Jes Staley - Group CEO Tushar Morzaria - Group Finance Director

Ian Gordon - Investec Chirantan Barua - Berstein Jonathan Pearce - Exane Michael Helsby - BOAML Martin Leitgeb - Goldman Sachs Andrew Coombs - Citi Tom Rayner - Exane Chris Cant - Autonomous Joseph Dickerson - Jefferies

Welcome to the Barclays Full Year 2016 Results Analyst and Investor Conference Call. During the call Barclays representatives may make forward-looking statements within the meaning of U.S. Securities Laws. They can be identified by the fact that they relate to future events and circumstances and sometimes these words such as anticipate, projected, may, will, seek, continue or aim amongst others by their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and as a result Barclays groups actual results may differ materially from the plans, goals and expectations which they will talk about. Barclays expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements made during the conference call. At the conclusion of the presentation, there will be a period where questions can be asked. [Operator Instructions] Thank you for standing by ladies and gentlemen for the Barclays full year 2016 results analyst and investor conference call. We are now live at the presentation suite at One Churchill Place in London. We'll hear some silence or some background noise until the presentation begins.

Good morning and thank you for joining us today. And welcome also to those that are joining by phone. Almost a year ago to the day, I set out our intention to accelerate the restructuring of Barclays, to refocus our business as a transatlantic consumer, corporate and investment bank, anchored in the two financials capitals of the world, London and New York. To achieve that, we announced a series of strategic actions, including the reorganization of our business into Barclays UK and Barclay’s international. Next, the renewal of our commitment to operate a leading global corporate and investment bank. Next, the reduction of our stake in Barclays Africa over time to a non-consolidated level, and lastly, the acceleration of the rundown of our non-core assets. The bank has made strong progress against this agenda. Barclays UK and Barclays International are doing well. The fourth quarter showed continued progress in those businesses consistent with the full-year numbers. Core income was up 14% versus the same quarter last year, delivering positive jaws, and profit before tax in the core, excluding notable items was up 39%. Our corporate investment bank has solidified its position in both brackets. Our non-core rundown is ahead of schedule and after a successful initial sale of Barclays Africa shares last May, we are now waiting for final approval from the regulators of our overall separation plan. So the weekend began to proceed with the next phase of our sell-down and we'll do that at the appropriate time. We also made great strides on our structural reform plans in 2016, standing up our intermediate holding company in US in July, in preparing Barclays UK to the legal establishment of our ring fenced bank in the first half of 2018. As a result, in 2017 we can begin to move - move on to new restructuring of Barclays. We can shift our focus solely to the future and in particular to how we can generate attractive, sustainable, and distributable returns at a group level for our shareholders. Getting to this point however has not easy. In 2016, we applied a ruthless focus to non-core, cutting the dividend to fund this critically important job. We sold retail businesses in Spain and Italy, and Portugal. We sold card businesses in Southern Europe, insurance businesses in Spain, Italy and Portugal, the wealth management business in the US and Asia, our index business in the investment bank, and we closed offices in nine countries around the world. Together with an aggressive push to sell or innovate other assets and legacy derivatives, these efforts reduced our non-core risk-weighted assets in one year by £22 billion, £12 billion of that reduction came in the fourth quarter alone. Our non-core risk-weighted assets now totaled £32 billion, which is ahead of our projections for the end of 2016. So we now expect risk-weighted assets in non-core to be roughly £25 billion by 30th of June 2017. Given that progress, today we are announcing that we will close our non-core unit at the half year, six months earlier than previously targeted. Our half year results will therefore be the last time that Barclays will report non-core separately. From then on, our core financials will be our group statutory financials and we will in effect have completed the restructuring of Barclay' at that point. We expect to reduce non-core losses significantly in 2017 and for those losses to be well under half of what they were in 2016 at roughly £1 billion, with most realized in the first half as we complete the closure of non-core. All told, this company will have eliminated around £85 billion of non-core risk-weighted assets and reduced our headcount through non-core by around 10,000 people in just over three years. And we did so in a way which has preserved value and released equity to the rest of other group. Last year, we also announced the difficult decision to sell down our stake in Barclays Africa, to allow us to deconsolidate the business of the regulatory matter. In May, we completed an initial sale of 12.2%, since that the transaction our focus has been on a green separation arrangements between Barclays Group and Barclays Africa. An agreement on the terms of separation is integral to achieving the regulatory deconsolidation in due course. Planning for the disengagement of two enterprise businesses is a complex matter, which has required an extraordinary amount of work. But I'm pleased to report that in the last quarter, we have reached an agreement on separation terms with the local management, at a cost of some £265 million to Barclays. This is now with the relevant regulators, its part of our formal request for permission to reduce our position to its end state level. Following an approval, we will be in a position to proceed with our sell-down within the timeframe previously guided to. Based on the year end share price and currency translation, we would expect to realize over 75 basis points of CET1 ratio accretion on regulatory deconsolidation and this is after all the separation costs are accounted for. Alongside our focus on non-core on African [ph] 2016, our core businesses delivered strong underlying performance. Excluding notable items, profit before tax for the core was up 4% to £6.4 billion and return on tangible equity for the year was 9.4% off of the much higher equity base. For Barclays UK underlying return on tangible equity was an impressive 19.3%, as we continue to help our customers and clients and contributed to UK economy. In 2016, Barclays lent £3.6 billion to small and medium-sized businesses in the United Kingdom. We wrote nearly £19 billion of mortgages to almost 90,000 households across this country, including to over 18,000 first-time homeowners. We maintained our leading position in digital banking and now have 9 million users across our mobile app and Internet banking, as well as 3 million users of Pingit. Personal unsecured lending topped £4 billion in 2016, with half access to the six click process of our mobile app. Card practice transactions where we've been a pioneer in the UK more than trebled in value between 2015 and 2016. Average current account balances were up 14% year-on-year and we also saw debit card purchases by those customers rise 12% by volume. Barclays process some £ 216 billion of payments for consumers and businesses in the United Kingdom last year, with one in every £3 spent on cards, going through our payment system. We enhanced our customer’s experiences by introducing market-leading innovations, like voice security, contact-less cash, a new direct investing platform, and our collect cash management services for businesses. And I personally was especially proud when Barclays became the first major UK bank to run a TV ad on how people can protect themselves against fraud. In Barclays International the underlying - return on tangible equity was 8%. This includes the charge to exit 25% of our London office space, which we took in the third quarter and the cost of the changes we are making to deferred compensation, which I'll touch on shortly. Within that number, our markets income rose 9%, with credit a particular standup. Credit was up 44% year-over-year, driven by strong performance in secondary credit-trading in the emerging markets. Banking income rose 3%, as we've biased on three of the top five transactions globally, covering £513 billion of completed M&A deals, and so our advisory business in EMEA have its best year ever in 2016. Its particularly noteworthy that of all the peer banks which are so far reported full year 2016 numbers, Barclays is one of only a few which have seen investment banking income live year-over-year and that’s also on a US dollar basis. And according to Dealogic, we finished 2016 ranked fifth in the US in terms of fee share and third in the UK, up one spot in each from 2015. So I would challenge the notion that only US banks gain share in investment banking in 2016. Our consumer cards and payments income increased 21%, driven by growth in all key businesses. Loans and advances in our US card business are now over £20 billion and in our payments business we processed £60 billion in the fourth quarter alone, up 13% year-over-year. And to give some context of the relative size, our US card business is noticeably larger now than our UK card business in terms of receivables. We remain focused on driving improve returns in Barclays International, and in particular in the corporate and investment bank. However, the