GBP 7.3 billion. Overall, net interest income decreased 9% to GBP 8.3 billion. Moving on to our Eurozone exposures. We've continued to reduce the redenomination risk with our European businesses during the third quarter. The local net funding mismatch in Spain is now immaterial. It has decreased from GBP 2.5 billion to GBP 100 million as a result of actions taken to attract corporate deposits and reduced corporate lending. In Portugal, we've lowered the mismatch to GBP 3.3 billion and initially, it's decreased to GBP 9.6 billion. We've also reduced our peripheral sovereign exposures during the third quarter by 15% to GBP 4.8 billion, driven by a 24% reduction in Italy to GBP 1.9 billion. In terms of outlook. We continue to operate in a challenging environment, but we remain confident in the strength of our market positions and robust risk management and the benefits of the universal banking model. Before I close, I want to mention some additional disclosure in our announcement today, which gives quarterly balance sheet and margin data for the first time. From January next year, we'll also be allocating more head office costs to the businesses. In summary, we're reporting a good performance for the first 9 months. Adjusted profits grew 18% to just under GBP 6 billion. Income was broadly stable despite the GBP 1 billion gilts gained in 2011. Impairments improved 7%, while operating cost decreased 4%. Our capital liquidity of funding remained strong with a Core Tier 1 ratio of 11.2%, and we further reduced our exposure to the Eurozone. Thanks very much. I'll now hand back to Antony. Antony P. Jenkins: Thanks, Chris. As I said earlier, this is a positive performance in challenging conditions. I've shared previously our goal to make Barclays the go-to bank for all of our stakeholders. I see this is becoming the partner of choice when an individual or organization wants to do business with a bank where there is an emotional as well as rational connection. This goal applies to all of our businesses and geographies. We will do this through our TRANSFORM programme, which has 3 objectives: turnaround, return acceptable numbers and sustain forward momentum. Over the past 2 months, I've spent time listening to their priorities and sharing our approach for the broad range of stakeholders, including colleagues, customers and clients, regulators and a significant number of investors. The feedback for our TRANSFORM programme has been positive. Work is now well underway, with cross-firm workstreams established to meet our 3 objectives. In particular, the business performance review is in full progress, involving analysis of the financial performance and reputational risk of our business at twice the level of granularity of previous reviews. Using this analysis, we are modeling a range of options as to where we can grow significantly, where we can turn around businesses or where we have to run them down or exit them. While we remain absolutely committed to our universal banking model, this detailed analytical assessment will allow us to determine the future size, shape and composition of Barclays. From my meetings with investors, I fully understand that delivering returns above the cost of equity, increasing dividend payouts and lowering compensation ratios are key issues. We are on track to share a detailed action plan with you in February. We have a lot to do, but we intend to build a universal bank that is customer and client focused to deliver sustainable and superior return to shareholders and benefits all of our stakeholders. Thanks very much. And Chris and I are now happy to take your questions.

[Operator Instructions] And your first question this morning, Mr. Jenkins, comes from the line of Jason Napier of Deutsche Bank.

Three, please, if I might. First, there's been a lot of comment in the media, particularly from members of the Bank of England's FPC committee on bank capital adequacy. I wonder whether you'd be able to be explicit as to the capital targets that Barclays has been set, say, for 2013. Second question, both of the Swiss banks are now talking openly about having leverage targets for balance sheet leverage on a simple basis. And we understand that the BOE are also looking at sort of more simple measures of that kind of nature, and I wonder whether we're at a stage yet where we can know what the sorts of targets are going to look like, how it might be calculated and so on. And then lastly, just looking at margins as sort of a picture of stability in the third quarter, and I just wondered, given sort of some of the more positive things that are going on in terms of the FLS, perhaps some of the pricing in the U.K. deposit market, LIBOR and a smaller liquidity pool, are we looking at a picture of sort of stable margins from here? And what would be the right sort of expectations into next year on them? Antony P. Jenkins: Thanks, Jason. So I'll take the first and the third points, and I'll ask Chris to comment on the leverage. But on capital, we acknowledge that this has been an area of intense focus for many commentators in the space over recent weeks. And of course, it's an ongoing discussion between us and our regulators, many of which I've participated in directly. We have received a letter from the FSA which quoted an absolute Core Tier 1 capital target for the end of 2013, which was the same target we had previously shared with the FSA as part of our capital plan. We continue to operate at a Core Tier 1 capital level of 11.2%, which is a strong level. And we believe that this dialogue with the regulators will continue but will continue to be in a positive sense. We are confident that we can meet requirements on capital for Core Tier 1 and the broader capital stack going forward. So I would say that the dialogue is constructive, which is perhaps not always the impression you might receive, but it is indeed that. On margins, we do think that our margins are broadly going to be stable from here going forward. But Chris, do you want to touch on the leverage question?

