Jes Staley – Group Chief Executive Tushar Morzaria – Group Finance Director

Joseph Dickerson – Jefferies Guy Stebbings – Exane BNP Paribas Andrew Coombs – Citigroup Andrew Simpson – Bank of America Merrill Lynch Claire Kane – Crédit Suisse Martin Leitgeb – Goldman Sachs Christopher Cant – Autonomous Ed Firth – KBW Fahed Kunwar – Redburn Robin Down – HSBC John Cronin – Goodbody James Invine – Societe Generale

Good morning, everyone, and thanks for joining the Second Quarter Earnings Call. The results we post today show a business which is performing well, having addressed the challenges of the last decade. Once again, we have shown progress against our strategy across the group and significantly. This is the first clean quarter we have reported in quite some time. In this quarter, there are no significant litigation or conduct charges. There’s no restructuring charges. There’s no cost to achieve, no Non-Core adjustments, no other exceptional losses which hit our profitability. This is therefore really the first sight of the performance of the business which we have reengineered over the past 2.5 years, Barclays transatlantic consumer and wholesale bank. And it is a positive sight. Our group return on tangible equity for the quarter was 12.3%. This was produced from revenues of £5.6 billion for the quarter, which were up 10% on the same period last year. Profit before tax was £1.9 billion, and profit after tax was a little over £1.4 billion. We grew our equity with TNAV of 8p in the quarter to 259p. And our CET1 ratio was increasing from 12.7% at the end of Q1 to 13%. It’s worth noting that the group generated a gross 44 basis points of organic capital in this quarter alone, which demonstrates the capital generation capability of the bank. We’re also pleased to declare an interim dividend of 2.5p today. And it remains our intent to pay 6.5p for the full year as we begin to increase the return of excess capital to shareholders. We were delighted to pass the CCAR stress tests of our U.S. holding company in June, an outcome which shows just how far we’ve strengthened and improved our controls, modeling and risk regime over these past two years. And we also get advise to secure regulatory deconsolidation of Barclays Africa just a couple weeks ago, formally concluding this particular strategic move. All told, Q2 of 2018 represents our most profitable quarter in the last three years. And this was achieved with risk-weighted assets lower by around £60 billion and was done 50,000 fewer people. While we can’t expect every quarter to be as positive, I do expect clean profitability unfettered from the drags of the past to be much more typical of Barclays’ performance going forward. Within the group, both of our business units delivered good returns. Barclays UK posted an RoTE of 18.8%, a 310 basis points improvement on the first quarter driven by the performances in Personal Banking and Business Banking. Barclaycard also continued to do well, recording its highest-ever UK consumer spend in the month of June of this year. Barclays International delivered an RoTE of 12.2%. Consumer, Cards and Payments remains an attractive growth opportunity for us, and in the second quarter, we saw profits improved markedly due to higher revenues and lower impairments. The Corporate and Investment Bank’s RoTE was 9.1% for the quarter. This was a decent result but one depressed by low-returning commercial lending assets within the corporate bank, which we are continuing to review and redeploy to higher-returning opportunities. Importantly, within the CIB, revenues in Markets were up 15% in dollars term, comparing favorably with our peers on the Street and resulting in double-digit returns in that business line for another quarter. The CIB RoTE for the first half overall was 11%. And we are pleased with the progress we are seeing, as our focus on investing in people and technology as well as balance sheet redeployments are having a tangible effect. This quarter’s results reinforce our conviction about the attractive and sustainable profitability of the transatlantic consumer and wholesale bank. It reinforces our belief that the diversified business model we have engineered, balanced geographically by business line and by currency, is well placed for today’s economic environment. It means we are confident in our ability to generate excess capital. It means we are confident in our capacity to return a greater proportion of that excess capital to shareholders over time. And for the first time in several years, we are also in a position to contemplate new investments and opportunities to grow our top line and bottom line. This no less is possible in part because we are now seeing substantial cost efficiencies from the establishment of our group-wide service company called BX. BX feeds capacity for reinvestment in the business while still meeting our cost target range for 2019. I want to be clear that reducing expenses remains a priority for management. And costs will be down in absolute terms this year versus 2017, and they will be lower again in 2019 versus 2018. And that will be achieved against a backdrop of rising revenues, but we are also in a position to invest in growth whilst maintaining discipline and focus on our cost targets. BX has helped the bank to transition from bad spend inefficiencies, which were ingrained in our old way of operating, to good spend today, which is the ability to invest in strengthening our system as well as targeting growth. One example of a way we are strengthening the business through BX is by our location strategy. This will see Barclays creating a handful of state-of-the-art campuses over the course of the next three years and consolidating our property footprint worldwide. These campuses are designed to concentrate collaboration and innovation in key global locations and to attract and retain the best talent. It will allow us to create even better customer and client experiences and outcome and deliver significant gains in technological competitiveness and efficiency. I was delighted to be at the opening of our newest campus at Whippany in New Jersey last month, which will provide a terrific work environment for 1,500 colleagues by the end of this year. To give you some perspectives of the difference this approach makes: The relative real estate cost per colleague in our Whippany campus is around 1/3 of equivalent costs in Manhattan. And just last week, we unveiled exciting plans for a new building campus in Glasgow, which we expect to eventually be home to around 5,000 colleagues devoted largely to delivering the digital future of Barclays. Now that we have this opportunity to focus on growth, our management team recently discussed and approved a number of investments which we believe will make a significant and positive difference to our revenues and profitability. This new spend is targeted primarily on the further digitization of Barclays. And let me talk you through just three examples of the kinds of initiatives we’ve had. First, the rollout of our newly launched Barclays assistant, which our customers access through Facebook messenger. This chatbot technology is designed to help the most common questions about our services. Deploying cutting-edge artificial intelligence software, customers start online to chat with us about anything, from making payments to changing personal details, to identifying fraud. Customers get a fast and accurate response to the majority of routine questions. And Barclays becomes more efficient as we increasingly automate the service, but it can also recognize when it is being asked about something which it’s not yet programmed to deal with and pass the customer to a colleague seamlessly. So instances of handovers will diminish over time through our ongoing program to extend the range of areas which the chatbot can handle. Second is a strategic partnership we launched today with MarketInvoice which enables us to offer selective and confidential invoice discounting to a wide range of our small-and medium-sized business clients in the UK. This significantly improves our sales finance proposition as well as regularly to grow assets and market share in this space. It is also a great example of how our scale and innovation combine to make us the partner of choice for the fintech community. Finally, we are investing in strengthening our electronic trading platform in Equities to grow revenues, build scale and enhance the risk and control environment. We have rolled out a new smart order router technology which has enhanced range of variables and real-time feedback integrated into the decision-making engine, leading to much improved execution performance. We’re already seeing a good increase in electronic trading volume on our platform versus Q2 of last year as clients respond positively to the enhancements we’ve made. The digital transformation of Barclays is continuing at pace and we will – and will be key to how we grow our business organically over the next few years. Our management conversation on investment opportunities are also important in terms of what it signals about where Barclays is as a business. This is not a discussion we could have realistically engaged in 12 months ago. While still in the midst of closing on forward exiting Africa, and it was again continue to complete, not to mention being a subject of major prosecutions on either side of the Atlantic. But now we have finished our restructuring and largely clear of those significant legacy challenges and have strong prospects. That feels to be a good position to be in. Our grip on control, cost and organizational effectiveness has never been tighter. And BX is delivering what we had hoped it would. We are able to focus more exclusively on the future and specifically on our objective to return an increasing amount of earnings to shareholders. While every quarter may not be uniformly progressive, the business will continue to strengthen as we execute on our strategy. And we intend year in, year out to deliver improved returns. As momentum continues to build in Barclays, I feel confident and optimistic about where we are headed. Thank you. And now let me pass to Tushar for a more detailed look at the numbers.