fundamentals of this business today and its capacity to generate significant profits are getting better. Taken together, our core performance is strong evidence of the potential for this group and have a bright future ahead. As we conclude our restructuring, the next phase of Barclay’s development becomes the priority of this management team. Put simply, how do we position Barclays for success, not only for the next couple of years, but well into the future? We have addressed the drag of non-core, but now we need to look ahead. We are starting from the premise that operational and technological strength is going to be a key competitive advantage for any global bank in the future. And so our intent is to build Barclays on a foundation of world class core operations and technology. In the model we envision, core functions for the entire group are standardized across the company, streamlining costs, driving high quality analytics and improving customer experience. By developing a strategic data architecture, which maintains and delivers information across all of our businesses, we can provide them with the ability to use data in new and innovative ways. That allow us to fundamentally rethink the way we run those businesses and how we serve our customers and clients. And for functions including risk and finance and treasury, this data architecture will also help to improve the quality of the group's capital allocation and strengthen our risk management. By creating shared utilities of the foundation of our company, we can generate efficiencies from scale, while at the same time ensuring that we deliver world-class customer experience, which we believe is key to driving loyalty and long-term growth. This model also allows us to simplify core processes across the bank, everything from how we handle complaints or fraud, to how we onboard a client. If you then layer our diverse set of market leading consumer and wholesale businesses, on top of the state-of-the-art foundation the prospects for them are truly exciting. Our core businesses are already high quality and characterized by deliberate diversity. We have a diverse product set, from institutional advisory to international cards and payments, from equity capital markets to corporate lending, from macro to mortgages. We are extremely well positioned across the consumer and client continuums. And 53% of our income in 2016 was from our consumer business, where as 47% was from our wholesale businesses, the balance between the two is a huge strength for Barclays, giving us opportunities for growth across a wide waterfront, and resilience in earnings with one side of the next comes under pressure. We were also well diversified geographically, and this gives us the benefit in both exposure to different economies and a significant mix in terms of currency risk. Last year, over a third of our income roughly 35% came from the US in with the dollar strength relative to sterling which was even more valuable to the group. Our deliberately heavily weighted exposure to the transatlantic developed economies of the US and the UK, with strong wholesaling and consumer businesses in both geographies is we believe a unique and attractive banking model. It gives Barclay' the capacity to generate strong sustainable returns at a group level through any cycle, especially with the reinvestment capacity we expect to generate some cost savings from the single core operational foundation that we are - that we are building out. And if go right back, that foundation of shared core operations and technology is scalable, giving us optionality for the future in terms of organic and inorganic expansion. And it is the reason why bringing Paul Compton in as our Chief Operating Officer in the middle of last year, as well as hiring a new Chief Technology Officer, a new Chief Data Officer and a new Chief Risk Officer was so critical to the company's future. Costs remain a priority for management and we continue to target a group cost income ratio of below 60% over time. We are confident however in our ability to deliver on that target, given that the core cost income ratio in 2016 was already 61%. We will carry on driving efficiencies, where we can with our priority being to use additional savings beyond our target, to reinvest in the business and its supporting technologies. Core costs for 2016 indeed exceeded our previously stated £13 billion target, by some £400 million, exceeding that target was my decision. In December, we identified the opportunity to address some long-standing practices in the way we treat deferred bonuses, which reduces the operational leverage we should have in this company. Under existing deferral arrangements there is currently a limited relationship between the performance cost book at Barclays each year and any changes made to the bonus pool related to that year's performance. This is a consequence in part of overall levels of deferral in prior years, as well as the way in which those cost of those deferrals have been recognized in our accounts. As a result, while shareholders experienced the full impact of a fluctuation of end year revenues immediately, the effect of related decision on bonuses which should offset some of that revenue fluctuation was spread out over future years. To correct this, we are changing the timing of the accounting for those deferrals, as well as aligning overall levels of deferrals in the compensation plans across the group, making them more consistent with our peers. The net effect of these changes is that where previously shareholders in year to have virtually nothing of the benefit from a declining bonus pool. Now they'll potentially see around 80% of the benefit of such a decision in year. This will greatly improve our operating leverage. It is in our shareholders interest to have a strong relationship between in year revenues and in year bonuses, but fixing this issue meant taking the £325 million increase in cost that I noted in 2016. I decided that that was the right thing to do for the company, despite the impact on our 2016 cost target in a place in the group on a much better footing going in to 2017 and beyond. And to be absolutely clear, the overall bonus pool for 2016 is down year-on-year, despite profits being up and that is after we have already absorbed a very significant currency headwind from the strong US dollars. But if we see opportunities similar to this one in the future, which we believe are the right thing to do for our shareholders long-term interest, this management team will take those decisions. Continue progress on our 2016 priorities together with the organic profit generation have strengthened our capital position in the year. We generated 100 basis points of additional CET1 accretion in 2016, to trend a very strong 12.4% ratio at the year-end. This progress demonstrates once again the underlying earnings power of Barclays and the group's effective capital management. Tushar will give you some further detail about how our expected capital trajectory is in his remarks shortly. But what should be very clear is that the company has a strong capital position today and a very good ability to generate further accretion down the road. We are consequently well-positioned to absorb any headwinds over the next two years, as well as to take advantage of opportunities which makes sense in terms of future profitability. And headwinds may include regulatory changes like IFRS-9, potential changes to risk-weighted asset calculation. Others could arise from conduct matters which we haven’t forgot about, which we still need to resolve or relation to macroeconomic or political developments. But regardless of the source, we have incorporated these challenges into our planning and believe we are well prepared for what lies ahead. At the appropriate time we will of course update our shareholders and the market on our approach to investing and distributing the sustainable ongoing excess capital which we will generate as a business. Confidence in our path allows us to start to take advantage of capital as a strength of Barclays. As an example of this, we recently gave notice that we will be using some of that current capital strength to call one of the two remaining dollar preferred shares, equivalent to just under $1.25 billion. This allowed about a half pence per share to earnings in perpetuity. The ability to take advantage of an opportunity like this is a result of the hard choices we made last year, they were the right call and they have put us on a path to complete the restructuring in 2017 and to focus solely on the future of its bank. For me personally, it's been an extremely busy, yet rewarding first year. I am continually amazed by the talents that we have within Barclays and the dedication people showed to this institution. From my perspective, it is one of the company’s greatest assets. So now on to 2017. First, we will close our non-core unit early and when we achieve that in June we will no longer be a bank in restructuring. Second, subject to regulatory approval, the next stage of our exit from Africa is hours to complete and we will do that at the appropriate time. Third, we will continue to execute the development of our company's core operations and technologies as the foundation of Barclay’s future success. Fourth, we will grow our capital to our target end state as soon as possible. And lastly, we will continue to drive the diverse set of businesses that make up our transatlantic consumer, corporate and investment bank to deliver attractive returns to our shareholders. We are now just months away from completing the restructuring of this bank and I am more optimistic than ever of our prospects of 2017 and beyond, so thank you. Now let me hand it over to Tushar to take you through the 2016 numbers in some more detail.