Let me touch on leverage. There is a lot of work going on and a lot of interest by the FPC and the regulators about leverage. What there isn't yet is a target that's been set for any institution that we're aware of. We are working with them in terms of technical issues, like the definition of leverage, and they have requested that there will be some disclosures of that at the end of the year. That will be the next step. And I think in terms of capital requirements or leverage requirements, that will follow into 2013 and beyond.

And the next question today comes from the line of Tom Rayner of Exane BNP Paribas.

Can I have a couple, please, the first one on your FICC business? Just trying to get a better handle on that sort of quarterly progression because obviously, Q2, in terms of revenue, you outperformed your peers quite markedly, down 18% versus sort of circa down 40%. Q3, peers are up circa 15%. You're down 20%. I'm just trying to get a sense. When I look at the year-on-year progression in the first 3 quarters of this year, it looks very stable, plus 9%, plus 15%, plus 10%. Most of your peers are having big swings, positive and negative. So I'm just trying to get a sense what it is about your FICC business that sort of gives you a different and possibly less volatile progression in terms of revenue. And I have a second question, if I may, on capital. Antony P. Jenkins: Do you want ask your second question, Tom, and then we'll...

Yes. The second really is in light of the sort of announcements today on the new inquiries in sort of from U.S. regulators and whether you're still comfortable that sort of 9.5% fully loaded is adequate in light of sort of potential, I guess, further provisions to be taken at some point in the future. Antony P. Jenkins: Okay. I'll have -- I'll answer both of those questions. Chris may want to add on the capital question. So let's talk about the Investment Bank performance in Q3, particularly with regard to FICC. Our model is a conservative model, which means that we tend to outperform our competitors when markets are weaker and perform less well and then when markets are stronger, and you can see that pattern in Q2 and in Q3. It's important to note that in terms of flow, we haven't lost any market share in Q3. So I would describe the performance in Q3 as actually pretty solid. I'm pleased also that we continue to manage our cost, within our cost to income ratio, and that we've improved our compensation ratio from 46% last year to 39%. Also important to note, of course, that our ROE was strong at 14.2%, up from 12% in 2011. And that would put us in the top quartile of our peers. So I think this is a reflection of our business model as much as it's a reflection of anything else. And I know you asked your question specifically about FICC, but we're also particularly pleased with our performance in equities, which is up 26% quarter-on-quarter. With regard to capital and the disclosures that we've made today, we continue to believe that the organization is adequately capitalized given everything that we can foresee. But I don't know, Chris, if you want to add anything to that?

I think that's right, and one of the things we have is a barrage of numbers which, you're absolutely right, shows the fully loaded Core Tier 1 ratio at the pro forma December '13 at 9.5%. I think a probably better comparison with our ratios today is the 10.4%, which we refer to as the transitional Core Tier 1 ratio. And at that level, with that level of capital, I absolutely think we're appropriately capitalized.

And the next question comes from Chris Manners of Morgan Stanley.

