Operator: Ladies and gentlemen, welcome to the Barclays Quarter One Interim Management Statement Analyst and Investors Conference Call. I will now hand you over to Antony Jenkins, Group Chief Executive.
Antony Jenkins - Group Chief Executive: Good morning, everyone and thanks for joining us. I'm here with Chris Lucas, who will take you through the numbers in a moment.
But before he does that, I'd like to talk briefly about the progress we've made since February. When I set out our goal to become the Go-To Bank for all of our stakeholders, you will see clear evidence today that having outlined our TRANSFORM program in February, we are now very focused on implementation and made good progress in the first part of 2013.
As you know, in January, we agreed a since cross business purpose for Barclays helping people achieve their ambitions in the right way, have five core values which underpin it. Since then, we have focused on implementing these across the organization and I am pleased with how my colleagues have welcomed the changes, including how performance will be measured and rewarded.
We made six financial commitments for 2015 at our strategy review. To deliver a return on equity above the cost of equity; to reduce the cost base by GBP1.7 billion on a net basis; to achieve a cost-to-income ratio in the mid-50s; to reduce RWAs by GBP75 billion gross; to ensure our transitional common equity Tier 1 exceeds 10.5%; and to accelerate our progressive dividend policies in 2014, targeting a payout ratio of 30% over time.
Cost is a critical underpinning of these commitments. I work to transform our cost base by looking at processes end-to-end and by improving controls and the customer experience is already well underway.
We are on track to execute the GBP1 billion program of restructuring and investment for 2012, which we announced in February. Half of that cost has been taken in this quarter. Reducing our European Retail branch network in order to focus on the mass affluent segment and resizing our equities and investment banking operations in Asia and Europe have been the immediate priorities.
As we promised in February, we have also reallocated more elements of the head office costs to the businesses. So the aggregate of those businesses results is more closely aligned to those of the Group, including the Group return on equity. This will increase transparency and accountability and reduces execution risks against our TRANSFORM goals.
As we move from the planning phase into execution, I announced a number of organizational changes in our Corporate and Investment Banking and Wealth businesses last week to support and accelerate delivery. These changes follow the elimination of the Global Retail and Business Banking layer in late 2012 and the integration plans in hand to bring together Barclays Africa and Absa and ensure we have the team in place to build the Go-To bank.
We told you in February that we'd have a good start to the year and that momentum has continued through the first quarter. I'm pleased also that we've delivered improved underlying profitability across most of our businesses.
The cost to achieve TRANSFORM have impacted return on equity in this quarter, but it is important to bear in mind that at the time the program will help us both reduce our cost base and achieve sustainable returns above the cost of equity. Our return on equity excluding the cost to achieve was 10.6%.
I will now ask Chris to go through the numbers in more detail. Chris?
Chris Lucas - Group Finance Director: Thanks, Antony and good morning. We're reporting a good set of first quarter results this morning. We made a strong start to our TRANSFORM program, with significant restructuring, especially in Europe Retail and Business Banking.
Impairments has continued to improve. We further reduced operating cost excluding the TRANSFORM restructuring charge and our capital liquidity and funding position remained strong. As usual, I'm using adjusted numbers today (to usually give a) better understanding of the business performance.
The only adjustments is own credit, which is a much smaller charge than the first quarter last year. We have not adjusted for the TRANSFORM restructuring charge, but we will highlight the effect of these costs on key performance metrics. In general, my comments compared to first quarter this year for the same period last year.
Turning now to the headlines; we're reporting adjusted profit of GBP1.8 billion, which is reduction of 25%, which reflects restructuring cost of GBP514 million and a one-off hedging gain of GBP235 million in the first quarter last year. Excluding these items, adjusted profits would have been up 6%.
Total income was down 5% at GBP7.7 billion as a result of last year's hedge gains as well as adverse currency movements in Africa, Retail and Business Banking.
Impairment improved 10% to GBP706 million, with lower charges in both the Corporate and Investment Bank. We continue to reduce costs, which were 4% lower at GBP4.8 billion, excluding restructuring charges.
This slide shows the adjustments to the statutory numbers. You can see that we've made no further provisions for PPI during the quarter. We told you in February that the year-end provision for PPI was just under the GBP1 billion. We have used GBP300 million of that in the first quarter, leave you a provision of about GBP700 million at the end of March.
Claim volumes have come down slightly and we continue to monitor them closely as provision reflects our best current estimates. There has been no material developments concerning redress on the interest rate hedges.
Return on equity decreased from 12.4% in the first quarter last year to 7.6% in the first quarter this year, as compared to return on equity of 9% for the full year in 2012, the reduction is largely the result of restructuring cost as part of TRANSFORM which is designed to help us achieve return above the cost of equity in 2015. As you know, we've allocated more head office results to the businesses and this is reflected in our reported business level returns.
The Group's cost income ratio increased from 61% to 68%, what was entirely due to restructuring costs. Adjusted earnings per share decreased to 8.1p and we have announced the cash dividend for the first quarter of 1p. As usual, we intend to pay equal dividends for the first three quarters and retain the ability to flex the dividend in the final quarter.