Thanks, Jes. I'll spend a couple of minutes summarizing the financial highlights for the full-year and then focus on the Q4 performance across the businesses. We have as usual highlighted notable items, and I'm pleased to say that we haven’t adjusted for anything material in Q4, although we have called out the additional $395 million additional compensation charges that Jes referred to earlier. When I run through performance of the businesses, I'll talk on an underlying basis, excluding notable items. Full year core RoTE it’s below double-digit at 9.4%, but that figure does include the additional compensation charge and reflects a significant increase in equity allocated to the core. The core businesses are showing great resilience in the year of significant political and macroeconomic events, with Barclays UK reporting an RoTE of 19.3% and Barclays International 8%. Our CET1 ratio strengthened significantly to 12.4%., up 80 basis points in Q4 making an increase of 100 basis points for the year. It is strong evidence of our organic capital generation and underpins our confidence in reaching end state capital levels. We've announced that we are closing non-core unit ahead of plan at the 30th of June with RWA is expected to be around $25 billion and also its reducing significantly in 2017, leaving a reduced strive to be absorbed by the core businesses following closure. As we switch to our attention to running the group on a normalized bank - as a normalized bank, we remain very focused on costs, having achieved a 61% core cost income ratio for the year with positive jaws, we are on track to achieve 60% or a sub 60% level for group cost income ratio in a reasonable timeframe. Before I go into the underlying results, a word on the statutory outcome for the year. These numbers showed a benefit of the significant reduction in the headwinds from notable items, down $2.9 billion net to a negative $420 million. We've shown the breakdown of these items in the appendix. Groups tax before tax more than doubled to $3.2 billion, resulting in attributable profit of $1.6 billion and a group statutory RoTE of 3.6%. We've declared a final dividend of 2 pence, making 3 pence for the full year as previously indicated. Tangible net asset value per share increased 15 pence to reach 290 pence at year-end. Turning now to the full-year and Q4 core results on an underlying basis. Our core businesses increased underlying profit before tax by 4% to $6.4 billion and generated an RoTE of 9.4% on an average tangible equity base that was $4.1 billion higher year-on-year. Core income increased 7%, with strong growth across Barclays International, which benefited from the stronger dollar, reflecting coming Barclays UK despite the headwind from the UK base rate cut. Cost were up 6% with currency headwinds, and the additional compensation charge in Q4, partly offset by cost savings across Barclays UK and CIB, but it still delivered positive jaws across our core businesses. Impairment rose by $623 million from the historically low levels of last year, driven significantly by modeling updates in our UK and US card portfolios. Delinquencies trends are not causing us a concern, although hiring US cards reflecting a change in portfolio mix. The core tax charge increased 28%, resulting in an effective tax rate of 30%. This reflected introduction of the 8% surcharge in the UK, and higher tax rate highly prevailing in the US where we generate significant profits. On the right-hand side, you can see the Q4 core numbers. As you know there is some Q4 seasonality, including the bank levy, which we can't accrue through the year, so the core delivered just under $600 million from attributable profit, while PBT was up 39% year-on-year. Core income was up 14%, so our costs were up 13%, both reflected the 18% Q4 - on Q4 strengthening of the dollar. The core costs line also included $390 million of the additional compensation charge, excluding this underlying costs were down in constant currency terms. Overall the combination of that charge and the Q4 bank levy to core returns below the double-digit that we have often referenced. As you can see from this slide, we trend are being pretty consistent, despite a significant increase in equity allocated to the core. Moving on to the performance of each of the core businesses and beginning with Barclays UK. Income was flat year-on-year, while costs reduced to 1%, delivering slight positive jaws, and a cost income ratio of 58%, reflecting Q4 seasonality. The full year cost income ratio was 53% and we still aim to get that down to below 50%. Headline impairment for Q4 decreased 18% year-on-year, as a result, we reported a 7% increase in PBT and an RoTE for the quarter of 17.1%. Full year RoTE for Barclays UK was 19.3%. Looking more closely at the income line, both non-interest income and NII were broadly flat. NII accounted for over 80% of income and reflected a net interest margin of 356 basis points. This was down on the Q3 level of 372, which included some one-off treasury income, but slightly higher than we guided to Q3, resulting in a full year NIM of 362 basis points, up 6 basis points on the year. And I am pleased that NIM has been pretty stable, as we have maintained pricing discipline in a low rate environment. We continue to estimate a range of 350 to 360 basis points for 2017 and assuming those base rate moves. Additional business continues to grow strongly, digital unsecured lending was up by over 40% for the full year with over $2 billion of loans originated and we are now extending this capability into business banking. We continue our strategic focus on and investment in automation, digitization, and data analytics, trading further opportunities for structural cost reductions. Together with our strict pricing discipline and prudent growth, this makes us confident of being able to sustain attractive levels of returns. Turning now to Barclays International, it reported year-on-year income growth of 21% in Q4, reflecting the stronger dollar and underlying growth. PBT was $373 million, down slightly year-on-year. So this reflected the majority of the $395 million additional compensation charge without which PBT would have nearly doubled. Turning down into the performance of CIB and consumer cards and payments. CIB generated strong income growth in Q4 of 21% year-on-year, reflecting both the strengthening of the dollar and improved performance in both markets and banking. Markets income was up 31%, with strong increases across all businesses. The pace in our share of the flow businesses across markets, as we continue to focus on sustainable client driven business and maintain tight control over inventory levels through a volatile period. Banking was up 14% overall, with banking fees up 42%, driven by advisory income, reflecting its - reaching its highest level since the first quarter of 2014. The banking fee growth was partially offset by margin compression in corporate lending and transactional banking and of course these income lines have relatively little limited dollar component compared to markets and banking fees. Overall a good income performance up 21%, and while the cost increase was 26%, this reflects the additional compensation charge without which we would have produced very strong positive jaws. Impairment had a limited impact on the CIB results in the quarter, year-end RWA was up 47% on the 31st of December 2015, reflecting second dollar strength, but were down on Q3. It is a negative return reported in Q4 and the 6.1% for the full year aren’t where we'd like them to be. But looking through the deferred compensation charge, I think we are making encouraging progress and our confident as we enter 2017. Consumer cards and payments had another good quarter with 22% income growth and strong positive jaws, driven by robust performance across international cards, payments, and our international private banking business. We are of course keeping a close eye on impairment, which was up year-on-year on the loan book that grew 24%. This continues to reflect the shift in mix of cards that we referred to at Q3. However, the higher-risk portfolios are performing well on a returns basis and we do expect some rebalancing over the next few quarters as the effect of the renewed American Airline deal come through. So I'd expect some moves towards a lower risk mix in 2017 and for that to be reflected in the impairment charge. Overall, PBT was up 4% delivering a return of 13.2% and we continue to view this business of providing further growth opportunities, not only in international cards, but also in payments and private banking. Turning now to non-core. I'll quickly summarize the financials then focus on the forward trajectory. As a reduction in return strike, its key to the group returns profile. Here we've shown Q4 against Q3 and also the full year comparison. The full-year loss before tax was up from $1.7 billion to $2.8 billion, as we accelerated the