I had just a couple of questions for you, if I may. The first one was on liquid assets. I see you've cut the liquid asset buffer by around GBP 10 billion in the quarter. And obviously, the FSA has made a number of changes and changing the tiering system of the ILG and also the allowed composition of the buffer. Are you going to be sort of taking this buffer down a bit further? And maybe you could give us an indication of how much relaxation the buffers could help your profitability. And the second one was just on Africa. I noticed the PBT contribution sharply down versus sort of a run rate over the past couple of years. Obviously, you've had impairment losses in Absa and that provisioning top-up. Just wondering actually maybe about the revenue trajectory going forward and how you see that developing and then recovering your profitability there. Antony P. Jenkins: Chris, thank you. I'm going to ask our Chris to talk about liquid asset buffer, and then I will come to the question on Africa.

Chris, you're absolutely right that we have reduced the overall size of the buffer, and we're also looking at the composition very carefully. And that's because, as I think you've heard me say, our first objective was to get the liquidity buffer. And the second objective, which is subordinate in all respect, is to maximize the carry that we can get from the buffer to our liquidity pool to enable us to reduce the overall impact in the group. When we first built the liquidity pool, we gave you a number of about GBP 1 billion of cost as a result of running that pool. That has come down because of the change in composition to somewhere around about GBP 500 million, that sort of number. So we will continue to do this but with one absolute critical factor. The liquidity pool has to be a pool of liquidity that's available to us, first, and optimized in terms of cost, second. And we will never sacrifice the first for the second. Antony P. Jenkins: Thanks, Chris. So let me talk a little bit about Africa. I continue to believe that the long-term macro prospects for Africa are very good. It is likely to be the fastest-growing region of the world over the coming decade. There are many reasons for that, firstly because, of course, it's a very commodities-rich environment. Secondarily, there's a lot of inbound investment into Africa, particularly from China. We're seeing increasing political and social stability, increased democracy, the rule of law, emergence of the middle class and so on. So the macros are attractive if you take a decade-long perspective. I also believe that we are very well positioned in Africa. We're the largest bank on the continent. We have substantial franchises in countries like Kenya and South Africa and, of course, in countries like Kenya, Zimbabwe, Botswana. We've been there for many years, in some cases over 100 years. And as such, we are seen as much as a local bank as an international bank. So when you put those 2 things together, Africa is a very interesting strategic opportunity for the Barclays Group. However, when you do business in the developing world, there is always going to be more volatility in that environment than you see in the developed world. That's partly driven by economics and partly driven by the political environment and as we saw last year, a lot of disruption in Egypt. We've seen disruption in the mining industry in South Africa and so on. If I turn -- so I'm very positive on Africa in the longer term. And if I turn to the sort of short-term performance of our business, I think our businesses performed well across Africa. Two of our biggest businesses you don't see reported directly, that'd be Investment Bank, which is rolled up into the Investment Banking numbers and the credit card business, which is rolled into the Barclaycard numbers. Both those businesses performed very well. We've had some specific issues in our mortgage portfolio, which we referred to earlier. But in a local currency basis, costs are down, income is broadly in line, but that impairment issue has affected profitability. So if I think about of a more short-term revenue-driven perspective, I continue to see opportunities for us there. And those opportunities are driven by our ability to connect our local, on-the-ground presence with our global product capability, with our relationships with multinationals either in the U.K. or the U.S. and in Asia and also across the large regional players. And when we put together the customers and clients that we have with our local presence, with our global product capability, that leads to good things happening. We proved that hypothesis out in Investment Banking and cards, and we're proceeding to do it across the continent. So I continue to be optimistic on Africa while recognizing that we'll have to deal with volatility in the short term.

The next question today comes from the line of JP Crutchley from UBS. John-Paul Crutchley: Two questions, if I can. Maybe a technical one on capital for Chris and a broader business one for Antony. Chris, the capital one was just looking at the pro forma Basel III numbers you give in the appendix. Unless there's been a bit of a shift downwards since the half year, and it seems to be the main differences in the other transitional deductions between 2014 and 2018, which have gone up by a couple of billion. I just wondered if you could maybe just explain just what the movement behind that is. And then the second question on broader business was just on the European Retail and Business Banking for Antony. I guess when I look at that business, I think what strikes me is actually, it's less of an issue for that business in terms of impairments but actually, it's more of a revenue and a cost problem [ph] in that business in terms of how it's more broadly performing. And I mean as you start to think about that one ahead of you [ph], do you think more about leaning on [indiscernible] levers or cost levers in terms of getting that business back to what we'd consider an acceptable level of return?