Looking at capital; our Core Tier 1 ratio increased to 11%.
Before I talk about individual businesses, I'd like to talk in more detail about costs. Overall costs increased by 7% to GBP5.3 billion and they were down 4% excluding the TRANSFORM restructuring charge of GBP514 million. Performance costs for the Group were down 10% to GBP804 million. It reduced non-performance costs by 2% to GBP4 billion excluding restructuring.
Looking at the TRANSFORM restructuring charge in more detail; GBP356 million is in Europe Retail and Business Banking, GBP116 million in the Investment Bank, and GBP37 million is in Corporate Banking. This restructuring will result in a total headcount reduction of 3,800 people.
Our program of restructuring and investment is intended to transform our cost base that will help us keep – to reach a target of cost-to-income ratio at the mid-50s by 2015.
Turning now to the individual businesses, I'll start with U.K. Retail and Business Banking, where there was strong profit growth of 29% to GBP299 million. Total income was stable at GBP1.1 billion with resi mortgages offset by a decline in the contribution from structural hedges.
Impairment charges were up by GBP13 million, but the loan loss rate increased just one basis point to 26 basis points. Cost reduced 7% to GBP704 million. Europe Retail and Business Banking made a loss of GBP462 million, largely due to TRANSFORM restructuring costs of GBP356 million.
Income fell 6%, reflecting a difficult economic environment. The net interest margin was stable. Impairment increased 30% to GBP70 million, mainly as a result of deterioration in mortgages. However, there was a slight improvement on the fourth quarter last year and delinquency rates remained modest.
Costs increased by GBP362 million, as a result of the restructuring charge. The restructuring will result in a more focused distribution network across all four countries in Europe RBB and the headcount reduction about a quarter, which is nearly 2,000 people.
In Africa RBB, income decreased 13% to GBP668 million, mainly due to adverse exchange rate movements. Impairments increased 8%, and that's a favorable currency movement. This was the result of further provisions taken in mortgages in the absolute recovery book. Charges in the first quarter this year were significantly lower than the previous three quarters.
Cost increased 10%, largely due to currency movements and profits were down 39% to GBP81 million. In local currency terms, profits decreased 24%.
At Barclaycard profits were up 5% to GBP363 million, income grew 12% to GBP1.2 billion, impairments increased 21%, mainly as a result of higher volumes over 30 day arrear rates improved in both the U.K. and U.S. Costs grew 11% due to business growth, including acquisitions and the cost-to-income ratio was flat, at 43%.
Turning now to the Investment Bank, where profits grew 11% to GBP1.3 billion. Total income 1% to GBP3.5 billion, there was a net impairment release of GBP14 million compared with a charge of GBP81 million last year. Clearly we don't expect a net release each quarter. We reduced costs by 1% to GBP2.2 billion, this include a restructuring charge of GBP116 million as we resize our Equities and Investment Banking operations in Asia and Europe. We're reducing headcount by 1,800 in Corporate and Investment Banking.
The cost to income ratio improved from 64% to 63% and the compensation to income ratio reduced from 43% to 41%. We continue to target compensation to income ratio in the mid-30s in 2015. The return on equity was 16.3%, up from 13.8% in the first quarter last year.
The income in the Investment Bank is seasonal and the first quarter has generally been the strongest in the recent years. Total income was GBP3.5 billion was up 1% from last year's first quarter, but 34% higher than the fourth quarter. This income was achieved despite a 5% year-on-year reduction in RWAs to a GBP182 billion.
Breaking income down into more detail, Fixed Income, Currencies and Commodities decreased 6% to GBP2.2 billion compared to a strong first quarter last year. Equities and Prime Services grew 19% to GBP706 million, reflecting both improved market volumes and share gains and the Investment Banking was up 8%, up GBP558 million.
In Corporate Banking, profits decreased 10% to GBP183 million as a result of lower gains on fair value loans and cost to achieve TRANSFORM of GBP37 million. U.K. profits improved by 8% to GBP270 million, while losses in Europe increased GBP114 million as a result of the restructuring charges.
Income was down 9% to GBP772 million. Impairments improved 38% to GBP130 million with reductions in U.K. and Europe. There was a 39% reduction in Spain to GBP57 million, resulting from lower exposure to the property and construction sector. We reduced cost in Corporate Banking 3% excluding the restructuring charge.
In Wealth and Investment Management, profits grew 22% to GBP60 million as our investment in the business continued to bear fruit. Income grew 4% to GBP469 million, driven by a high net worth business and related increases in both customer loans and deposits. Costs were up 1%, and client assets under management increased 7% to GBP200 billion, mainly as a result of net new assets in the high net worth business.
Losses in head office were GBP53 billion compared to a profit of GBP321 million in 2012. This was mainly due to a one-off gain last year of GBP235 million on hedges relating to employee share awards. As you know, (we have managed to take the) Head Office results more fully to the businesses to give greater transparency. One-off gains like this are an example of the type of profits or cost we will not allocate out.