Thanks, Jes. As usual, I’ll focus on the Q2 results rather than H1. We continued to progress, as we reported last quarter, towards our objective of double-digit return for the group, as we reported a group RoTE of 12.3%, excluding litigation and conduct. There were no material negative one-offs in the quarter to bring to your attention. There were, however, a couple of positive one-offs in income that we disclosed totaling to circa £200 million, which are shown on the usual slide in the appendix. In the rest of my comments, I’ll exclude litigation and conduct from the income statement metrics, in line with our financial targets framework, but would note that the charge this quarter was just £81 million. Attributable profit was £1.3 billion, generating earnings per share of 7.8p. Income was up 10% overall despite the effects of the weaker dollar, partly reflecting the non-recurrence of the Non-Core income expense reported in Q2 last year. Costs were down 3%. This resulted in positive jaws of 13% and a group cost-income ratio of 59%. And in Q1, we reported significantly lower impairments, down 46% year-on-year, including further single-name recoveries in corporate lending; and the effects of changes in expected loss inputs reflecting IFRS 9, notably in U.S. cards. In terms of underlying credit conditions, delinquency measures were reassuring in all key areas, including a downward sequential move in U.S. cards in the quarter. The effective tax rate for Q2, allowing for litigation and conduct, was around 23%, but we are still guiding to a full year rate in the mid 20s. In Q1, which included significant litigation and conduct, we reported healthy accretion in both the CET1 ratio and TNAV in Q2, with the CET1 ratio increasing from 12.7% to 13% and TNAV increasing by 8p to 259p. With capital level in our base target of around 13%, we’re now firmly on track towards a surplus capital position; and are declaring an interim dividend of 2.5p; and reiterating our intention to pay a 6.5p dividend for 2018, subject to regulatory approval. Looking at the individual businesses now, starting with Barclays UK. BUK reported an RoTE of 18.8% for Q2. Income was up 1%, while costs were down 1% despite continued investment, generating slight positive jaws. As in recent quarters, we exercised pricing discipline while growing our mortgage book further, adding another £1.6 billion of net balances at margins which still earn an attractive RoTE despite continuing price competition. NIM for the quarter was 322 basis points, consistent with full year NIM guidance in the 320s; down year-on-year, reflecting the inclusion of the ESHLA loans. It’s also down in Q1 but a downward trend given our focused on growing secured lending while remaining cautious on the extension of unsecured credit. In addition to the mix effect, ring-fencing has resulted in a recategorization of some treasury income within the UK, which had a negative effect of around 3 basis points on the calculated NIM. I would expect downward trends from the mix effects to continue over the coming quarters and for NIM for the full year therefore to be at the low end of our guidance, with a Q4 NIM below 320. However, I don’t see this as an issue in terms of market expectations for overall income. Our focus is on generating income and attractive returns rather than keeping reported NIM flat. Some people have asked about the effect of rate rise, but this would mainly show up next year due to time lags. And we put the usual slide in the appendix reminding you about significant sensitivity to rate rises over time. As Jes flagged, we are very focused on the digital evolution in banking. It’s a key strategic initiative to reinvest cost efficiently in digital transformation and our open banking offerings. Digital engagement amongst our customers continues to hit record levels with over 10 million digitally active customers, up 5% year-on-year, with around 13% growth in active users of mobile banking. And we now have 4.7 million digital-only customers. Impairment was down 3% year-on-year and up 6% on Q1. As I’ve mentioned, we have remained cautious on unsecured lending whilst growing secured. And credit conditions remained pretty stable across BUK portfolios, with 90-day arrears rates for cards flat and 30 days down from 2% to 1.9% both quarter-on-quarter and year-on-year. Overall, BUK continues to have strong market positions. And we are able to maintain our prudent risk appetite while still delivering attractive returns. Turning now to Barclays International. BI delivered a RoTE of 12.2%. With around half of the BI businesses being U.S. dollar denominated, we again had a year-on-year decline in the dollar of 6% compared to 12% in Q1, representing a headwind to profit and income and a tailwind to costs and impairment. BI delivered positive jaws, with income up 3% and costs up 1%. And in Q1, impairments decreased significantly, down 76%, reflecting write-backs in CIB and the effects of inputs into IFRS 9, but underlying credit metrics were less volatile. As a result, PBT increased 7%. Looking now in more detail at the BI businesses. Total income for CIB was up 1% to £2.6 billion. Within that, Markets was again the stand-out performer. Markets reported growth in income of £130 million or 11% in sterling terms despite dollar headwinds. This year-on-year comparison benefited by around £35 million from the legacy funding costs now reported in Head Office. I’ll reference U.S. dollars for each of the business lines for ease of comparison with CIB peers. Markets income was up 15% in dollars. This reflected another very strong performance in Equities, up 37% on Q2 2017; and a solid performance in FICC, which was up 1%. And in Q1, the Equities performance reflected strong execution in derivatives and in equity financing, where the benefits from the additional leverage that we allocated in previous quarters again showed through. Within FICC, both Macro and Credit produced steady performances in a quarter of mixed market conditions, with lower volatility though in Q1. As others have mentioned, volatility has been low in July, which is generally a seasonally weaker month, anyway, so it’s too early to predict market conditions for Q3 as a whole. Banking overall was down 5%, but within that banking fees were up 4%, or 8% in dollars, as we improved our global fee share ranking to number six; as well as offset principally by a reduction in commercial lending income. Some of it was due to the effect of lower balances and the redeployment of RWAs into areas of markets, but there was also somewhat effect of negative fair value moves of hedges for CIB loans, which doesn’t necessarily reoccur. Impairment was a net release of £23 million, reflecting a number of single-name recoveries, notably in the oil and gas sector. We also had a net credit in Q1, but we don’t expect credits every quarter. Costs were up 1%, as we reinvested cost savings in order to drive sustainable double-digit returns. RoTE for Q2 was 9.1%, which was dampened by lower corporate banking returns. Improving the returns on RWAs allocated to commercial lending remains a key priority going forward. Moving on to CCP. CCP had a good quarter, reporting an RoTE of 28.9%. The low level of impairment and continuing underlying growth in U.S. cards were the most significant elements of these results, although we also had interesting growth opportunities in our other payments businesses and in private banking. Net receivables in U.S. cards grew by 6% year-on-year underlying in dollar terms. This is below our medium-term goal of 10% CAGR, but the underlying dynamics across the portfolio reinforce our belief in the growth prospects of the business. We exited one of the U.S. card partnerships in the course of the quarter, but our portfolio performed well, notably American Airlines and JetBlue achieving double-digit balance growth. We do expect to take on new partnerships and exit others, as part of our business model. And just to remind you, that over 70% of the partnership book is now covered by agreements that last through to 2022. Overall, CCP income was up 8%. Excluding a £53 million gain of the portfolio sale and the