Okay. Let me answer the first question and the change for Europe. So you're right, it's -- what's happened since the half year is due to a reassessment of the PVA and DVA calculation. Antony P. Jenkins: Okay. Let me talk about Europe RBB. We've taken a deliberate decision in Europe to minimize asset growth for all the reasons that you'd expect, firstly because of the weakness of the operating environment, but also because of our desire to manage the redenomination risk. I think we've done a very good job in cutting costs, and you could see that costs were down 31% year-on-year. But unfortunately, a combination of lack of asset growth has impacted the top line and of course, impairment has deteriorated somewhat. So from my point of view, our strategy in Europe is all about risk mitigation, mitigation of both redenomination risk and credit risk, which I think is appropriately prudent. In terms of the go-forward strategy for Europe, that of course is part of the business portfolio review that I referenced earlier. We are operating that review at a very detailed level. We're looking at about 80 different lines of business through the lens of both reputation and return. And our expectation is that as a result of that review, we'll be able to talk to you in February about what we're doing with each of those units. So it would be inappropriate of me at this time to be more specific than that. But I do think that the operating environment in Europe will continue to be difficult for the foreseeable future.

Your next question this morning comes from the line of Michael Helsby of Bank of America Merrill Lynch.

Just I've got 3 questions actually, if that's all right. Firstly, on costs, Chris, I think that the nonperformance costs were GBP 3.8 billion in the third quarter, so if I annualized that on that GBP 15.2 billion, which is a little bit lower than your GBP 15.5 billion. So -- and I was just wondering, is the GBP 15.5 billion more of a GBP 15.2 billion? And also maybe if you could just talk about what else you could do in terms of nonperformance costs in terms of the out-years. And also, clearly, within the Investment Bank, the comp ratio has fallen a lot, but I was just wondering if you could talk about how you see the evolution of that 39% comp ratio given the structural changes that seem to be happening at an industry level in terms of costs. That's Question 1. Question 2... Antony P. Jenkins: I thought that was 2 questions, Michael.

Yes, it was 2 but -- if you want to answer those, that would be great.

Yes. Let me start. The GBP 15.5 billion is not the GBP 15.2 billion. The GBP 15.5 billion was the basis upon which we were able to drive the P&L cost line into -- to operationalize the GBP 2 billion target savings that we gave you. That's our basis, GBP 15.5 billion. If you do the straight annualization, I agree, it's GBP 15.2 billion. And the other information we have, like what's in our plans, gets us to nearer GBP 15.5 billion than GBP 15.2 billion. There's a little bit of a finance director's help in there as well, but you should look at GBP 15.5 billion as the nonperformance cost target that we have set ourselves, and that's what we intend to deliver against next year. Antony P. Jenkins: And Michael, if I could just make a strategic comment on cost and my interactions with investors and with many of the sell-side analysts, I've been talking a lot about how I see cost as being the strategic battleground for the industry for the coming years. It's across the case where if you share my view of the world, which is that we're in a period of prolonged low to no economic growth and therefore very little tailwind around the top line of the business, then you'd have to focus intensely on cost. I do think there is a strategic opportunity and the potential to build competitive advantage through a much more structural approach to cost, but that, again, is something that we'll be covering in February. Regarding the Investment Bank compensation ratio, we're acutely aware that this is a topic of intense interest for our investors and for others. Our aspiration is to be top quartile in this area of our business but also to do that in a way that protects the franchise because clearly, we have a very powerful Investment Banking franchise as part of our universal banking model. And we are on a path to continue to drive this ratio down but always with an eye to being competitive. And we believe that we are in the top quartile with this ratio, but we expect to continue to reduce it over time.

Okay. So the question 2 is just a very quick question on -- I think you mentioned equities were -- actually, it looked quite good Q-on-Q. Certainly, that was a lot better than what I would have thought. I was just wondering if you could give us a bit more color in what drove that. Is it cash derivatives for IPB? Antony P. Jenkins: Yes. It was a pretty solid performance, Michael, across all the geographies where we do business.