Moving on now to capital, liquidity and funding; our Core Tier 1 ratio increased to 11% on a Basel 2.5 basis, reflecting first quarter retained earnings and the exercise of warrants. RWAs were broadly flat, net of currency movements. Our liquidity position remained strong with a pool of GBP141 billion. We had a liquidity coverage ratio of 110% at the end of the quarter based on the latest Basel standards.
We aim to fund our Retail Banking, Corporate Banking and Wealth businesses with customer deposits. The loan-to-deposit ratio for these businesses improved further from 102% to 98%. This has reduced our total wholesale funding requirements. Given the prefunding we did in 2012 and our strong liquidity position, we did not have access to public debt markets in the first quarter this year.
As you'd expect, we have updated our Basel 3 ratios based on current expectations. Our latest estimate show a transitional common equity Tier 1 ratio of 10.8% as of March 31. We continue to make good progress building capital to the fully loaded ratio of 8.4%, up from our earlier disclosure of 8.2% as of the end of December. Detailed calculations are in the appendix to the slide pack. We continue to believe we are well-capitalized.
Turning now to margins; Retail Banking, Corporate Banking and the Wealth businesses all contribute to our net interest margin analysis. Overall margins from these businesses fell 4 basis points to 179 basis points. 1 basis point of this decline was from reduced hedge contribution.
Increased volumes more than offset a slight customer margin contraction, so that net interest income generated from customers was up slightly at GBP2.5 billion. Overall net interest income from these businesses grew 2% to GBP2.8 billion.
As far as the outlook is concerned, a good start to the year has continued into the second quarter across our businesses. Although the macroeconomic environment remains unpredictable, we continue to focus on costs, capital and returns in order to improve the performance.
In summary, we are reporting good results this morning. We've made a strong start to our Transformation program. Adjusted profits were down 25% to GBP1.8 billion, but excluding restructuring costs and one-offs, they were up 6%.
Impairment has continued to improve with further reduced operating cost, excluding restructuring charges and our capital liquidity on funding position remained strong.
Thank you very much indeed. I'll hand you back to Antony now.
Antony Jenkins - Group Chief Executive: Thank you, Chris. You'll hear much more about our progress in delivering TRANSFORM later in the year, including in our seminar on the individual businesses. But as you can see, we are very focused on the execution of TRANSFORM and there is good momentum in the business.
The Investment Bank delivered a relatively good top line income performance compared to peers. In fact, we continued to consolidate our leading position outperforming our peers' year-on-year.
We monetized our build out in equities with revenues up by 19% year-over-year across the U.S., Asian and European businesses and in the U.S. IPO market, we finished the quarter ranked number one with the market share of 12%. Barclaycard delivered a strong set of results with a pleasing 12% increase in income coming from solid growth across the business and 2012 acquisitions. This drove PBT up 5% with ROE stable at nearly 18%.
We've continued to support the U.K. economy by providing FLS eligible gross new lending of an estimated GBP20 billion, to U.K. households and businesses in the first quarter. It's early days and there is a long way to go, but so far, we're doing exactly what we said we would do. I look forward to giving a more detailed update at our first half results in July.
With that, I'd now like to open it up for questions.
Operator: JP Crutchley, UBS.
John-Paul Crutchley - UBS: Two questions if I can. The first is on the impairment, particularly in the Retail business, which – I just wondered if you could maybe just give – maybe a slightly broader color on that. Clearly, both in the Barclaycard and the Retail business impairments have picked up, albeit from very low levels. I am just wondering how you feel about the shape of impairment trends playing forward over there and particularly dovetailing it with the comments (indiscernible) earlier in a month or so about trying to (indiscernible) building the expectations of future impairments down the line to capital plans. Looking at your overall capital position clearly 8.4% fully loaded Basel 3 is robustly above the 7% of (Banking) (indiscernible) gives you clearly about GBP5 billion to GBP6 billion of capacity above that number. I just wondered any conversations about how much they are expecting to be taken from your capital base in respect of managing to (that) 7% number?
Antony Jenkins - Group Chief Executive: Okay, thanks JP. Let me take the question on impairment and I'll ask Chris to deal with the capital question. So on impairments, although we've seen some uptick in the absolute number in Barclaycard and the Retail Bank. In the Retail Bank it's so de minimis number in the scheme of things. In general, our outlook for impairment in our base Retail businesses is what I would describe as broadly stable. As you know in the last few years we've seen an improving picture. We've been talking about that improvement beginning to slowdown and stabilize, which is where we see it now. If we look at the forward flows on delinquency across our big portfolios, the mortgage business in the U.K., unsecured lending in the U.K., cards in the U.K. and the U.S. We see again a stable to – in the U.S.'s case it's slightly improving picture. We continue to watch closely the European Retail businesses and our South African business where there has been some stress, but I'd say, in the aggregate we think the picture is broadly stable from where we are, JP. Chris, on capital?
Chris Lucas - Group Finance Director: In capital, there is a lot of fluidity going on and lots of people are making announcements. We've been focusing on building the capital base, whether that’s through Basel 2.5 went up to 11% in the first quarter or whether it's on Basel 3 on a fully loaded basis, it went up to 8.4%. So my mind is that delivery of internally generated capital is going to be really important and that's where we will be focusing hard on.
Operator: Chris Manners, Morgan Stanley.