headwind from the weaker dollar, the growth was 5%. Costs increased 5%, excluding FX as well as litigation and conduct, delivering neutral jaws, despite continued investment across CCP on growth initiatives. Impairment charge is down 68% year-on-year and down significantly on Q1. While we wouldn’t expect a charge to a bit low in every quarter, we are comfortable with the underlying credit trends. Focusing again on the U.S. cards trends which drive these numbers. The slide show 30 day and 90 day delinquencies are up modestly year-on-year, reflecting the credit conditions in the market to – through 2017 and into Q1. However, delinquencies have improved from Q1 to Q2, and we continue to focus on underwriting standards while expanding the business. A rebalancing of the risk mix with the sale of private balances in Q1 of last year and growth in high-quality portfolios has meant we are less exposed to customers with low FICO scores, which has been the more challenging part of the credit spectrum. We also saw reductions in balances with significant expected loss provisions in the course of Q2 and annual U.S. tax refunds came through. The IFRS 9 charge exempted these sorts of movements. Turning now to Head Office. The Head Office result continues to be influenced by a number of specific items, and we highlighted them more significantly in Q1, part of the legacy funding costs which we now report in Head Office that’s around £90 million a quarter and a hedge accounting charge which is running at £100 million to £200 million per annum, for this year and next but is expected to drop away thereafter. I’m pleased to report that the most significant additional item this quarter is a positive one-off of £155 million relating to a Lehman settlement. There is also a positive from the BAGL dividend on our 14.9% residual stake, but the final dividend currently comes in Q2 and the interim will be in Q3. There are still some items that vary quarter by quarter, but I think the income line overall is now more predictable. Costs in Head Office were £36 million, resulting in an attributable loss of £98 million. Given the one-off Lehman credit, the run rate is likely to be higher in the next three quarters but will then be expected to reduce to the extent we call on the legacy instruments and as the hedge accounting charges reduce. The level of equity allocated to Head Office is now just £3.6 billion as of the end of the quarter. And RWAs have been reduced to £26.3 billion, principally reflecting the regulatory deconsolidation of the BAGL stake. Next, a few comments on impairment, the effects of IFRS 9 and how I think about the charge going forwards. We have seen two quarters of impairment charges down significantly year-on-year, particularly in CIB in Q1 and CCP in Q2. This reflects the implementation of IFRS 9 at the start of the year, which makes the year-on-year comparisons complex to analyze. We knew in advance that, because of the way IFRS 9 works, we will see some volatility in impairment charges. The IFRS 9 charge is sensitive to shifts in economic forecasts; and to changes in credit parameters, such as increases in the balance size and, of course, delinquencies; and to changes in categorization between stages. We saw an improvement in U.S. economic forecasts feed into the impairment calculation for the U.S. businesses in Q1. And in Q2, there were a variety of effects, notably in U.S. cards where we saw reductions in certain balances particularly following the significant annual tax refunds, which we wouldn’t expect to recur in H2. For the UK businesses, we have a little change in economic forecast views. Looking forward, in the absence of changes in economic forecasts, I wouldn’t expect the low levels of impairment we have seen for the group in Q1 and Q2 to repeat every quarter. If economic forecasts were to deteriorate, of course, IFRS 9 is designed to take this up earlier and was the case on the previous accounting standards. Before I finish with capital, I want to have a few words on our cost trajectory. I’ve shown on this slide the continuing downward trajectory of costs for the group. As we discussed in recent quarters, with the implementation of the service company model, we’ve been implementing cost efficiency programs across the group to create strategies to reinvest in growth and digitalization. In Q2, we reported a 3% reduction year-on-year in costs. This takes us to £6.7 billion at the half year stage, but in H2 of course there is some seasonality from the Q4 bank levy. We continue to guide to 2019 costs, excluding litigation and conduct, in the range of £13.6 billion to £13.9 billion, which is expected to deliver a group cost-income ratio of below 60%. We haven’t previously given guidance for 2018, but we’d expect a level clearly below the 2017 outturn of £14.2 billion, but it could be around the top end of our 2019 range, subject to major currency moves. We remain focused on delivering cost efficiencies such as standardizing front-to-back processes across the bank and rightsizing our infrastructure. These cost efficiency programs means we can still fund investments in growth areas and in cybersecurity and resilience, which we believe will become key attributes in the future. So we have some significant ongoing cost investment programs running in the second half of the year. Moving on to our capital position. I’m pleased to report improved conversion of profits and capital accretion compared to the first quarter, where litigation and conduct charges of 61 basis points took our capital ratio down to 12.7%. The ratio increased in Q2 from 12.7% to 13%, returning us to our end-state target of around 13%. Profits generated 44 basis points of capital accretion, while the foreseen dividends based on a 6.5p per annum dividend, plus AT1 tier bonds, took off 13 basis points in Q2, the same as in Q1. We’ve disclosed previously the headwind from pension deficit reduction contributions which come through in Q2 and Q3 each year, according to the agreed payment schedule. We had a positive one-off of 11 basis points from the regulatory deconsolidation of BAGL, but then this was more than offset by AFS moves across the group, notably on the value of the 14.9% residual BAGL stake as both the share price and the rand weakened in the quarter. The residual stake is now treated as a 250% risk-weighted asset. There was no significant litigation and conduct in the quarter. In terms of capital, however, I would remind you that capital accretion won’t come evenly every quarter, as we deploy capital generated in a way to drive group returns over time. But I think this quarter gives clear evidence of the potential for our profitability to drive capital accretion above our capital target and allow us to improve returns of capital to shareholders. We’ll say more on tax for 2019 and beyond at the full year, but in the meantime we’ve reiterated our intention to pay a 2018 dividend of 6.5p, subject to the usual regulatory approvals. Our spot UK leverage ratio ended the quarter at 4.9%, well above our required level. Finally, a quick word on TNAV, which has also shown accretion in Q2. After a reduction in Q1 due to litigation and conduct and the IFRS 9 opening provisions, TNAV increased strongly in Q2 from 251p to 259p. This reflected a contribution of 7p from profits, plus some currency tailwind; and was despite of the headwinds from FX movements. So to recap. We reported a 12.3% RoTE for the group. Although H1 is seasonally stronger than the second half of the year, this puts us in a good position to deliver on our 2019 and 2020 RoTE targets of greater than 9% and 10%, respectively; H1 CET1 ratio of around 13% and excluding litigation and conduct. We saw a healthy accretion in both the capital ratio and TNAV, reinforcing our confidence in creating the capacity to deliver attractive returns of capital to shareholders over time. We have reiterated our intention to pay a total dividend of 6.5p for 2018, subject to the usual approvals, with a 2.5p interim dividend. Thank you. Now we’re happy to answer your questions. And I will ask you to limit yourselves to two each so that we get a chance to get around to everybody.