But from a product level, was it just a broad base in terms of the -- what drove the improvement? Or was there a big change in PB or derivatives or... Antony P. Jenkins: I think it was pretty much across all of the product categories.

Right. Okay, fair enough. And then just finally, clearly, there's a hell of a lot of focus on capital, and we've had quite a few questions on that today. I think you've said that you're happy -- I think, you've implied that the regulator is happy with your capital plan. I was just wondering -- I mean, you're still paying a dividend. And should we take that as an endorsement, a direct endorsement, from the regulator and from yourselves that you're happy with the capital plan? Is that a reasonable litmus test? Antony P. Jenkins: Yes. Michael, let me just make one clarification on the equities question you asked. It was primarily driven by PB and equities derivatives. Going back with your point on capital, of course, capital is a topic of intense discussion between us and our regulators. We talk to them about our approach to dividends on an ongoing basis. And Chris, I don't know if you want to add anything.

I think that's very fair to say that it's a direct endorsement by the regulators. It's probably something you have to talk to them about, but we have a deep and transparent relationship with them. They've seen all of our capital plans. They've seen our dividend plans. And the fact that we are paying dividends, I think, is an endorsement of our view.

The next question today comes from the line of Raul Sinha from JPMorgan.

If I can have 2 questions, please, the first one just following up on sort of the recent discussion on capital, if I may. And I'm just trying to understand your updated view on contingent capital given the comments you've made about being adequately capitalized. How would you decide the size of any potential issuance going forward? What might be the key criteria there? And have you given any thought to what it might cost you?

We've done a lot of work with the market over a year ago in terms of the type of capital, what would contingent capital look like, what would the coupon be, what would the maturity be. And that led into a lengthy series of conversations with the FSA. Those are now pretty much completed, and we're now in a position to go back to the market and refresh the work we did over a year ago with them. I think we really need to do that before coming out with anything more definitive. But we do believe the contingent capital is important. It enables us to bridge the gap between ordinary share capital Core Tier 1 and Tier 2. And therefore, it's an instrument that has been and remains of attraction to us. The objective will be to see whether we can issue it as that will -- we have a lot of work to do before getting to that point.

Should I think about this as dependent upon the demand within the market rather than any particular size that you do feel you need to issue?

I think it tends to be both. We have a long-term capital plan that goes down below Core Tier 1, goes down to Tier 2. And within that is a number for quarters [ph] that of course was previously taken up by reserve capital instruments and Tier 1 notes. So we're looking at the capital structure, not just in a year forward, but 5 and 10 years. And this is, we think, a very useful addition to the armor.

All right. If I can have a question for Antony on redress. Antony, could you comment a bit on interest on the mortgages? I believe you made some comments previously in the past, and I wonder if you might be able to share your updated thoughts on this issue. And then secondly, on PPI, if you could talk about how you derive comfort from the provision you've made so far. Antony P. Jenkins: Yes, sure. So one of the things that we've been doing over the last couple of years is to look proactively at upcoming areas of our business which might cause concern to our broader stakeholders. And because interest-only mortgages became prominent as a product about 15 to 20 years ago, you're now seeing the maturation of those mortgages. So we have been doing a lot of work and have been talking to our regulators about that work to make sure that customers understand their obligation to repay the principal at the end of the loan. And we've also been doing a lot of work to deal with customers who are facing any sort of hardship because their plans didn't turn out to be the way they thought they were going to be. And we think that we are leading the industry in this regard. Now it's true to say that we're seeing the leading edge of this because these mortgages are just starting to mature. But right now, I feel that we are dealing with this product in exactly the right way, in a way that's consistent with our approach to put the customer at the heart of everything that we do and to build the go-to bank going forward. But I also expect that this will become an increasingly focused-upon topic at the industry level over the coming years as the numbers of these mortgages begin to mature. The one thing I would say about our mortgage book, and it will be well known to many people on this call, is that it is inherently a lower risk mortgage book than many of our competitors. And if I look at the distribution of interest-only mortgages, a very significant proportion of them have low loan to values, and our target is at what we would describe as mass affluent customers. So we think that the product targeting is appropriate for these customers. And so we expect to be able to deal with this issue going forward, but I do also expect it to become increasingly a topic of media coverage. With regard to PPI, PPI is very difficult to forecast as it's based upon our volumes that we're experiencing, have experienced, our anticipated future volume, the types of volumes that we receive, how we adjudicate those and so on. At the half year, volumes were trending down, so we felt that we were adequately provided. But based upon the third quarter experience, we think that it's appropriate to take the additional provision. And as you would imagine, we've incorporated in the calculation of that provision all the available data that we have to date and operated inside the accounting convention. So this is our best view right now of the requirements for PPI redress. It's also worth stating that more than 1/2 the claims that we've received have no PPI policies or are duplicates. So that is our best view right now, Raul.