Chris Manners - Morgan Stanley: So I have two questions for you, if I may. The first one was, essentially the sort of non-Investment Banking revenue, even (exing) out the derivative gain in Q1 last year was maybe a little bit softer than the consensus. I was just trying to understand how you'll think the net interest margin is going to move from here, 1.79% is obviously a little bit lower than the last year. But I would have thought with deposit costs coming down, how you'll shrink your liquid asset buffer that should actually offset some of the hedge decline. The second question was just one the impact of the clearing of OTC swaps. Just in terms of what impact you think that could have on the FICC business in terms of the volume impact maybe from (extra collaterals) being held, margin impact from the price transparency, just how you guys are thinking about that?
Antony Jenkins - Group Chief Executive: On the first question, if we look at non-IB revenues, I think I have been very clear in my essential thesis around macroeconomic environment that we are going to be doing business and I do think that it's going to be quite weak for as far as I can foresee. So we happen to assume, as you know, in our three-year plan, particularly aggressive income growth and I think this quarter just validates that hypothesis. Of course, you can see the impact in there of some of the hedging gains rolling up over time. But by and large I think the performance of the businesses on an underlying basis when you look at the shares of product where we're number one or two on new flow across the whole product suite in our major markets is very encouraging and I continue to believe that we've good underlying momentum that will allow us to win more than our fair share of the available business that's out there. I think on margins, we've talked about broad stability, but as you know we divide it into sort of customer margins and other margins and Chris, I don't know if there's something you want to add on margins.
Chris Lucas - Group Finance Director: I think you're absolutely right. The pleasing point from my perspective is that the margins have performed very much as we expected them to do. So, Chris, you're actually right. There is a 4 basis points to 179 basis points. The hedge contribution reduction is one of that and customer margin is down 3 basis points. What we expect to see is the margin decline, but to be offset by volume increase, so taken in the round net interest income should be flat to up in the customer level and that is exactly what we're expecting to see for the second quarter and for rest of the year.
Antony Jenkins - Group Chief Executive: Chris, could I take your second question in terms of clearing of non-OTC swaps and I do think it is very early days. We have been a leader in the primary spot clearing markets. We think that we'll continue to have that role. We do welcome these developments and we have made a huge strides in other areas like CapEx, which helps markets to be more transparent. Our initial conclusion is that we don't expect that to be major impact on revenues, but I think it's quite early days.
Operator: Jason Napier, Deutsche Bank.
Jason Napier - Deutsche Bank: Two please, if I may. The first for Antony and then second perhaps for Chris. Antony, the reference you made to leadership change announcements. I wonder given the almost complete change in top-level management at the firm now. Can the investors sort of take it as (read) that leadership is stable and this is the team that's going to deliver TRANSFORM over the next three years? Then the second question for the IB, clearly, the top-line performance, one of the best in the industry and as reference made to credit and securitized products benefiting from tighter spreads in the quarter? CS have also broken securitized product out as being a place that they've done well. I just wonder whether you would quantify the benefits from spread change or perhaps talk about where spreads are relative to the end of the first quarter, just as a resource of momentum into the second quarter?
Antony Jenkins - Group Chief Executive: Let me just talk about leadership changes first. We've announced a new Director for the Bank with the Go-To Bank and the TRANSFORM program. Although when people look at the executive leadership of the Group, they always tend to see it through the lens of individuals. For me, it's equally or perhaps more important to look at that through the lens of the structure of the executive committee and we made some quite profound changes to the structure. So we eliminated the Retail and business banking layers that I used to run by the appointment of Val Soranno Keating and Ashok Vaswani to the executive committee. We've bolstered the second line of defense by creating a totally independent function and having that represented at (Executive) level by Hector Sants. We've created a Group operations and technology function led by Shaygan Kheradpir. Lastly, we announced essentially an elimination of a layer in Corporate and Investment Banking with the appointments of Eric Bommensath, Tom King to the Executive Committee and we have also increased our focus on the U.S. with the appointment of Skip McGee. So those are all very important structural changes to the organization. In addition, we, of course, have a very big strategic push against Africa, which is very ably led by Maria Ramos and our Group Risk function remains led by Robert Le Blanc. So I think that we have the right structure for the Group now. We have the right individuals in role to take the strategy forward. I do think that in the course of the coming months, we will complete the appointments of the Group HR, Director, Finance Director, and General Counsel. At that point, the executive team will be in place to take the strategy forward. In terms of the points you made about (presence) on in the credit market, I wouldn’t want to get too excited about that, but I think Chris maybe wants to say a couple of things on that.
Chris Lucas - Group Finance Director: I would and Jason, I'm further going to disappoint you, because I am not going to breakout the asset analysis by further categories, although I think I would say in overall terms, it has been a fantastic first quarter to the Investment Bank, the FICC business, the Equities and Investment Banking business. I think it's really much of what we have been talking to about over a number of years that has come to fruition and we are very pleased by it.
Jason Napier - Deutsche Bank: Just to sort of follow-up on that and I can almost hear what sort of the bears are going to be thinking. When you talk about a fantastic quarter for the IB, you are not trying to say that inventory had a fantastic quarter, that's a fair characterization, not to put words in your mouth?