rundown. It’s also reflected our decision to take all the exit costs above the line this year, last year we charged close to $900 million as notables. The attributable loss was $1.9 billion for the full year and the Q4 loss before tax was just under $800 million, as we took significant exit costs on derivatives in particular. This helped us take RWAs down to $32 billion, despite currency headwinds, with reduction of $12 billion in Q4. The Q4 reduction reflected completion of business sales, with a $3 billion reduction in the quarter, principally Southern European cards and Asia wealth and progressed on derivatives rundown which delivered a further $5 billion reduction. We've also reduced the operational risk RWAs allocated to the non-core by $4 billion, which recognizes the rundown of non-core assets. Of course, these RWAs have been reallocated back to the core, as our total group of risk RWAs have not reduced. So we plan to close the non-core unit at 30th of June, with around $25 billion of RWAs. The principal residual assets on closure expected to be derivatives portfolio of Italian mortgages and the ESHLA portfolio of high quality sterling loans. There will also be some off risk RWAs remaining that will be absorbed back into the core, plus some capital deductions, principally PVA. But overall the capital tied up in these low yielding assets will be a single-digit percentage of the group's capital. We've also shown the quarterly income on this slide, like in a significant negative income in Q4, driven primarily by exit costs, as we accelerated the derivatives rundown. You can see here that the full-year income was $771 million negative, excluding the ESHLA fair value moves that caused a lot of noise in H1, but which are now much less volatile. We're pleased with the outcome of the 2016 rundown and while we have further exit to complete in 2017, we expect a much smaller negative income, also $1.8 billion, but with costs in dispose business is coming out and the non-recurrence of the $400 million of restructuring, we expect a significant reduction this year. So overall, we expect the loss before tax from the non-core asset to be in the region of $1 billion in 2017 and that will be roughly half negative income and half costs. The total losses will be skewed towards H1 for balance being absorbed into the core in H2. And for 2018 we're indicating a further reduction in negative income and in operating expenses and so a materially lower loss to be re-observed into the core. To give you more detail on the re-absorption at a half year, but I would just note that returns drag from lower losses and capital requirement will be reduced. Now few thoughts on impairment and our risk positioning. I mentioned earlier the increase in group impairment of just over $600 million, within large part driven by one offs, including the review in Q3 of the impairment models across our credit card portfolios by new Chief Risk Officer, Venkat. Our underlying 30 and 90 day delinquency trends for our UK and US card portfolios have been pretty stable with increases of 20 basis points in US cards in Q4, reflecting the evolution of the business mix. As I mentioned, that expect some trends towards a lower risk mix in the US in 2017 and for that to be reflected in the impairment charge. Retail coverage ratios are up and on the wholesale side our cautious risk appetite has resulted in limited impairment. So for Brexit vote, we've been keeping a close eye on all leading indicators, we have not been signs of credit stress in the UK. So in summary, we remain comfortable with our conservative risk positioning and underlying impairment trends. Turning now to changes in deferred compensation which Jes referred to. These changes are being made to align income statement recognition more closely to the performance awards granted. Incentive awards was down 1% overall, as we absorbed the currency headwinds from the stronger dollar. However, the changes added $395 million aggregate to the compensation charge in the fourth quarter. As a result, compensation costs for the full year were up 2% rather than down 3%. This slide illustrates the two elements of the changes we have made. We rebalanced the potential bonus awarded in different form, to harmonize deferral structures across the group, resulting in 30% of awards being deferred compared to 46% in 2015. The increased amount of in year-bonus feeds straight into the income statement, resulting in a higher charge than we would have had with the 2015 split. So less will be carried forward and the charging of this deferred element has been accelerated, as shown on the right-hand side of this slide. Previously none of the deferred awards would have been charged in 2016, where as now 33% hits the income statement immediately. We'd expect lesser effects for these changes in 2017 and less again in 2018 as they take full effect. To give the forward waterfall of unamortized compensation in the results announcement unusual, and you'll see that the stock of unamortized compensation has reduced significantly. The other things being equal is difference between the amount awarded and the income statement charge will reduce, plus increasing the sensitivity of the income statement charge - of the income statement to changes in performance awards. Turning now to liquidity and funding, before I finish on capital. We maintained a strong liquidity position through H2 in the aftermarket of Brexit vote, ending the year with an LCR of 131%. We've also made excellent progress in HoldCo issuance through the year, raising over $12 billion qualifying MREL across senior debt and capital. We continue to optimize our overall funding costs in 2016, redeeming another two of our callable US dollar preference shares and carrying out further liability management exercises on capital instruments at the OpCo level. We're also pleased that Moody's recently upgraded the Barclays PLC and Barclays Bank PLC ratings to BAA2 and A1 respectively. Turning now to our capital position. Our CET1 ratio finished the year at 12.4% on an RWA base of $366 billion, an increase of 80 basis points in Q4 and up 330 basis points over the last three years. The main UK pension scheme moved from a $1.1 billion deficit to around flat, but the rate moves up Q3 broadly reversed. We also demonstrated the capital generation capacity of our businesses. We expect ratio accretion from the sell down of our BAGL shareholding to a level that would commit regulatory deconsolidation over the next couple of years. As an illustration, based on the year-end BAGL share price of 168 grand, and a exchange rate of 16.8, we'd expect the ratio accretion to be in excess of 75 basis points. Of course, there are lot of assumptions which affect its number, but they still factor into account all the separation costs. Our core businesses are demonstrating organic capital generation, with our CET1 ratio at 12.4%, we are increasing the confidence of our capital flight path towards our end-state capital level, below there remain further headwinds from outstanding conduct and litigation and over time from IFRS-9 and potential RWA recalibration notably operational risk. You'll be familiar with the component parts of our potential 2019 CET1 requirement, as you know, we are moving down a notch on the G-SII buffer to a 150 basis points, before the moment we are used - we are finding on using this 50 basis points to hold an increased management buffer of 150 to 200 basis points above this regulatory level. Having taken into account the 450 basis points drawdown in the recent Bank of England stress test, we are likely to target the upper end of that bugger range to close to 13%. Lastly, the leverage ratio increased to 4.6%, comfortably above our regulatory minimum. And so to recap, we continue to make good progress in delivering the plan we announced on the 1st of March and the diversification benefits for the group are showing through. The core is demonstrating its ability to generate attractive returns, the non-core rundown has proceeded well, and given the strong progress we are closing the unit six months early. We are seeing significant income growth in certain areas of the core, notably international cards, but recognizing the income outlook is uncertain, we remain focused on achieving a structurally lower cost base, and are on track to hit our group cost to income ratio of below 60% over time. We have continued to apply our conservative risk appetite and despite the one-off impairment in card portfolio this year, we believe our high asset quality puts us in a good position. Our capital ratio at 12.4% is on track through our planned and state-level, allowing us to increasingly focus on enhancing returns, as we complete the non-core closure and aim converge group returns to core returns. Thank you. Now Jes and I will be pleased to answer your questions and I'd ask you to limit yourselves to two questions each, so that we can get around to everyone.