[Operator Instructions] So our first question today, gentlemen, comes from the line of Joseph Dickerson of Jefferies. Your line is now open.

Hi, good morning gentlemen. I just actually have a very quick question on the outlook statement and some of the guidance. So on – you mentioned the lower volatility in July. I guess I was surprised that you made a comment on the current quarter. I was trying to understand why you might have done that given that presumably, at least if we looked in the past 24 hours, volatility seems to have picked up, so any steer as to why you chose to call that out about the July volatility? And then secondly, on the costs, I guess something changes. Why didn’t we perhaps have a discussion of this at Q1? And how can we think about those costs being deployed into the Investment Bank, in the payback? And the timing of payback we might expect on those given that, I think, some prior investment last year of – in similar systems seems to have paid off. So any discussion on how to quantify your investments that you’re making now. That would be great. Thanks.

Yes, thanks, Joe. It’s Tushar. Why don’t I take those two questions? Yes, I wouldn’t sort of read too much into our statement on lower volume in July. It’s just a factual statement, not the price bottom. And obviously, as we pointed out on the first day of August, maybe it’s a little bit higher already, but it’s really just a comment on what others are seeing, which is that price volatility has been a little bit lower during the month of July. And that’s just something to bear in mind when you think about how the industry may perform. We obviously feel actually very good about our Markets business. I think you’ve seen in our relative revenue performance that we believe we’ve taken a bit of market share again in the second quarter after taking some market share in the first quarter and in the fourth quarter. I’m really pleased with our performance in Equities. And also, even in fixed income obviously we didn’t participate from the – what appeared to be the buoyant conditions in commodities we – with no longer a significant share in our business. But excluding that, we actually feel very good with our performance. In terms of costs, we – it’s the first time we are giving guidance for costs for 2018. Our guidance for 2019 is completely unchanged, so no new news there. On costs, I will say a few things. Firstly, just to remind everybody costs will be down this year relative to last year, were down previously and will be down in 2019 relatively to 2018. And within that, we no longer call out restructuring charges and costs to achieve or any other forms of onetime expenses that allow us to create capacity to invest. So whether it’s branch closures, whether it’s real estate – Jes talked about in his opening comments our new Glasgow campus and new Whippany campus. The costs of setting all that up, the costs of moving people there is all included in our cost numbers. And that cost number is lower year-on-year-on-year, but the point we want to make across is – get across is we’re very good at creating the capacity to invest through the use of our service company; and allowing us to invest, for the medium-term benefit of the company, in products and services, in core infrastructure, in cyber, in resilience, in digitization while at the same time costs continuing to come down and revenues continuing to go up. So hopefully, that gives you a bit more context.

Let me just add, Joe, that – so now that we’re behind the restructuring, whilst we will continue to run this bank more efficiently, as Tushar say, we will take costs down sequentially. When we deliver the level of profitability that we delivered in the first half of this year and we can use the management of costs, which we now have under control, if we can use that management to make intelligent investments to drive further profitability, we’ll do that. I mean we have a business that in the first six months delivered over 11% return on tangible equity. And focus cannot be relentlessly on costs when we have that level of profitability.

I got it. Thanks.

Thanks Joe. Can we next question please, operator?

Our next question on the line comes from Guy Stebbings of Exane BNP Paribas. Guy please go ahead.

Thanks. The first question was on U.S. card impairments, clearly very low in the quarter. Risks fell in Q1, sort of highlighting reassuring trends, but would you be able to give any sense on how card impairments or perhaps the flow of delinquencies in the book phased over the period? As I believe tax rebates can distort the picture a little bit. And some of your trust data has suggested a pickup towards the end of the period. I just wondered if that’s reflective of the wider trend. And also, I think you might – you said that you exited a partnership in Q2. Did that have any impact on the EBIT level? That was the first question. And then secondly, are you able to clarify the comments and guidance around NIM and income in Barclays UK, that you’re comfortable with expectations for income? Is that in reference to 2018 or beyond as well? Because obviously pointing to an exit NIM in a year below 3.20% is suggesting that volumes or – need to pick up. So some color there would be very useful. Thanks.

Yes. No problem, Guy. Let me take a stab at both of them. U.S. cards impairment, yes, you correctly pointed out that delinquencies were down quarter-on-quarter. And that’s really a function of the risk mix actions that we’ve been taking. You’re probably aware that we sold a very low-FICO-score portfolio at the beginning of last year. And we’ve been prioritizing growth in our airlines partnerships, so whether it’s American, JetBlue, Ryan, Frontier. That’s been we’ve got a good portfolio for airlines, and they’re actually growing real well. So just that change in risk mix improves sort of the credit dynamics. We did also see some actually probably higher-than-anticipated paydown of certain card balances in the second quarter. It seems very coincidental with the U.S. tax season. It’s very hard for us to obviously join those dots together, but it seems sort of timing coincidental with that then. And that also improved the quality of our book. Now of course, those paydowns wouldn’t necessarily, I expect, to reoccur on a tax season at a point in time. And I’d say, over the second half of the year, you’d expect revolving activity to probably increase, as it usually does seasonally, particularly into Q4. And that will be associated with impairment billed. We did have, I think, as a consequence of the things we talked about in Q2, probably a "lower than a sort of typical run rate" impairment quarter in U.S. cards, but probably a more typical number may be a little bit higher than maybe Q1. You talked about the partnership sales. Yes, that’s a portfolio we’ve had for some time. It just didn’t meet our returns requirement. It’s actually a very sort of prime portfolio in that regard. It just wasn’t a very profitable partnership for us, so we moved on from that. NIM in the UK, just a couple of words on that: Firstly, we actually feel very comfortable with income levels in 2018 and, for that matter, into 2019. We’re talking here about ensuring that we’re maximizing net interest income at attractive returns rather than just trying to achieve a particular NIM objective. You’ve heard us talk in the past, and we continue to emphasize, growth in our secured lending book. We’ve increased net lending in mortgages by a further £1.6 billion this quarter, plus £6 billion over the last four quarters, while actually not growing our unsecured lending book. So just the way NIM is constructed, you will have that reflected in as secured balances grow and obviously our balances then grow. The other thing I’ll just point in – point out, that – and hopefully, you got it from the script. .:

Given that we want to be prudent given the uncertainty of Brexit, it’s a conscious decision to slightly change the mix from unsecured to secured. So that is being driven by us, as opposed to market.

Thank you very much.

Thanks. Can we move to next question please, operator.

You certainly can, the next question on the line comes from Andrew Coombs of Citigroup. Andrew please go ahead.

Good morning. If I could follow up on costs and then one on the CIB business. On costs you talk about a decline to £13.9 billion this year, but a lot of that decline is due to the FX tailwind that you’re seeing, so what does give you confidence that the cost saves will be more than that to offset the investments going forward into 2019? And then my second question is just on CIB revenues. The corporate lending revenues, £198 million in the second quarter, are down about £100 million year-on-year, so similar to the improvement in Markets. Is the repatriation of RWAs between the two now done? Is this a new base level for corporate lending, or would you expect it to fall further from here still?