Chris Lucas - Group Finance Director: Thank you for that. It was meant to be a description of the overall performance of the business.
Operator: Raul Sinha, JPMorgan.
Raul Sinha - JPMorgan: Can I ask two please as well? The first one, could you comment on the outlook for impairment in the non-Retail areas? It looks like you had a bit of help in the quarter from recoveries in the IB and Corporate. I guess IB can be a bit volatile, but can we expect some of the improvement in Corporate to sustain going forward? Then the second question is on IB regulatory pressure? Antony, I was wondering if I could get your current thoughts on the U.S. proposals around legal entity structure for foreign banks and I was wondering if we should be expecting some changes to your U.S. business entity structure.
Antony Jenkins - Group Chief Executive: So on impairment in the non-Retail space. Of course, that tends to be susceptible to more volatility quarter-on-quarter because it tends to be the sort of so-called single names. We did have a very good quarter in the Investment Bank. We should not expect that necessarily to be repeated quarter-on-quarter. But again I think the impairment will be driven by the general macroeconomic environment in which we operate. I'm grateful that we don't have large exposures to things like commercial real estate in the U.K. But from time-to-time there will be challenges and as I said before, the environment is quite muted and therefore susceptible to impairment from time-to-time. But I don't think as we look at it around now we see a material deterioration in the environment and therefore we wouldn't expect a material change to our impairment. What you might see from time-to-time. There is a bit of volatility in the line. In terms of regulation in the United States, the regulation as you know is in the process of formulation, the consultation period has just closed. I did meet with governments really when I was in the states a few weeks ago. It is too early to say by far what the specific output of this will be, but my view is that given all of the changes that we have to make to accommodate the ring fence in the U.K. whatever (Comstar) in the U.S. CRD IV in Europe that we will be able to accommodate those within the Group's structure and that we'll be able to implement them over time in a way that allows us to do that to preserve the benefits of the universal banking model for our shareholders, but I can't be specific, because there is nothing to react to at this point.
Raul Sinha - JPMorgan: If I can just follow-up on the impairment question and on Corporate specifically, there was a little bit of improvement in the quarter, and again I understand it can be volatile, but just in terms of we are starting to see credit availability pick-up in the U.K. and is that any cause for optimism there on the Corporate side, and do you think the European Corporate provisions are now (past their peak)?
Antony Jenkins - Group Chief Executive: We have continued to see improvement in our wholesale impairment levels in Spain, in particular, and we signaled that to you previously and I think we’ve seen moderate improvement in the U.K., but it continues to be quite a challenging environment for Corporates. Corporates in general being conservative, I think that's helped overall impairment in the sector, but as I say I think our general view is that the situation has not changed very much from what we signal for last couple of quarters.
Operator: Andrew Coombs, Citigroup.
Andrew Coombs - Citigroup: Two questions from me please. Firstly, thanks for spilling out the GBP500 million TRANSFORM restructuring cost on Slide 6. Would it be possible to give some guidance on the annual cost saves, which is specific to those actions? So the 2000 headcount reduction in Europe, 1,800 in Investment Bank and so forth. Are those cost saves split in a similar proportion to the restructuring charge. My second question is on capital. I mean to pin down to next paragraph on Slide 32, you state that there will be an extra GBP4.5 billion capital deduction for CRD IV rules on financial holdings, but did you adjust that for management actions? So perhaps if you could just elaborate on exactly what those actions are? Then in the context of the wider discussion on capital and how you believe the FPC and PRA willing to effect those rules when they use their own calculation methodology versus that 7% target that they’ve set?
Chris Lucas - Group Finance Director: Shall I start on capital. If you go to Slide 31, you see on that the GBP4.5 billion of non-significant holdings in Financial Institutions offset by mitigation in the management action they fall basically into two categories. One, improvements in hedging and secondly, just generally a reduced activity in financial stocks, both of those we think are eminently achievable and therefore that we get to mitigate almost fully the impacts of the non-specific holdings of financial institutions, so it's early days. We've disclosed this at the year end, although we had netted the two down. We felt that it was appropriate to show the two numbers growth, but as you can they are included in the fully loaded ratio as it is appropriate.
Antony Jenkins - Group Chief Executive: On the benefit of the cost save, I think we are (sticking with) about 2.5 year payback on the initiative, so I think you believe do the math from that.
Andrew Coombs - Citigroup: Just coming back to the mitigating actions, would there be any revenue attrition associated with those if you have to proceed down that route?
Chris Lucas - Group Finance Director: We would expect they would not be anything significant.
Operator: Chintan Joshi, Normura.
Chintan Joshi - Normura: First question, just wanted to clarify something, the cost run rate that we should be thinking about going forward, you have highlighted to GBP16.8 billion in 2015, about GBP17.5 billion including CPA. If you are thinking about a sustainable cost base, which one of those numbers should we be thinking about?
Antony Jenkins - Group Chief Executive: Well, what we gave is a 2015 number and the GBP17.5 billion is the number that you should think about in terms of what would flow through the P&L.