[Operator Instructions]

All right. Let’s start with Ian.

Good morning Ian Gordon from Investec, two please. Firstly on Barclays UK, I take the point that revenues have been held flat against base rate headwinds, but we’ve now had roughly eight quarters of no balance sheet growth, and that's a choice you’re not capital constrained, you're not constrained by effect name on FBR book, so it’s a choice you’ve made, now you use the phrase we may believe in some cash from a table. So my question is what you can to do about it? And my second length question on Brexit to your great credit you’ve not put up a sign like news headlines as you're only a naive about restructuring issues arising from Brexit you’ve also made a comment today that you've seen no deterioration in UK credit since Brexit if you virgin or make sure that would add the word whatsoever to that comment? And a lot of that doesn't reinforce the opportunity for rethink in terms of scale of your balance sheet ambition in Barclays UK your high return business, and secondly could you just please reaffirm your comments around the limited impact from restructuring spaces?

Okay for asset growth in Barclays UK just be your first question. Yeah I mean it's occurring very slightly as a volatile it's actually growing much more than assets. And that's kind of interesting just to touch on label we are not come back to us it’s our liability basis going up it’s about £189 billion in Barclays UK soft £20 billion I think. And I think the light of us actually lowering our deposit rates quite significantly, Jes mentioned earlier that a lot of our growth is seen in very much operational deposits for us whether it's in business banking, current accounts, as well as some savings accounts balances. So that's good in sense that even in a low rate environment, which are tracking customer flows operational customer flows into - in the Barclays. On the asset side, yeah absolutely we have some choices around that, margins have definitely been continue to be eroded in the mortgage business and we've been quite cautious around that try not to chase a low margin business all the way down. In fact when I look at in our fourth quarter completion mortgage margin was actually up for the first time in some time for us actually, so we are making that choice of trying to balance maximizing and NII, but not necessarily just chasing banshee growth at low margin business to achieve that. You're right in the sense we're not as capital constrained as we may have been in times gone by, so we do have those choices, but our objective function really is to maximize NII, and that’s a trade of change volumes versus margins and can see a sort of flexing our leaders on that.

With Brexit again I think, we’ve said truly after the Brexit and put up the shot that’s necessarily to an economic shock. And I would say that you've seen a fairly robust reaction by the British consumer post-Brexit vote. On the other hand there is another caution out there, which is what you’ve seen in inflation, into certain degree some of the increased consumers spend in consumer credit numbers that you see is driven by inflation. And there are some signs that consumer confidence is beginning to reflect some of that inflationary impacts, so we need to keep an eye on that, but ultimately we're here to support the UK economy and I think the numbers that we should in terms of using our balance sheet for small businesses, for corporate, for unsecured lending, we will continue to do that, but in the prudent way not with the capital position of the bank.

[Operator Instructions]

[Indiscernible] with the corporate bank is [indiscernible] what you think investment banking which is Barclays at present and Tushar you mentioned in your speech that you think that improve what are the thing they and where do you get in turn.And secondI mean Jes in your comments I think the American’s are gaining market share you said in the tax goes with Brexit you remember half the capital applied to investment banking as the Big American, where would you scale yourself, where would you scale you ambition in investment banking and as we think about how big you want to be you go the capital to make choices? Thank you.

We are running an integrated CIB, so there's no sort of concept internally between your guys work for an idea and you guys work for see and we just I mean it is an integrated business I can't give you that break down it's not how we manage it. And 6.1 on sort of full year bottom line statutory basis. We put everything in through that you can decide yourself whether you want to look through any of those items, we put ourselves through the compensation charge and a couple of other items that we consider more so capital in nature and sort of returns. So we think we're much closer to the double digits. I think what's really pleasing for us is, pocket is going to immense restructuring anything that's on bank and it pleasing for us to see that we’re improving our market share both in markets and in investment banking season we working to the top five in the U.S. dislodging one of the Americans which is being a preserve for them to some use, so we feel very good about market share. We've increased our market share in the UK as well and you’re seeing the improvement in our markets revenues. I still think we have opportunities to sweat the balance sheet harder, you’ve got Tim Close be sitting here in the audience, who is very skilled. And I think you'll - we stand some of that, but I think you know there's still more we can do, particularly as you integrate the corporate and investment banks further, further together I think as opportunities there. Growth in the take sort of point in our cost cycle probably the structural reform cost probably at the TQ having to ring fence in the United States run CCAR for the first time and for those of you that know all about that you can understand how extensive that is. For us are good and pleasing to me if I can see that the improvements in market share are dropping to the bottom line. And even changes in the deferred compensation sort of program will allow us to continue.

I just add you know first and foremost we actually have to run on investment bank which is safe and stable. And we will manage our risk in the investment bank so never threaten the stability of this bank. That aside as we've said since March first of last year the foundation of our strategy is having a balance between consumer and wholesale. And as we showed up there basically our balance right now is roughly 50-50 in terms of revenue, we never want to get that out of kilter. So we want to be a both bracket global investment bank, but within the context of having a balanced business between Barclays UK and Barclays International, our consumer businesses and our wholesale business. It's not balance, which I think gives a particular attractiveness to Barclays as a bank.

I want to add on that. We put other side quite deliberate as we get back, I think for three years, we showed core returns some capital allocation we thought in the core, extract about 10% average quarter-by-quarter we've actually not that much variability, you think about banks and things coming in and out, but as being quite stable. That’s quite important for us, but stability, but it's on the back of the profits growth because the XTB and allocating the cores track top. So if feel that we really kind of achieve that continue to track that profit growth to generate an approximate double digit return with a capital allocation we've got, and obviously you know you’ve seen that stability come through in Barclays as an overall group. And sometimes consumer bank business more than wholesale businesses I’m sure, that will be true at sometime different in the.

I got to decide that now, and I'll come back, yeah.

Good morning. Chira from Bernstein. Two questions, one instead of putting it in the investment banking side the split between the geographies UK and the U.S. now lots of people very excited about the U.S. recovery both in the new consumer side as will the mid-market and investment banking side. So the question to you Jes is, if the U.S. actually clocks at 4% GDP and we see the enthusiasm play out in the next two years. Will you be willing to move capital from the group incrementally into the U.S., how should we think about capital allocation and the way you think about movements. I understand the 50-50 split between to get some color on the geography. And the other thing as you showed 35% of income from the U.S. and Tushar what percentage of the tax base is the U.S., Israel that would to be great to have that number given of the tax regulations of that?

And I think you would [indiscernible]. I think you know we have been very clear that we like the balance of our portfolio and being a transatlantic bank is a core of our strategy. And we will always look at profitability and return on equity and allocating capital, and we said our receivables and our U.S. card business now exceed our receivables in the UK card business. We put in investment and to get America Airlines portfolio, last year we will continue to pursue opportunities like that. So it's our obligation as management to apply capital in a way that gives the best returns for our shareholders. We think at the end of day we are British Bank. We were anchored here in the United Kingdom. We think there are great opportunities here, and we want to keep that balance. So hopefully if there is an economic engine come in the United States that spreads and has a global impact and we benefit from it globally. But we won’t see as get our balance. We're not going to be you know we're not going to chase a model line opportunities because for a short period of time it's got nice returns.

On the tax rate, I mean we don’t break out, I mean that’s the question and we haven't broken out on a call like this. But it's interesting for us we are profitable in U.S. dollars you can see that also with the current status and see for the pretax profits. So any improvement in the tax regime in the United States will be very, very helpful for us, but there’s going to be in a detail that is all things being to meet it and too much speculation to really side what's going to happen and when it's going to happen.

Yeah, Jonathan.

Thanks very much. It's Jonathan Pearce from Exane. Can I ask you two questions? The first is the simple one on the FX guidance which exceeds or thing were about £300 million in the year, it's not it's entirely in core, where about in core does it say it is it all head office or somewhere else?

Are you getting into the weeds of it? That’s right, even in the all clients. So most of the FX guidance - and he has that’s the funny thing. Mostly FX guidance are really for us treasury operations, so yes, mostly through our core business, yes.

Okay, thanks. The second is a broader question on the capital trajectory for this year. I mean it's a couple of things obviously happening and see already redeemed one of the prestigious things ten basis points the next one the final big one looks to sit down 20 basis points which given your comments and that’s coming this year as well. Good thing to do obviously but not the 30 basis point headwind in total. On top of that I just try to understand the asset, the pension fund, because now the retirement fund is pretty much breakeven, looks like you’re going to have to contribute £1.25 billion this year, which will create a surplus, but that will be taken asset capital, rollover see that the cash and that's in a research is 40 basis points headwind to the capital. Presumably some assets rate, so can you confirm that those two things together could provide headwind this year maybe 70 basis points. The next detail one and maybe just framing the question in terms of the dividend as well. What's your current thinking on the resumption dividend growth?