Yes, thanks Andrew, let me touch on cost and I’ll do one comment on commercial lending, I think Jes will add some more to that. On costs, yes, look, we are very, very confident in our ability to continue to manage the cost base of the company down – we’re targeting a cost income ratio of sub-60%. We did achieve that in the second quarter but that’s obviously an annualized rate that we are targeting which is inclusive of things like the bank levy, which is seasonally in the back half of the year. And the way we are able to do that is – and don’t forget, the other thing I just remind folks, it is an all-in number, so we are not calling out restructuring charges or costs to achieve or various other charge-offs, it’s an all-in number, and we are able to do that because we’re able to generate very large gross productivity savings, which we have discretion to plow back into the company and it gives us some degree of flexibility. And so our confidence in continuing to be very efficient and drive that cost income ratio down is very high. Just on commercial lending, you’re right, it’s a last I would say just a couple of sort of technical points to bear in mind before I hand over to Jes. You do get the fair value of hedges against the portfolio running through that book, and that’s quite a meaningful component in this quarter’s number, that will be what it will be in subsequent quarters. So it probably looks a bit starker than – it’s probably what’s really going on, but Jes will maybe talk a little bit about where we are in commercial lending?

The only thing I’d add to what our cost income ratio in the second quarter was 59% - was the major target we set out for ourselves. I think if you compare that ratio with similar firms to Barclays, I think it does underscore that we’ve got this bank to a reasonably good place in terms of its cost efficiency, but more to come. Under commercial lending, in terms of the redeployment of the $10 million worth of risk-weighted assets, we did that pretty much in the second half of last year, and we are effectively done with that. It still needs to get improved profitability across that Corporate loan book, but that is going to take some time because we’ve got to make sure that people are driving transaction businesses through our Corporate bank. It’s a long discussion you have with very important Corporate clients. We are quite confident that we can get that over a period of time back in the double digits.

Thanks Andrew, here the next question please, operator.

Our next question on the line, gentlemen, comes from Andrew Simpson of Bank of America Merrill Lynch. Andrew, please go ahead.

Thank you very much. Hi, guys thanks for taking my question. First one is going to be on, similar to the last question, the second one on U.S. credit cards. Tushar, can you quantify what this fair value effect is in the Corporate lending line, please? Is that about half of the decline? Or any sort of guidance there would be very much appreciated, trying to gauge what the recurring number would be in that line, I think, please? And then on U.S. credit cards, is that still a growth business now? I know there was a portfolio sale in the quarter, so you’re up year-on-year underlying, but even adding that back it, and it doesn’t look like there was much gross quarter-on-quarter there? Thank you.

Yes, Andrew. Yes, it will bounce around a bit, but it’s probably about 2/3 of the decline. It’s explained by just the hedges moving around and it will obviously change in the quarter. U.S. Cards business is definitely a growth business for us. And we talk about underlying growth, just to give you a sense of the currency rates and various other things staying on there we’ll continue to take risk management actions to – as we did last year with – we want to reposition the books. But it’s definitely a growth business for us. The thing that we are really excited about the Cards business in the U.S. it has a few characteristics that’s very attractive to us. One is, although receivables are larger than they are compared to a UK card business, as a market share matter, we are still relatively small, somewhere around the two-or-so percent market share. So you can comfortably grow your book and keep very good credit controls when you’re still relatively small in the U.S. market. So that’s one thing. The second thing is the U.S. economy, we feel very constructive on. You can see the macro data coming out of the U.S. and everything that we’re seeing you can link them to is actually down slightly for us in our Cards portfolio. And the other thing that we like it about a lot is the partnership business is something that we believe we have an edge in. We have grown that business quicker than the market has grown, and we like to continue that. We are cautious, as you’d expect us to be, when you’re growing an unsecured lending book. We are very focused on risk metrics, and you’ve seen us take actions last year when we wanted to get the position back to where would prefer it, but we are very much keen on growing it and confident we can do. Is there anything you want to add to that, Jes?

The American Airlines continues to be very strong for us, balances where up 10% year-over-year. JetBlue is doing exceptionally well, those balances were up 33%. And then remember what we like about the partners – our core brand business, 70% of that book is under signed contract until 2022. So it’s got great stability to it. There was probably 6% this quarter, and we are still confident that over a couple of quarters, we can maintain a 10% year-over-year growth rate.

Thanks.

Thank you. Do you have next question please, operator?

Of course we can. For our next question, gentlemen, comes from Claire Kane of Crédit Suisse. Claire, please go ahead.

Hi, good morning. A couple of follow-ups, please and then one other. Just on the U.S. Cards, sorry, Jes, I can’t hear you so well, but are you still committed to the 10% net growth in balances even adjusting for any of these portfolio sales or partnership losses? I mean those ones flagged to that pool. And just to say, on this recent sale, is that deal closed? Is there any risk that, that gain you’ve booked this quarter could reverse later on this year? And then a second question, your comments around the Corporate lending reduction this quarter, given the RWA reallocation is largely done and we obviously have those hedging effectiveness losses. Can we now expect that business revenue to grow from here? And then finally, just given the capital now at 13%, are you looking perhaps to do the share per buy – the per share buyback this year rather than next? Thanks.

Let me just – yes, we are still comfortable with our 10% year-over-year growth rate in receivables in the U.S. Card business. So and what I spoke to was how well we’re doing with people like American Airlines and JetBlue and how stable the contracts are that we have in that business. So yes, we are still comfortable in that underlying growth trend. I’ll pass on the capital issue to Tushar.

Yes. And just the other point also, the small point you had, Claire, on the closing of the deal, yes, there’s – the accounting for that has taken place, so nothing else I’d call out there. In terms of – let me answer the question on the capital position and I’ll come back to commercial lending. Look, the capital position, we feel good that we are back to our end state, obviously we took a bit of a dip because of the settlement with the Department of Justice, but you can see our tangible book value and our capital getting back to levels of which we would like it at. 6.5p: As well as thinking in about other efficient forms in which we can get capital back to shareholders. So that’s probably one for later on. In terms of commercial lending, the objective function here is the returns as much as targeting revenue growth. In some ways, if I look at probably the issues of the past is by focusing just on top line in commercial lending, we would probably have a situation that we have at the moment where we weren’t focused enough on returns. But rather than guide you to expect commercial lending revenues just to improve, I think between Jes and I, we are much more focused on getting commercial lending returns up. And that will be continuing to ensure that the capital allocation to that business is generating the most productive return or to put that capital to a better use.

Great, thank you.

Thanks Claire, can we see a next question please operator.

Of courser. Our next question on the line, gentlemen, comes from Martin Leitgeb from Goldman Sachs. Martin, please go ahead.