Chintan Joshi - Normura: So that's something that we can take forward into the following year or we should be thinking GBP16.8 billion as the base?
Antony Jenkins - Group Chief Executive: Well, we've only talked through 2015, so when we get close to 2016 we'll provide you with some more direction on that, but I mean clearly, my view is that the process that we're in here is one that is not just about running a cost program for a three-year period. This is about changing the way we fundamentally run the business and that we are constantly reengineering our core processors in a way that provide a better customer or client experience, greater control and lower operating costs. To do that requires money, but by the time we get to 2015-2016, the benefit of past year savings will go in large part to fund the investments that we have to make to continue to deliver the sort of cost saves that we see, and obviously beyond '15, our view will be (informed) by growth opportunities that we may have and other investments we want to make. So I would focus on '15 at this point.
Chris Lucas - Group Finance Director: You see that in the Strategic Review (tag) that we produced that shows in 2015 the targets is (17.5), which includes (0.7) of cost to achieve for future cost reductions out beyond 2015.
Chintan Joshi - Normura: Second question was in Barclaycards, you're doing quite well on volumes out there, growing that very nicely, but margin compression seems to be an ongoing feature. I remember when you gave an update, you were hoping, I think, into the last year you were hoping that margins will stabilize here and given that there is a kind of ambitious revenue growth target here, I was just wondering what the headwinds from margins are, how much will they continue, just so that we can think about both volumes and margins in this area.
Chris Lucas - Group Finance Director: (In the news) the information at the Group level, which (picks) up the credit cards as well as the mortgages and commercial lending, I think that's probably as far as we're going to go which is that 4 basis points number that I gave you earlier (with increase) on the customer side. I think the overall position looks pretty good though. As I said, the important aspect from my perspective is the hedges are operating exactly as we would expect them to operate. The margin is down slightly because of the competitive pressure, but the volumes are improving. So, net-net, it's slightly positive output story.
Antony Jenkins - Group Chief Executive: I think in that business, we do have good momentum as you said on the volume side and I think the margin picture is stabilizing and when we get to the seminar on Barclaycard, we will talk in more detail about how we foresee the opportunities for that business, the 5% income growth is something – 12% income growth is something which of course we are very happy with.
Chintan Joshi - Normura: If I could just follow-up on Chris Manners question, if I think about traditional banking people (indiscernible), it’s quite below what market expectations are and I can't put a finger on which division is missing expectation if you could help out there?
Chris Lucas - Group Finance Director: When we look at it, we look at slightly different picture to the one we have had. The businesses, I think have performed well and particularly on an underlying basis. So, I don’t think there is much more for us to say.
Chintan Joshi - Normura: Just one request, thank you for head office allocation that really helps see a better picture about the Group, but it also messes a little bit your divisions targets that you had given with the Strategic Review and I was wondering if at half year stage you could update us with what the restated numbers would look like in terms of targets?
Antony Jenkins - Group Chief Executive: Yes, we will be sure to do that.
Operator: Fiona Swaffield, RBC.
Fiona Swaffield - RBC: I have two questions. One was on the strategic review, you talked about businesses you are exiting or I think transforming or transitioning. Has any of that flowed through to revenues already in Q1 so if you're already seeing some offset to revenue growth from that strategy? The second issue is on costs. The performance costs, is most of the 10% decrease due to deferred compensation going down? I'm just trying to look at the GBP18.5 billion for the full year and obviously you are because of seasonality running above that at the moment, I just wondered if you could comment on that?
Chris Lucas - Group Finance Director: The performance costs as you know, is in the accrual at this stage. So trying to split it between deferred and cash for the current year is a level of detail that we'd probably look at, at the half year rather than the quarter. So I think that one should probably be part and we'll come back to it in July-August time.
Antony Jenkins - Group Chief Executive: On the portfolio repositioning, obviously, Fiona, as you know, we've been doing that really for a number of years and we have significantly reduced our exposure in credit market exposures, for example, but I would not say that there is a material reduction in those assets within the quarter that would affect revenue. Obviously, we really began the program in the first quarter. So there is no impact there yet.
Operator: Tom Rayner, Exane BNP Paribas.
Tom Rayner - Exane BNP Paribas: I was also going to start couple of questions on cost. The first one really just follows on I think from Fiona's question. I'm just interested in the Q1 performance on costs, excluding the cost to achieve and just trying to get a sense of how comfortable you are with that performance in Q1 versus the (18, 25) full year target for '13 you set that in the strategic review. I know there is sort of seasonality here, so that's one that if you think that progress is heading very much towards achieving that number. I have a second question on costs within the Investment Bank and if you want that now or after?
Antony Jenkins - Group Chief Executive: So if could have the second question as well, Tom, please?
Tom Rayner - Exane BNP Paribas: Just looking at the combination of the accounting changes and then the reallocation of head office. I mean, for the Investment Bank, it seems to have less revenue broadly unchanged it's pushed cost up and brought impairments down. I'm just wondering if you're likely to sort of recalibrate the cost of net income, net operating income target of 60% to 65% on the basis of all those changes. I'm just thinking on the lines, if the comp ratio does get down to the mid-30s then even with the restatements of 60% or 65% possibly doesn't look that challenging as a target any longer. So I was wondering if you could comment on that as well please.