Antony, would you able to share what proportion of your mortgage book is interest-only? Antony P. Jenkins: Yes, it's about 44%.

The next question this morning comes from Andrew Coombs of Citigroup. Andrew P. Coombs: I have 2 questions on the fixed income result, please, and why the strategy there, and then also a follow-up on capital. Perhaps, if I start with the fixed income question. I know that you mentioned about outperforming during weaker quarters and underperforming on stronger quarters were added to the wider peer group. But I'm just interested to know how much the Maiden Lane gains in the second quarter and the absence of those this quarter accounted -- how much of that accounted for the 20% decline Q-on-Q and that -- or whether we should think of the third quarter as a better base for fixed income revenues. And my second question is with regard to FICC. Following the UBS announcement yesterday, what do you take is the read across from that? Is it first and foremost you see that as an opportunity for market share gains? Or is it you see steps to follow, reviewing businesses and considering running down errors [ph] and exiting some? Antony P. Jenkins: And your third question on capital? Andrew P. Coombs: The third question on capital is you mentioned that you'd submitted an absolute capital target to the FSA earlier this year and that they were now -- they just essentially said, "We'd like you to meet that target." You said you were confident you could achieve that, but you, yourself, also mentioned that the PPI, there's a lot of uncertainty there and it's very hard to forecast. So given that, I'm just interested in how much flexibility there is in the ongoing discussions you have with the FSA around that hard and fast absolute capital level. Antony P. Jenkins: I'll ask Chris to deal with the capital question. I'll address your first 2 questions. With regards to the Maiden Lane gain, we did not disclose the amount, but it's not material. I wouldn't infer anything into that in terms of distorting the overall trend of the numbers. I think the key issue is the one that I referred to, which is the strategic positioning of the business. And I think it is appropriate that we're conservative from a credit perspective. That is our approach to our businesses across the group, and it's one that I thoroughly endorse. Regarding your reference to UBS, I think it is, of course, to our benefit that a player is leaving the FICC space. We are, as you know, a huge player in the FICC flow businesses, and I would expect that to be helpful to us over time. Regarding our own strategic approach I've described in my remarks, the business portfolio review we're conducting as part of the TRANSFORM programme, which is set to determine the future size and shape of the group. I would emphasize that I expect that review will allow us to determine the lines of business, as I said before, where we will continue to grow businesses, where we need to reshape businesses, where we need to run down or exit, but that will be in the context of us continuing to be a universal bank and continuing to have a very strong investment bank within it. Chris, do you want to talk about the capital issue?

Andrew, yes, the absolute capital level was a number that was our number out of our medium-term plan. We expect to continue to have a dialogue as to that number with the FSA, and we'll be talking to them about changes for things like exchange rates that you would expect to go through. There is clearly a degree of uncertainty, and PPI is one of those areas. But our capital plan and our business plan are the bases for the overall absolute capital level and will vary as the year goes by.

Your next question this morning comes from Fiona Swaffield of the RBC.