Yes, good morning. For my side two questions, please. And the first maybe for Jes. The word Brexit doesn’t feature in the presentation, I think it’s on Page 44. One has to read up to into the fixed income appendix to get to it, which I found surprising. I just wanted to ask you, given where the progression of the Brexit negotiations to date, how concerned are you with regards to Brexit, maybe on a scale to one to 10? And then the second question on Equities and Equities’ particularly strong performance this quarter. Could you shed a bit of light on where the strength in Equities is coming from geographically? And then I think on the slide you referenced that in terms of U.S. revenue, you see yourself as the number one European Investment Bank now. Could you elaborate whether this is equities investment banking driven? Thank you.

So first on – thanks, Martin. First on Brexit, I think of Brexit within the context of other restructuring that the bank has had to face, whether it was setting up the IHC in the U.S., which was a very significant undertaking and then the, obviously, enormous lift of setting up the ring-fence bank in the UK. So strengthening our existing bank subsidiary in Ireland and then redomiciling our – or relicensing the branches across the UK, across Europe, whether it’s Frankfurt or Paris, that’s a much easier task for both the IHC and the ring-fence bank was. So we are preparing for whatever eventuality comes out of the Brexit negotiations. We want to make sure that Barclays can continue to do whatever business we do in Europe, European clients tomorrow that we do today and feel that we will have the legal structure and the financial structure to allow us to do that. I think the issue about concerns, vis-à-vis Brexit, is really with respect to the fact that probably our single biggest risk as a bank is the beta exposure to the UK economy. And obviously, if Brexit leans heavily on economic growth in the UK, we are going to feel that impact. Now what we do, like our strategy of being transatlantic, is we have over 40% of our business in the U.S. right now. It’s an economy, as you know, is growing quite well and there’s a lot of activity there. So we are – I’m not going to talk where we are on scale of Brexit, but I don’t think that risk is really to the Barclays’ business model. I think the risk is simply to what it may or may not do to economic growth in the United Kingdom. In terms of the Equities business, it’s pretty broadly aligned. Geographically, we are principally in New York and in the UK Cash equity flows were good. We rolled out during the quarter a new trade routing system, which I commented on, which has increased quite handsomely the volumes in electronic trading for us. As part of the redeployment of risk-weighted assets last year, a good portion of that went to our equity financing capability, where we are financing the balance sheets, mutual funds and hedge funds. And I think we’ve picked up good market share there. And then our flow derivatives business, particularly with corporate clients, we’ve had a very good couple of quarters there, and kudos to the team. What I do want to make clear, it is not positioning or taking risks to any degree different than what we have in the last couple of quarters. So it is flow business, it’s driven very much in flow derivatives and in equity financing.

I think your final question, Martin, was on just dollar revenues and rankings. I mean, we’re really referencing the Dealogic investment bank fee tables where we’re the best performing, if you like, non-U. S. bank in the Americas. A little bit harder to do insolent trading revenue, you don’t get quite the sort of the market share, volume share. So when we look at, sort of, a coalition survey that we get in somewhat a little bit in arrears, I think it’s clear we are consistently taking some market share over at least the last threee quarters, and that’s what we would like to continue to do.

Thank you Martin. Could you have the next question please, operator?

Of course we can so the next question today, gentlemen, comes from Christopher Cant from Autonomous. Chris, your line is now open.

Good morning thanks taking my question. Also two if I may. You mentioned, Tushar, that capital won’t improve evenly due to investment. It felt a little bit like you were perhaps guiding...

Hi, Chris, sorry, just a touch hard to hear on the phone. Do you mind just maybe speaking up a bit.

Let me start again. Is that better?

Yes, that’s great, thanks.

So you mentioned, Tushar, that capital won’t accrue evenly due to investment and it felt like you were perhaps guiding to a bit more of a capital drag in the second half. Should we be assuming as faster intangibles build for the rest of the year? I know that, that didn’t really change much in the first half? And then secondly, the UK payments regulators announced a review of merchant acquiring, seemingly in response to concern that exchange cuts haven’t been passed through in full. Could you please let us know how much of your Consumer, Cards and Payments revenue was actually payments-related? And how much of that do you think might be at risk in relation to changes to the merchant acquiring regulation in particular? Thank you.

Yes. Thanks, Chris. Yes, the comments around capital over the year is just – just to remind people that we have been steadily accruing capital, I mean, the last several years now at about somewhere around 100 or 100 plus basis points as we restructured the company and generated organic earnings as well as paid a bunch of fines along the way, but we haven’t done that linearly. So it’s just to remind people that capital doesn’t necessarily accrue linearly, and we want to prioritize utilizing that capital for productive uses as well as accreting it. The other thing, just to remind people, is that we do include against our capital ratio with each quarter a foreseeable dividends. You saw that on the slide under the pension contribution in Q3, you’ll see that on the slide as well. So somewhere in between, I think that adds up to something like 18 basis points or something like that, will go out from our capital base in Q3 and that will be offset by, obviously, profit generation and in other moves. So just – really just to remind people of the dynamics there. But the big message is that we’re still with the right capital place for the group. And as Jes has mentioned in the past, I think as we continue to generate capital above this level, we like to get that back into shareholders’ hands in some way, form or another, starting off with a 6.5p dividend. Your question on the UK payments regulator, yes, we haven’t called out the amount of income coming specifically from our payments business. It’s something – just trying to be helpful, we’ll think about doing. I think it’s a little bit early to quantify what effect that review will have, it’s a little bit hot off the press and no doubt there will be quite a period of time. We believe, though, that we have been very, very fair to our customers, particularly I think that particular review was talking about rather smaller customers and clients, and they got a raw deal from merchant services providers. We’re, obviously, an important participant in that market and believe in ensuring that we’ve being fair to all of our stakeholders, both our customers as well as various other stakeholders in that business. So we’ll see where that goes, but nothing I’d draw attention to as yet.

Okay thanks.

Can we ask next question please operator.

Yes sir. The next question on the line comes from Ed Firth from KBW. Firth, please go ahead.

Yes, good morning all. I just have two questions. The first was just coming back on these, the costs for the second half. It looks like you’re signaling reasonably material negative jaws. And I’m just trying to think, is it possible to give us some sort of quantification of what this investment spend is and where it might fall? I mean, should we imagine that, for example, the IB costs will grow in line, will move with the revenue, I guess, so we’ll see that flexibility? Or is there still some investment that might cloud that? So I guess that was question number one. And the second question was just on the share buyback. I notice you’ve dropped the share buyback comment, having repeated it in the last two set of results. Should we read anything into that? And I guess particularly in the context of your comments around prioritizing investment. And I suppose there’s also been a lot of speculation around M&A, et cetera, and I think in the past you’ve highlighted that your own shares were probably the best value, but I guess this speculation is often focused around a stock arguably even cheaper than yours. So how do you see that and what sort of comments can you make on that as well?