Antony Jenkins - Group Chief Executive: I'm smiling as they are not looking very challenging comment?
Tom Rayner - Exane BNP Paribas: If you can get the comps down, I mean that might be the challenging thing?
Antony Jenkins - Group Chief Executive: I understand the arithmetic. So let me just talk about cost in general. I think we have successfully run a cost reduction program in the Group. We started in 2011 under Bob's leadership, we called it Project Green. We targeted taking GBP2 billion worth of cost out. We've done that successfully and you could actually see that when you adjust out the cost to achieve in the year-on-year declining cost, but that is different from what we are talking about now. We're talking about a structural transformation in the cost base. That requires a lot of very detailed work to look at how our core processes operate, identify the activities that really drive costs, track them and track the gradual reduction of the work. So if you don't reduce the work, you can't reduce the cost. I would say that we've made very good progress in the last two or three months in put in place the architecture to allow us to do that. So we are very much committed to the cost reduction targets that I gave in February and I think we are making progress against that. Of course in any given quarter, things may move against your FX rates in particular, affected the cost number in this quarter but we are still committed to that overall direction. As you have observed, we have pushed out a lot of the cost across the Group, I think that's very appropriate. I certainly have sympathy for the position of our investors is what the business cost structure to reflect more accurately the true cost and the consequence of that of course is that the ratios have deteriorated, but we remain committed to the 60, 65 ratio over the medium term.
Chris Lucas - Group Finance Director: One last comment, I think when we look at costs overall, and I am looking at Page 6 of the IMS, you see a degree of seasonality in the operating expense line excluding levy and TRANSFORM, so I think I would hesitate to annualize because of that seasonality, the first quarter has always been richest from a cost spending perspective.
Tom Rayner - Exane BNP Paribas: Which is one interesting because the excluding cost to achieve, it looks like Q1 was about 25% of your target which is that a seasonally adjusted high quarter, then possibly bodes those quite well for how you are getting on, is that fair enough?
Chris Lucas - Group Finance Director: I would just hesitate to use the quarters as an annualized.
Antony Jenkins - Group Chief Executive: It's tempting to do; I understand it's tempting to do that math by. I'm tempted to do it myself on occasion. So all I can say is there is a lot of work to be done to the level that cost commitment that we made and as far as I am concerned we're right on track at this point for those commitments and I think we should just periodically in these conversations come back to the proof points around that.
Operator: Michael Helsby, Bank of America Merrill Lynch.
Michael Helsby - Bank of America Merrill Lynch: I did ask two, but unfortunate I've got another one now – Antony, can I just get you to clarify that point that you just made because you’ve completely confused me. I don’t see how you can be committed to a 60 to 65 cost income ratio in the Investment Bank, when the overall Group you've targeted of 65. Did you just slip off there or you're implying that the cost income ratio outside of the Investment Bank is going to be materially lower than 55?
Antony Jenkins - Group Chief Executive: That's always been our commitment on the Investment Banks to have a …
Michael Helsby - Bank of America Merrill Lynch: You didn’t really restate the 60 to 65 at the Strategy Day, you just talked about the comp ratio going from sort to the low 40s down to 35, clearly your target in infrastructure segment. So I’d always assume that naturally the cost income ratio would be going lower?
Antony Jenkins - Group Chief Executive: No I think it's – that's the commitment we’ve made. We’ve made the task harder by allocating at more essential cuts. You'll recall that the cost-to-income ratio in business like Barclaycard and the Retail Bank are lower than that, so we remain committed to those numbers.
Michael Helsby - Bank of America Merrill Lynch: In that case, can I just ask the two questions I was going to ask. Firstly, just to clarify on the risk-weighted assets, was there any RWA improvement from the management actions that you had identified in the context of legacy assets in Q1, that's question one. Then just on – in the sort of non-Investment Banking revenues, clearly Africa was weak Q-on-Q and you talked about the FX and volumes, but costs actually went up pre the levy Q-on-Q, so I was wondering if you could just talk more about that pre provision movement in Africa which was actually quite weak relative to certainly my expectations?
Chris Lucas - Group Finance Director: Let me start with risk-weighted assets. As you see, the move is from 387 to 397 billion and 8.5 of that is foreign exchange. There is some small amounts of – what would be described as business activity adjustments, but it is relatively small, it doesn't (indiscernible) a number but I think it's the reflection of one quarter rather than what (overall) programs are heading.
Michael Helsby - Bank of America Merrill Lynch: So basically nothing really. Fair enough.
Antony Jenkins - Group Chief Executive: On Africa in specific, we have experienced some decline in volume really during the course of last year and into this year we believe that that is stabilizing and we should see better performance going forward. On the whole, that's specifically to do with our Retail business in South Africa. On the whole, our African performance was good. We expect stronger performance prospectively.
Michael Helsby - Bank of America Merrill Lynch: Then the movements in cost, because the cost line clearly because FX drove revenue down, but the cost went up even more on an underlying basis. Is there anything to talk about there, because you didn't really mention in the commentary in your statement?