I cover for the capital things and just may want to put the word on capital distributions. But we're not going to comment on whether we're calling any other or any other liability management exercises, but the math you right, it’s a math it all very much depend on the currency rate providing us to what cost it would be to redeemed that particular transfer that something which is to do. I mean of course the waterfall of things we can do with any capital that we have, I mean you seen a stake real estate actions, you seen a stake liability management exercise, you see this change deferred compensation. The part of the business we think we can invest for franchise amount, so that the waterfall of things we can do and you'll see us you know cover of all of those actions some are only available to us at certain point in time like real estate some of their every single sort of quarters you like an element. In terms of the pension fund you're right you're going back to the deficit recovery plan from the last try and you win the current negotiations of our current trial to me nothing changes and you're absolutely right. We have a contribution to make. As you pointed out and given that we're in roughly flat at the moment and slight surplus I mean that will be straight of that capital a totally within our capital projections for our own capital plans how we get to our own state capital position, we’ve taken all of that into account. And of course, we have to make a whole bunch of assumptions on other stuff that we don't know like how our first lines going to be handled by regulators and whatever try to be prudent in all of our assumptions and we feel we get there quite well.

In terms of the evidence you know obviously the dividend policy of the purview of our board now [indiscernible] day. Right now we gave guidance for 2016 and 2017 add three pans obviously we’re accelerating non-core and I think at the right time we’ll be talking to our shareholders about the dividend policy going forward.

Next question [indiscernible].

Good morning Jes, good morning Tushar. Two questions if I may. The first one is, maybe if you could give us a little bit of an updates on where you are with the DoJ and the RMBS suites and where you are on PPI and if you can sort of taken of loss charge can you give little bit of color on the litigation side? And the second one is as we understand that the new administration states is quite keen to hear from banks as to what types of funds regulation they don't like what changes could be made and I just wanted to you maybe ask you what piece of U.S. regulation don't you like and what you preferred to be changed? Thanks.

Well on the DoJ and our general counsel is here, obviously we would not reach a settlement that at the end of last year, I think the only public comment that we've made is what we want to do is be treated fairly with respect to how the U.S. banks we're treated and leave it at that. On PPI, I think we feel that we are properly reserved at this level and lets you see how the PPI issues and for over the next couple years, right now, I think we have the right levels of reserves. Usually U.S. regulation, clearly the banking system is significantly safer today than it was going in the financial crisis. I think the banks are performing reasonably well within the scope Dodd-Frank, and the side that we're not going to comment on any specific part of that of that legislation. But overall we are encouraged by how the banking system is significantly, we are counterparty to all the major banks, and so having a safer banking system helps Barclays as well. Yeah, Michael.

Thank you. It’s Michael Helsby from BOAML. I’ve got a couple of questions, first on the incentives, can you tell us how much of the £1.5 billion resides in CIP and whether it is now we can work out next year is impact whether you'd expect the compensation relative to income to be broadly stable be helpful?

Yeah I’ll cover that now. It’s actually in the REM report and the annual report, so it’s just under £1900 million.

And you mentioned the future incentives, future headwinds on capital IFRS 9. Jes I think your own comfort in September you were asked, what you think is the biggest headwinds of capital for the industry or for European banks and you said, IFRS 9 was your part. So we bear in mind if it was brought into today I’m sure you run the numbers what you think and would be for Barclays in terms of capital and book value? Thank you.

I look at you know and disclose that, but it look it's the thing we don't know is, it is whether it's going to be any transitional framework as it comes and the accounting not it's definitely coming in. And that will take book value and I won't call it a number, because I mean we're still a year away from putting a change through. So I suspect like other UK banks and probably other European banks before we get to the end of the year. We’ll update everybody on that. In some ways the most interesting thing process the capital effect because just the one thing we just don't know. You’ve seen in the CRR 2 draft legislation as talk of a sort of transitional phasing in approach whether that makes into the final registers text remains to be seen in order something the Bank of England too keen on and other folks processing that we're sort of most closely watching. In our own assumptions we've taken the most prudent case and run our projections and will manage on that basis and told otherwise.

I think the regulators are recognizing our extraordinary process IFRS 9 would be in its current form.

Good morning. It’s Martin Leitgeb from Goldman Sachs. Can I can also have two please. The first one, is on USIHC and if I read your latest filings there, they show that you have injected around £1.4 billion in capital, half of which roughly equity, half of which in form of 81, which puts your leverage ratio, a ratio in U.S. to 5.7 at a quarter one ratio at the 11.2, if I compare this to U.S. peers a total select European peers such UBS and BNP the capitalization of Barclays IFC at this point in time seems meaningfully below that of those peers. And I was just wondering if you could set a bit of light in your capital plans there what kind of capital levels are you targeting and do you want to grow there by the tenders and which kind of time period or should we expect to further injections over there? And the second question is on your fixture revenue line for the fourth quarter, and if you look at it in terms of U.S. dollar are you up 9% year-on-year and this obviously compared to the U.S. peers up 43% and the 9% actually is quite identical with set of one for European peers for which there were considerable counterparty risk concerns over the quarter. Could you just sort of reply what held you back in the fourth quarter, and how we should think of performance going forward? Thank you.

Yeah, all right. So let me give you three questions. I think when we compare ourselves to the other folks that reported, on the few things to stand. I think we have a higher risk weighted assets than state and many other Europeans, and I think uniquely we're profitable which in the peer that the others as well. So with that in mind and for so with our own capital projections you'll see us get to the - what we consider to be the right capital level to ensure that we are appropriately capitalized in advance of the 2018 CCAR run. And we feel pretty good about getting this. So I'm not going to sort of quote a number out there that's not guidance we need to get, but we know where we need to get to we know what we need to get to the CCAR process and pretty comfortable get there in the time.

[Indiscernible]

We make profits and we have the ability to inject capital, but I cannot enter into any more detail than are you see the quarterly is a very common 193 report. So that's pretty confident we'll get there in good time, and we're running a private CCAR this year actually and that will give us a lot of feedback if we need to make any amendments to the plan to return having price which already of course shared with the appropriate regulators. The banning constraint and I see will be the CCAR process, so we have that plays out. In terms of the thick revenues in the fourth quarter as we’ve said, all during the year 2016 we run actually very light market risk part of U.S. in our investment bank, and I think to be relative to some other, but that doesn't mean that we are - we have less data, I think in our - I’d be than many of the other competitors, so when you see the direction in the markets like you saw on the first quarter of last year head south on a relative basis, we did extremely well. When you see a recovery of data in the fourth quarter, we're going to lag those some of the people that put more capital on the stand we do. We like in a capital that we have deployed in investment bank, likely where we are positioned right now, and we'll take those swings in kind of have less data and more asset to our portfolio which we are comfortable with.

In the second quarter as well, when you saw the asset price sort of risk on environment, the people that run larger inventory positions and we do we’ll see that in their income. But a stability of our revenue I think is something where we find quite interesting relative to others, particularly if you look at this last year eventually every quarter season markets or almost within a £100 of each other which is quite consistent with observe bit more up and down with asset price market news. Okay. Andrew and then I’ll go back to the side.