Yes. Thanks, look, why don’t I start on cost and Jes will talk on, sort of, capital distribution. Cost in the second half, it’s the first time we’ve given guidance, and just – it’s to help people think how we’re thinking about cost shape obviously we’ve got the bank levy coming into the fourth quarter, and you’ll see what that is. Just as a reminder of that seasonal effect. The investments that we’ve been making, we believe, are paying off. You can see that in our income line with very strong positive jaws in the first half of this year. Now the revenue line won’t always be linear, but look at the improvements that we are making in products and services in our UK bank, in our U.S. Cards business as well as some of our Markets business. And it’s an ongoing journey. I think it’s important for a company like ours to continue to have the capacity, to continue to invest. And that’s really all that’s going on there. And again, I would just like to stress to folks that we are able to do that while paying for everything. It’s an all-in cost number. There is no restructuring charges, there is no, sort of, passes on onetime items, while overall costs are going down and income is improving year-on-year. So not much to say more than that at this stage, Ed. I think over time, we may try and talk more and more about what’s going inside our cost line, but that’s probably all we’ll say for now.

Sorry, sorry, Tushar.

Go on.

You did change the accounting, I think it was last year, around the Investment Bank, in terms of making sure then – and I think at the time you signalled that, that would mean that the costs in the IB would move more in line with the revenues. So I’m just trying to think, if we are expecting a seasonal revenue downturn, which is pretty normal, we’ve had that most years, should we expect the cost to go down in the IB with that? Or is there something different we should be thinking about?

Go on, Jes

Yes. I think the statement that we changed accounting so that we can more correlate revenue with cost with best lines is correct. And you could assume that we have applied that in the first half of this year, and we will apply it second half of this year as well. So going to the share buyback, we are laser-focused, now that we have clear quarters and hopefully in front of us and the issues of the decade behind us. We are focused on returning excess capital to shareholders, and buybacks are as much an opportunity for us today as it was in the last few times that we’ve managed it. So don’t read anything into the language, we know where the stock is trading right now, we know the economic benefit of using excess capital to execute share buyback. It is still very much front and center for both Tushar and myself. And then along that line, there is no consideration of an M&A transaction, and there will not be – there is – we are not opening retail branches in India, we are not going to get back in the financial markets of South Korea, we are focused on running the bank as we laid out in March 2016, delivering returns like we delivered in this quarter and taking those returns and returning them back to our shareholders.

Great. Thanks so much.

Thanks Ed, Can we have the next question please, operator?

Of course we have. The next question comes from Jennifer Kirk of Mediobanca. Jennifer, your line is now open.

Thanks for taking my questions. Two questions, please. Firstly, sorry to focus on but circling back to the Corporate lending income line, RWA redeployment seems to have been a drag here, but I’m assuming that those RWAs have been redeployed elsewhere. Appreciate if you could give us the income delta there between income loss and gained on redeployment? Secondly, just on your capital allocation. You seem to have reallocated Head Office RWA out across both Barclays UK. and CCP but not into the CIB. Within this, if I look Q-on-Q, the equity allocation in the UK. has increased in line with your high RWA, which makes sense. But in Barclays International, the equity allocation in CCP has lagged the rate of RWA increase. And the equity allocation in the IB has increased despite the RWAs going down. Net-net this means the CIB is now on a 14.5% CET1 versus 13% to 13.5% in the other segments. I was just wondering if you kind of walk us through the rationale on that one? Thanks.

Yes. Jennifer, I was signalling to Tushar. To your first question, we are done with the redeployment. We were taking risk-weighted assets that were basically commercial loans in the Corporate bank that were generating low single-digit returns from annual equities and reallocating primarily to the Markets business and the IB, to places like Equities financing where our return is strong double-digits on tangible equity. Making that redeployment has allowed us to make the statement both in the first quarter and the second quarter that our Markets business is generating, overall, a double-digit return. And as we said, this is the third quarter in a row where we think we are gaining market share.

Jennifer, on capital allocation, just – it’s an average equity allocation over the period. So you have to look at average risk-weighted assets. Of course, there are reserve movements. And there is nothing sort of unusual going on in terms of allocation of capital out to the businesses. We are allocating now at 13%, so minus, obviously, reserve moves that are sort of relevant to those businesses over the average of that period. If you’re struggling to see, sort of, how that triangulates, I’m quite happy for maybe someone in IR to give you a call later on and just take you through the numbers, if helpful, but there’s nothing I’d call out on there that’s unusual.

Great, thanks.

Thanks, Jennifer. Yes, next question please operator.

Yes, of course. The next questioner on the line is Fahed Kunwar of Redburn. Fahed, please go ahead.

Hi, good morning. Thanks for taking my questions. Just I had a couple of question on Barclays UK. and one on capital, if you wouldn’t mind. Just to clarify, if I look at what consensus has in for 2018 on Barclays UK. it implies 3% half-on-half growth in revenues. I think in the outlook statement, you talked about steady revenue progression the second half 2018 versus first half 2018. So is 3% growth in revenues half-on-half in 2018 what we should expect based on your comments about being fine with market expectation on revenues? And the second question on Barclays UK. was just thinking about your comments around focusing on NII rather than margin. And I think it was last quarter or perhaps the quarter before where you said that you’re actually going to focus on margins rather than volumes. You’ve seen, obviously, some spread improvements coming through in the UK. in the last, kind of, month or so. The base rate potential could be higher today if MPC raises rates. I’m just wondering what’s changed your tone on that? Why have you now shifted towards focusing on volumes rather than margins versus where you were a quarter or so ago, considering the change in disparate environment in mortgages? And then my third question on capital. Barclays UK. is sitting I think a 14.1 core Tier 1 ratio. So the rest of the bank is but finishing sitting sub-13%. I understand, you guys want to do buybacks because of the valuation, but how confident are you, you will get regulatory approval to do buybacks considering that the rest of your peers seem to be heading up towards a 14% core Tier 1 ratio and you’re sitting at 13%? Thank you.

So just to take them in the order you gave them. In terms of expectations, I said in my sort of scripted comments that we gave some guidance for NIM, but when I look at income expectations that the market has, I feel okay with them for 2018. Hopefully that answers that question. Now there’s really no change in terms of volumes and NIM. The comment I made on NIM, and apologies if they didn’t come across clearly, was really focused on mortgages itself, that we are trying to do what we can to ensure that we are producing front book mortgages that are still at very attractive levels, which we continue to do. But as we grow the mortgage book relative to the unsecured books, I mean, it’s just an output function, obviously it’s a lower-margin business, but, obviously, it does throw off good net interest income, particularly good risk-adjusted net interest income. And finally on capital. Look, I think it’s appropriate for us to speculate on regulatory approval, will let that process take place. But you mentioned that Barclays UK. capital, as a legal entity function, at 14.1%, the rest of the group must be sort of somewhere a bit lower than that. That, of course, is correct. Obviously, the Barclays UK. legal entity has the domestic SRB attached to it, which you don’t need to do in an international bank, that gets held at the group level. Then we’ve obviously got a countercyclical buffer in the UK. Obviously, the UK. bank is just a UK. bank so it attaches more weight to it, then. But of course, that countercyclical also will apply to the international bank in a small portion. So the key point is at 13% of the group, we are able to capitalize our subsidiary and move capital around appropriately. And as capital requirements change, if countercyclical buffers move up or other things change, we’ll also keep the market informed on that. But we feel at this stage, around 13% is sufficient, and we are keen on getting capital back to shareholders, as Jes has mentioned in the past, and keep you updated on trying to do that as we need to.