Just a follow-up really on the leverage ratio debate, just 2 things. I mean, firstly, could you kind of give any indication or have you looked at the extent to which the adjusted assets you give, and have done for a long time on leverage, would be dramatically different? I mean, I assume that they inflated quite significantly under the Basel III numbers and as you look at that. And secondly, if there is a leverage target that's put place or something comes out from the FSA, have you looked at your ability to reduce kind of low-yielding assets? Is there any kind of scope there to reduce repo or do anything quite quickly?

We give you the [indiscernible] 20x the number that we worked to. I think we'll also tell you that [indiscernible] is about 33x leverage. That number is going to come down. In terms of where do we get to the FSA, I think, to be honest, it's premature to go much beyond the fact that we are in dialogue. We have a very transparent view of our leverage on our basis and what it would be on a Basel III basis. And we will continue the dialogue. It feels some way away from completion at the moment.

Can I just follow up on the 33x? Is that with a higher asset base? Or is that Basel III tangible equity or...

It's Basel III tangible equity.

And what about the assets? Would they be...

Tier 1, Fiona.

But would the assets be including current exposure method and off-balance sheet and...

Yes, yes. Actually, well, some of those calculations are, by the necessity, relatively high level because there is still a considerable dialogue going on in relation to what the inclusion of different assets are in the calculation of the 33x Basel III calculation.

And the next question comes from Manus Costello of Autonomous.

I just wanted to follow up on JP's question, please, on the capital deductions because it was a quite material increase in capital deduction, as you say, Chris, driven by the PVA deduction. I wonder if you could give us more clarity around that because it suddenly seems that some kind of change here is eating into a lot of your organic capital generation. And thinking about the capital plan going forward, it's somewhat worrying that you're generating capital on the one side but it's being removed by increases in deductions on the other side.

The work is ongoing. It is expected that there will be changes in terms of the calculation and the inputs into the calculation. There is quite a lot of work going on as we finalize these. And clearly, we're looking at the capital generation on one side relative to the changes in interpretations and rules on the other. I think the PVA, DVA numbers are conservative, and they are numbers that we will be working on in terms of refining and optimizing over the next year to 2 years. And I think it's hard to go much beyond well, what I've said and when we provide the guidance in this area.

The next question today comes from the line of Jon Kirk from Redburn.

Just a couple of questions, actually, the first question relating to capital. The first is on contingents. I'm just interested if you could perhaps help us here. If you decide to or are able to raise contingent vertical capital, will you be retiring some other form of capital in your capital stack to offset the cost of that? Is that part of your -- is that assumed within your plans? First question.

That's one of the attractions of contingent verticals, yes.

Okay. So we should be expecting sort of 10%, for example, coupon on contingent capital to be formed wholly, i.e. there will be a netting off of that from retiring of capital or...

I should say the 10% is your number, not mine.

Yes, okay. Sorry. The second is bigger picture, just relating the Basel, and it's just comments that you've literally just been making about the amount of time that it's taking for the Basel regime to be finalized both by regulators and then I guess also by the banks themselves, and it's called optimization. But in reality, I guess it's the process of trying to get to grips with what the new regulations are and how best you can employ them. And you're saying it's going to be another year or 2. And I guess when you tie that together with some of the work that's being done by regulators and also by some of my peers on the sell side, looking at the risk-weighting process and kind of exposing some of the issues with the risk-weighting process as a whole, do you think there is any chance that the Basel regime is thrown out entirely or is significantly simplified over coming years? Because it strikes me that it's lost credibility. And actually, the complexity seems to get worse and worse with every year past.

I would say that the Basel III calculations are difficult and complex and in some respects have given answers that were counterintuitive. And therefore, you have to go back around the route again to recalculate and see what extent the numbers make sense. I expect and we are certainly positioning ourselves to implement Basel III, recognizing that there is some work that's started to see how and whether the whole process could be simplified. It feels like it's going to take a number of years, and our objective is to get to grips with the existing Basel III requirements, which in themselves are taking up a lot of time.

Okay. But I mean, just -- sorry, to follow up, but the stuff in the press recently about the Bank of England, it sounds almost like they've given up on Basel III to a degree, I mean, just looking at an absolute pounds billion capital requirement for the U.K. banks. Do you think that will become the lead form of regulation for you rather than a Basel III ratio as such?