Thank you good morning. It’s Andrew Coombs from Citi. Two from me, one on U.S. cards and then one on structural hedge; on the U.S. cards portfolio you have elevated Q3 provision due to the cheer up Q4 so you look to quite elevated in certain mix shift in the portfolio, obviously you could elaborate on how much is mix shift versus how much of the underlying trends. And also on that note you talked about a robust trend in 2017 in terms of mix shift again obviously you could elaborate. And then second questions, structural hedge, you net structural hedge contribution actually kicked up slightly I think £0.1 billion, so interested to that was driven not a nominal was going to the place to the rate, so if you could just provide more detail on the outstanding book and then also current rate that is what you will be investing it? Thank you.

I’ll take them. So on the U.S. card portfolio, yeah the business mix of something that we economy was coming in a second half of the year one of our larger portfolios in the U.S. business with the American Airlines portfolio had it was sometimes a very seasoned portfolio. And of course, that came up for renewal and there was discussions with American Airlines I mean we have the U.S. Airways component obviously Citibank, American Airlines, so it’s a full three way negotiation. So the result of that the production origination in that portfolio just slowed down. For the rest of our book of course continue to grow and we've got the similar some marquee brands whether it stuff we've all heard of. But the American Airlines portfolio is sort of super prime so just by having our production slowed down and it being a reasonably meaningful component of our business our mix just naturally shifts without really doing anything else. So underlining delinquencies have ticked up I think you see that across some other U.S. banks I think across the sector delinquency trends have ticked up, it is quite small. So these are off low levels as well. So I think we should be in a careful to extrapolate at this stage as to whether something more going on there. We're on greater or lower than any real small tick up. For us we kicked up slightly more than other banks only because that mix shifted more and more appreciably than others. Returns with great with very, very happy with the risk profile that we’re running, but I think as we see the American Airlines activity come back on, because it's a sizeable portfolio, the mix will shift again for the culture higher credits scoring mix if you like and that will be reflected impairment charge and we want to grow the books so that’s not telling you the impairment charges industry as coming down, but it will tell you that sort of the type of impairment charge level will reflective of that risk mix. But returns are pretty good we don't feel at all uncomfortable with the way the books performing. Your other question on structural hedge, your structural hedge is roughly flat, I mean sort of rounding probably between last year and this year. It's a little bit harder one to sort of side this year, because we have such a sort of sharpness in the rate environment, so you know we've all these sort of we call in but you know it's swaps go on and get refinance into lower it. So it’s a continuous activity it's called the thing good started and kind of the rate environment it continues to work out well. You know it's reflected in our name, our name has been pretty stable. So I think you can see that the effect of having these structural hedges in places as it has helped in that regard as well. I’m really called out whether you know the nominal to increased or whether the rate changes shifted much, but it’s probably need or above it's just the right sort of going back to where they were before.

Hi [indiscernible]. Obviously have questions on to start here year other investment banks have talked about going off to an incredibly good start, I just wondered if you wanted to make a comment and also run in terms of credit, which was incredibly strong in 2016 whether you see that as a repeatable number?

We won't comment on January, February. In terms of credit, yeah obviously we are very pleased with what we did on our credit business last year. Obviously leverage finance as well. We made terrific envelop last year with the sponsors community the Blackstone et cetera, so like that space and one of the advantages credit is to certain extent you can there is a four window one of reality bond that they mature, and generally people have to remove them. And so you can get up fairly active forward calendar maturities and that’s going to I think allows for stability to the credit markets. We have a great training as there, is very strong. So we like that business and we like our position and business and there is instability, I think the credit cycle would some of that asset classes don’t have.

Thank you, Tom Rayner from Exane. Can I have two please? The first one just staying on the U.S. card book, just wonder if you give us any color on what sort of risk adjusted margins you see under different sort of blips within there and whether as delinquencies deteriorate a little bit you can actually maybe keep that margin stable bar for pricing just to sort of understand the dynamics there please? And then the second question was just on the change in methodology on deferrals. I guess we wait long enough whatever you do all washes to become neutral, but when you originally move from low to a high percentage that was I think it probably understates the true cost of running the business, I just wonder if what you've done today is maybe just reversing that now and actually now reflecting more of a genuine cost of running the IP lot of and then anything else you do?

I think on a second one yeah absolutely. I thought of towards is little bit of a mortgage in the future. It's definitely more real time accounting environment accounting just timing it's cash at the end of the day, it's just making the timing differences on accounting matching revenues and costs more real time, so I think you get a more clearer picture of what's really going on so I think you’re right on that. In the U.S. card portfolio risk adjusted margins I mean risk adjusted margins really attractive for us and I think what our business as work out so well for us, is really good pricing discipline particularly with the partnership business, which is the strong point of ours. So we are in partnerships that priced at very attractive levels on a risk adjusted basis. So when you see impairment charges go up just because there's a shift in mix delinquencies I mean the margins on those businesses are incredibly attractive and there is definitely pricing capacity there. So depending on you know rate environment changes and any other changes and there is ability to flex pricing, and the thing business it's on a pretty good job of being able to do that. When American Airlines its production is already up and running, now you're just see that naturally normalize again overtime, I think.

We're talking to shareholders through last year about the investment bank or in sales deeply frustrating us, if you gave me a business model which you knew had volatile revenues, but had a fixed cost number. I've never been our business. And the truth is what this decision is take and don’t work in fourth quarter, but I will be in a business where you have variable revenues and five variable class underneath that which I can use to protect my margin. And I think that essentially starts what we did in the fourth quarter.

Okay thank you.

Okay. Three questions on this side. So I will take all three, yeah.

Hi there its [indiscernible] from Credit Suisse. Couple questions on costs please. So the core number for 2016 was quite good the ID compensation I guess there some debates around how much of the non-core cost will lingered when we you sold it back in so maybe you could talk around how comfortable you are about taking out those cost longer term. And so how long a reasonable timeframe is to get the group to 60% cost income. And then my second question is partly related to Barclays UK, can you see much need for investment in the technology platform do you think your mortgage offering platform side as a bit as a service and ability to take flow?

Okay on non-core how much costs will for linger and time to get to the 60% group cost income of share. We think over the course of the next calendar year you know it’s about a billion pretax loss half in costs half in income sort of front loaded if you like so when you see the group Re constituted a little less than half that run right you should see flow through 2017 and then lesser getting 2018. So I think you'll see a study-study march down. When you look at cost income ratio, we haven't put a clock on it, but reasonable time frame isn't for the way under an aspiration I think it is quite realistic if you can actually take you know one work back into and you've probably done this already if you look at core income or £22 billion was excluding the visa going to £22 billion, £13.2 billion in cost to get a 60% cost income ratio. And you can back in from the £16.2 billion of the group that we had to take other PPI charge like a litigation sort of core tier what I think non-core look like you get into sort of the high 13s very quickly in fact the mid-13 on my mind. So it's not a long way to go to get the one assuming you know nothing else going on around the company. I mean what's really important isn't just my touch on this as we do want the capacity to reinvest as well we just can't keep on reducing costs without reinvesting back into nothingness probably the cost of your second question. So by already being relatively close to that 60% cost income ratio on a sort of underlying basis it allows us to continue to invest for the future.