I’ll just add – maybe if I add three points to that. One, is after last year’s stress test, we said publicly that we continue to view 13% as our instate CET1 ratio. When we increased the dividend from to 3p to 6.5p, obviously, that was done in consideration of where we are with our regulators and our level of capital, and reiterated again that 13% was our instate CET1 ratio. And also, I think, quite frankly, one of the things that the stress test showed is there is a diversification benefit that this bank has from having the business it has in the U.S., the wholesale plus the Consumer business. So I think there is a diversification benefit which allows us to run comfortably at a 13% CET1 ratio.

Okay. Thank you very much.

We have the next question please, operator?

Of course. The next question on the line comes from Robin Down of HSBC. Robin, please go ahead.

Good morning. Just a couple for me. Firstly, the structural hedge contribution base in Q1 and Q2 is a down quite a lot on last year, and I was just wondering if you can give us a bit of color as to what has driven that? And then second question, actually following up from the previous question. One of your competitors has, obviously – I think is was Pillar 2a letter from the PRA and that’s obviously fallen for them. Just wondering if you had also got your letter and whether or not there is kind of no change there? And if I can finally just sneak in a small technical one. Just on the U.S. Card sale, could you give us some indication of timing of that? And whether we’ve seen the impact in the quarter of, I guess, the revenues you have lost with that card sale? Or whether that’s still to come in Q3? Thanks.

Yes, on the structural hedge, yes, I mean, it’s quite straightforward in a way. You’ve obviously seen LIBOR rates increase off the back of the increase in rates that the Bank of England put through previously. So of course the structural hedges, fixed versus floating, you’ve just got floating leg that we pay on increasing. So that’s all that is, there’s nothing else going on there.

This doesn’t indicate volume change.

No, that’s right, we haven’t got the notion or anything like that or anything like that, it’s just LIBOR rates going up. Pillar 2A, yes. We’ve got – if we had anything to update you, we would have done. I think different banks probably get their information at different points in time, we haven’t got anything to disclose at the moment. And U.S. Card sale, yes, you should have seen that sort of dropped out as an accounting matter. So yes, that should be pretty straightforward, hopefully, in your modeling.

Thank you.

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

The next question on the line comes from John Cronin from Goodbody. John, please go ahead.

Hi, there and thank you for taking my question. One for you, Tushar, and then one for you, Jes. On the PPI, could you speak a little about your most recent experience with respect to claims volume and, indeed, upheld rates? And then the second question is – look, stepping back beyond this morning’s stock performance relative to expectations coming in, clearly a strong set of results that arguably validate the strategy pursued. In that context, Jes, do you have any great concerns? Or what would you say about further possible agitation and distraction as a consequence of the presence of a certain shareholder on the register? Thank you.

Okay. Thanks, John. Let me take the PPI question. Yes, look, we’ve got and we feel pretty reasonably provided at the moment on anything we can see. If we look at our, sort of, burn rate at the moment and look at our provision level, it’s kind of as we expected. We’ve seen the CMC, the claims management companies, sort of the introduction of the fee caps, so that will – we’ll see how that plays out. But by and large, everything we see at the moment, we feel pretty reasonably we have provided. So we’ll see where we go from here.

In terms of the overwhelming sentiment as I go and visit with shareholders is to stay the course. The bank has gone through an extraordinary restructuring which is now behind us. New print the returns that we delivered in the first half of the year. We’ve got a management team committed to the strategy articulated in March of 2016. Clearly, we are focused on the share price and the returns to our shareholders as we put the restructuring issues behind us and we generate profit levels like we demonstrated in the second quarter, we will be able to start to return significantly more capital to our shareholders than we have historically. Again, just looking at the weight of conduct and litigation expenses and things like PPI over the last couple of years, it’s been a long journey that our shareholders have gone through. We believe that it’s largely behind us now. We believe the strategy is delivering a level of profitability. At least the first six months, way ahead of our cost of capital, we’ve given you our targets for 2019 and 2020. I think all that the last six months have done is to reinforce our confidence in delivering at those targets or better. So management has to be focused on running the business and executing the strategy, and that’s what we’re doing. And if we get it right, and I think today’s numbers hopefully give encouragement to you, our shareholders. And if that happens, the stock price will take care of itself.

Thank you.

Do we have the last question? I think we’ll take an several more question to the operator.

Of course. Our final question today comes from James Invine of Societe Generale. James, please go ahead.

Hi, good morning. I’ve got two, please. The first is on CIB. You obviously put quite a lot of extra resource there, both from the balance sheet and in terms of the headcount. I was just wondering if you could give us an idea of the tailwind that, that revenue line has enjoyed in Q2 this year versus last year because of that investment? I mean if I say something like 10%, is that about the right number? And then the second question is, there have been some press articles that you’re looking to expand your, kind of, primary U.S. retail and do more there. Just wondering if you can give us an update on what your thoughts are, please? Thanks.

I’ll ask Jes to talk about U.S. Consumer. CIB tailwind, I mean it’s a really difficult thing for us to answer. Obviously, we talked about the three prongs of our strategy is to make sure that we have the right people, the right capital and the right technology, and we’ve made progress on all three. Tim Throsby, since him coming in the beginning of last year, has been a terrific add for us, and he’s reset his management team relatively quickly, and I think that’s making a difference. Jes has talked about the reallocation of capital within the CIB, the points of leverage as well. That definitely has made a difference, for example, look at our Equities financing business. And then technology, Jes has given examples of how we’ve rolled out some more e-trading capabilities and the way we connect to our clients. So I don’t think you can put a number on any one of those things, I think it’s all three factors driving improved performance and allowing us to take a bit of market share for the last three quarters running, and that’s our intention to keep going in that vein.

And in terms of – first let me just state, the overarching strategy of the bank, of being transatlantic Consumer wholesale bank, is not going to change. We are not going to open retail businesses in India, we are not going to change the geographic footprint of the institution. We are laser-focused on, first and foremost, returning excess capital to shareholders, that’s above all else. We do believe we have a very attractive Consumer business in the U.S. The returns coming out of that Card business are quite strong, and we are doing that whilst improving our FICO scores, while expanding our business, particularly around the co-brand. I think we’ve done a very good job of having a digital deposit gathering business in Delaware, which essentially allows us to fund the UK. receivables through U.S. deposits at a very profitable margin to it. We have talked about growing receivables there, about 10% per annum, and that will take some capital support. Whether we expand the nature of that digital consumer business, that’s something that we look at when we look at the future terrain in front of the bank. So I think it’s safe to say as we begin to focus on growing the footprint, the U.S. consumer market is one that we find very attractive. But I do want to reiterate that, first and foremost, we are really focused on returning capital to shareholders.

Thanks, very clear. Thank you.

Thanks, James. And thanks to everyone on the call. Appreciate it, as always. Hopefully, that was helpful. And I’m sure we’ll get to see some of you on the road in the next few days. Thank you.

Thank you.