I think it's too early to determine. We're working on the basis of all the requirements that are in front of us.

And the next question comes from Ed Firth of Macquarie.

I just had a quick question. The regulator was making comments earlier this month expressing concerns about or highlighting concerns about balance sheet valuations across the U.K. banking sector. And I guess my question is, have you had discussions with the regulator in respect of your own balance sheet? Are there particular areas you're focusing on? And is this something you're going to be looking at, I guess, in your strategic review in February? Antony P. Jenkins: Yes, well, there were associated comments made about that but I think if you look at them closely, they were made about banks in general, particularly across Europe, not specifically to do with the U.K. As you would imagine, the nature of the assets on the balance sheet is a topic of constant discussion between us and the regulators, but you'll note that we continue to reduce our credit market exposures down now to around GBP 10 billion. And we've exited those positions at or above the marks than we have. So we feel comfortable with where we are, and I wouldn't infer anything from those remarks.

But were there any areas of particular concern that you know they're focusing on? Is it a commercial real estate type lending? Is it Level 3 assets? Is it pension deficits or... Antony P. Jenkins: To be perfectly fair, I'm not trying to dodge the question. You would have to ask them, not us. I can only talk for us, the Barclays Group.

And today's final question comes from the line of Chintan Joshi from Nomura.

My first question is for Antony. You've had a pretty substantial improvement on funding costs. And if I think about mortgage rates that are being offered on the front book, Bank of England, they, on Monday, suggested they were dropping. I just wonder if this will continue dropping and therefore pull the mortgage rates even on the back book down. I'm just wondering about that dynamic. What are your thoughts on that? Antony P. Jenkins: I don't think that there's -- that the mortgage market on the front book is going to have a material effect on the back book. I think you are beginning to see some of the impacts on the Funding for Lending Scheme on some of our competitors who have less access to funding or access to more expensive funding than we do.

Okay. The second question was on liquidity buffers, I'm just wondering how to think about them going forward into 2013. How much of that you can reduce? And also if I could think -- or if you could share some thoughts on how much of the liquidity buffers is for BarCap, how much is for the traditional R&C businesses so that we can think about how it can evolve over time.

I would just look at the overall liquidity buffer rather than trying to allocate it to different parts of the business. That's more of an art than science, and I would just look at it in totality. Do we have set deadlines or requirements for how much we reduce it? No. The critical point is the one that I made, which is it has to be a stored liquidity rather than all that we run for its return. And we will continue to do that and look at the mix of assets within it, but that is an ongoing piece of work that we'll tell you about as and when it's done.

If I can just follow up on that, when FSA has relaxed liquidity requirements and I guess struggling to think about how much lower can you go on liquidity buffers on the back of that, is there something you could guide us to where -- to think about the numbers there in terms of how much you can reduce?

Interestingly, the primary constraint is our own liquidity risk appetite numbers, which are fighting before the FSA's requirements. And there is some room for downward maneuver but not -- I wouldn't regard it as particularly massive.

Okay. And the next question was on, could you tell us how worried we should be regarding these 2 new investigations that you've disclosed on the last page of your release? Antony P. Jenkins: Well, as you would understand, Chintan, we have disclosed what we can say at this time. Both are the subject of ongoing investigation. You should not assume that either of them will imply any wrongdoing on behalf of the Barclays Group.

Okay. Finally, Antony, if I can try my luck with one more, how -- I mean, you've had a good, detailed look through your businesses. In particular at BarCap, could you give us a sense of how much of the business is in the gray area where you need to take some action? And how much is in the clear where you start meeting this goal and will grow? Antony P. Jenkins: Well, Chintan, I certainly respect you asking the question, but as you'd imagine, we're deep in that work at the moment, and that's what we'll be sharing with you in February. So I'm not going to front run that discussion. I'm afraid you'll have to wait until February. So I think that concludes the session. I thank everybody for their participation and their questions. And obviously, if you have follow-ups, please do contact the Investor Relations team. Thanks, everybody.