In terms of technology and Barclays UK, Ashok is here and he's done an extraordinary job on the front end of using technology for our consumer goods, we have you know 5.7 million customers now bank with Barclays through this. And if you add who's transacting with just thought the internet that’s the eight million customers I gave you before. We have millions of consumers making payments through the app, so we think technology is a big part of our consumer offering across the UK. I’d also say one of the things sort of going back to our core operations and technology that we talked about earlier is some of that I find is very compelling about Barclays here is in UK we go from the consumer to the small business to the corporate to large institutions. We go across the product offerings, and if you believe in stents act or if you believe in that you know banks are increasingly pick technology companies with a balance sheet, the ability to use technology innovation across the entire financial platform in the fifth largest economy in the world, is a huge interest in asset I think Barclays is going forward. I do believe and the technology front particularly consumer we have been in the front of that. The other important thing is to use a technology to improve the customer experience and one of the data points that I give me sort of comfort as we look our business is on average every day 60,000 consumers across the UK get an SMS message from us, saying you're about to go overdraft, that is 60,000 SMS messages to decrease our revenue line, but to increase the customer journey with Barclays.

Hi it’s Chris Cant from Autonomous. I just want to come back to your comments about UK mortgage growth or some pick up in completions in the fourth quarter. I think you've said in the past that your UK deposit costs are now very close to zero obviously we've seen some from big spread compression again in terms of new mortgage pricing in recent months. I'm just trying to think about how much growth you can actually put on while staying within your 350 bps to 360 bps. Margin guidance for next year, I can’t imagine it's too much given the limited room for maneuver on the liability side just wondering if you can flesh that out?

Yeah on that one that's been very clear that we think completion margin actually take up a little bit, so its again its balancing which one to make as much NII as we can the returns are quite attractive, but we're trying to just like that the big most profit that we can, it’s balancing volumes versus margins at the moment you know we have played that going quite well for us where we keeping our margins held up as best as we can all see in the in the face of quite competitive pricing front from others. Operating in a part of the mortgage spectrum that's our core strength it's probably towards the lower end the risk spectrum probably more in the remortgages space rather than in the sort of the new mortgage space. And that's just pretty well. And we feel it's a good business for us and we’ll continue to play in that. We gave a 10 basis point range 350 to 360, if you think about just sort of quoted earlier we printed £19 billion of new mortgages this year, the books started £120 billion of course you've got redemptions and thing coming off. So you need to be printing an awful lot of brand new mortgages a very, very low rates, so I’ll taking our entire stock of NIM down dramatically. And so it does give us plenty of capacity to flex up and down as we said.

Thanks. And just following on what is your deposit rate on the UK right now?

Deposit rate, on the back you mean our savings book?

Yeah savings book.

Five basis points, we can assign you offer a deposit account if you're interested.

Don’t want unfortunately, I'm just on the non-core…

Define you offer a nice one.

On the non-core, top of the cost line coming down to question earlier, but on the negative revenue side you might have an idea of the maturity in that book. How long does it take to that negative revenue to go away and we’re talking a decade and considering how long tail that derivative book is?

It's kind of less static, so I mean there you could of course get rid of if you unwind every single transaction instantaneously some of them are quite long dated in nature. I think it's asymptotic so it will sort of continue to stress down more steeper at the front end of that timeline and shallow out. And you’ve kind of seen that was taken a lot of that steepness already, and it will be able tail once it's folded back and you should think of non-core it’s a little bit of a tail wind into Barclays International, because even if nothing else changes for the last before tax of the non-core that falls back in well most of it will fall back into will diminish over time, in a reasonable timeframe. And then you get to the point where you want to stop talking about it, because there are other things in there that you know every business or something that isn't carrying as well as you like and everything else.

Just following on from Jes’s comments on the UK consumer and the outlook and the delinquency trends been pretty good in this quarter. How do you think about the risk in that UK consumer book and have you been taking actions now to offset any potential what will be probably a way to squeeze in UK? Thanks.

Yeah so we haven't changed our risk appetite really since probably the turn of the last cycle since the last crisis I guess, so and we've operated in that we we've kind of one of things we haven't done is chase high margin business to protect margins for example you know vital that or and are trying to increase market share in first time buyers or it's like that, so I think quite disciplined in our pricing. And so I don't think our risk profile I look at for example even commercial real estate I mean you can see how small that as you can look for in our credit closures in the annual report you'll see how small that is. So I don't nervous about anything on our balance sheet that that sort of rally are and of course if we're going to UK recession and it's not a great place to be in UK banks, but I don't think will to do with anybody else thinking about the like and would probably outperform in a down cycle with the relative manner.

Thank you.

One more question or we do have one question on the phone line.

We have a question in the telephone line Joseph Dickerson of Jefferies. Joseph, your line is open.

Thank you gentlemen for taking my question. You've already touched on these areas maybe looking for a bit of clarity on a couple. On the first if you could just talk about the portfolio makes you seen in cards. Is this what we've seen of some of the other U.S. issuers whereby the 2015 vintage where a lot of players want a little bit further down the credit spectrum this vantage is now seasoning and driving the impairment higher is that the type of portfolio mix you're referring to or is it something else. And what would you attribute the pickup in DQs to in the U.S. given the unemployment trends are still robust in that market any color there would be helpful. And then secondly Jes on the ROE in the investment bank if I kind of back out the comp deferral change in 150 million real estate expense earlier in 2016. I'm getting about a seven kind of 7.5% ROE if I backed up the bank level and probably get a little higher, I guess how do you drive that and are there any further investments that are required is that seems to drive it seems to drive that higher you need to move away from float fixed income. So other investments that need to make and for U.S. ECM M&A any color there would be greatly appreciated? Thanks so much.

Yeah I’ll do the card and then - for the portfolio mix I mean some of it is that for the seasoning as you pointed out for 2014, 2015 vintages sort of seasoning so you get to picking payment levels for the card business about two years in, and of course we did bring on a lot of portfolios at around that point, and you see that's where the growth of balances has gone up. But having said I think what's more important for us is less over sort of seasoning it's more so just the fact that one of our larger portfolios just exhibited relatively less growth than the remainder of the book, and that particular part of portfolio was kind of like super prime as a relative matter to the rest of our book. So that little bit of both, but I wouldn't say it was more driven by the seasoning than it was by just the fact that our portfolio mix changed accompanied by some seasoning of those 2014 portfolios.

Joe I think how you bracketed the CIB is good. I think 2016 taking out things like you say were not used 7.5% to 8.5% ROE range and obviously we like to get a higher number to cover the cost of capital. I think we are competitive that's where most of the other players in the industry were in 2016. The three commoditize that we focused on is, one cost, and a lot of what we're doing around the core architecture and technology that Paul, Crompton and others are focused on is the desire to reduce the cost of running the operating platform for that investment bank and we do think that there is room there to go. That shouldn't be lost anyone for three years now and in a row we have increased the profitability of the investment bank and taken on the bones for all of three years. So for those that wanted a compensation response to profitability rather we like to have I think management has demonstrated we’re willing to do that. And the third one is our stock line growth and I think we showed that in 2016 and make a couple of things, a couple comments there. One is an important part of our European IV platform is still new. I mean we are on a large amount of brand new to the business and Europe and I think there's there are there is room to grow there on the top line and we encouraged by our IVCs being a record year in 2016 but we have more room I think to go there. And also you know we do have a new management team in part coming with Tam and I think our hope is that we can refine and prove relative use of capital across the CIB to improve to increase profitability there.

Thank you.

I think with appreciated everyone coming down to Canary Wharf for that. We look forward to and also we appreciate the stock can go down 8% this year. So we look forward to talking you later. Thanks.

Thank you ladies and gentlemen, that concludes today’s conference call. And you can now disconnect your lines.