Antony Jenkins - Group Chief Executive: Yeah, I don't think that we should read too much into that, Michael. I think it was just an in-quarter movement. I don't think that's a trend.
Operator: Ian Gordon, Investec.
Ian Gordon - Investec Securities: If I could have just three quick ones, please. Firstly, on U.K. Retail, in terms of balance sheet settings, equity (or MG) acquisition, the numbers look pretty static and I guess that's actually outperformance against pretty dire industry numbers than today's BBA numbers are no exception. I guess my question is, what if anything does this morning's FLS announcement do for you other than extend the period of contingency funding requirement, which you probably don’t need and may or may not use? Second question, again focusing on the overnight announcements, the email which came out from (Billy Bank) seemed quite smug in terms of the scale and scope of redress (office) so far, wondered if you've got any comment on that. Then thirdly, forgive me, I haven't actually found your normal geographic split of revenues, but my question was more specific to Barclays Capital. Can you just provide any commentary on the split by geography of revenues either in this period or forward-looking, where I guess you've had a bit of FX tailwind from the currency movements?
Antony Jenkins - Group Chief Executive: Let me deal with those. Firstly on the Retail Bank. You are right to say that the market is quite low growth, and I do think that we’ve got more than our fair share of business across the major product categories whether that’s savings, mortgages, loans, et cetera. Funding for Lending is a scheme that we’ve supported. We think it's important to make sure we're doing everything we can to support the British economy. But as we've said before, we don't need the liquidity, we've got plenty of liquidity. The scheme change that’s just been announced and we’re looking at it quite closely, but I would expect we would continue to support the Funding for Lending Scheme. On interest rate swaps, I think that (Billy Banks) has been quite complementary of how Barclays has handled the processing of claims and the engagement that we've had with that lobby group. We are just beginning to pay out the first claims on this. We have an enormous focus on addressing these claims not only fairly but also expeditiously. They are quite complex claims, very different from PPI, for example. Every claim has on average about 3,000 pages of documentation that needs to be reviewed. As we said in our announcements, we don’t see the need to change our provision at this point. Finally, on the geographic split. Chris, do you have a comment on that?
Chris Lucas - Group Finance Director: Yes, end of the first quarter or the first quarter broadly as follows, about 50% in the U.S., 40% in the Europe and in the U.K. and the 10% through the rest of the world.
Operator: Peter Toeman, HSBC.
Peter Toeman - HSBC: At the Strategy Day, you talked about the reduced costs of the U.K. ring-fencing regime and I think you also indicated that there is a high capital requirements for – dedicated capital for U.S. subsidiaries wouldn’t be too onerous in P&L terms as well. So I just wondered if you would highlight why you are thinking about the cost of the ring-fence has now become more sanguine, the data has become sanguine?
Antony Jenkins - Group Chief Executive: I think our view on that hasn't really changed from what we discussed at the Investor Day. I do think that as the regulation in general becomes more clear and the timeframes are also clearer. We have a better sense of how we would run the ring-fence. So I think it’s possible that we will be able to operate what we have described in the past as a narrow ring-fence with basically retail, deposits, current accounts, and small business accounts in there and to match it up with appropriate assets. We also think that the market has begun to price in the funding costs around ring-fence, because as you see we have raised long-term debt in the last year, which would exceed the period in which we got to implement the ring-fence. So we do think that it’s been reflected in our cost of funding. That's really what we said in February and don’t have anything more to say at this point or new information.
Operator: Christopher Wheeler, Mediobanca.
Christopher Wheeler - Mediobanca: A few questions, but hopefully quick. The first one is on the transformation costs. Obviously the GBP500 million charged in the first quarter are you expecting to bring forward much of the GBP1.7 billion, which is planned for the next two years or are you assuming you'll just stick around the GBP1 billion for this year. That's the first question and linked to that really (as well) will be charged is slide 23 a good guide or can we start to see some of that shift down to the European RBB that's the first question. Second one on the Investment Banking, equity is obviously an excellent performance, up 19%, I think if we look to hold that that peer group so far they fallen 6% quarter-on-quarter. You said market share gains, is that mainly in the United States on the back of (external) IPO performance or is it more broadly base than that. Then staying on IB, you at the investor meeting in February talked about aiming for 35 – I think a 35% compensation ratio, but that obviously against the 39% under the old accounting regime. Where are you on that? Has that changed at all, and then finally just on Wealth Management obviously Tom's departure last week raised a few questions about the future of the plans you had for that business. Could you perhaps confirm that you expect to continue with your plan of building out Project Gamma and perhaps give us a feeling for the sort of person you are looking for to run that business going forward?
Antony Jenkins - Group Chief Executive: Yes, so that's quite a lot of questions there. Let me just deal with them in no particular order, on the equities we are very pleased, it really was across the board, not just in the U.S., but also in our Asian business in particular. On the comp to net income ratio number that we signaled for the Group, we were talking about the mid-30s. We're not changing our aspiration there. On Wealth, Wealth is a business we remain committed to. I do think there are opportunities for us to further leverage capability across the Group, but that will only help us to execute the strategy more effectively and in terms of costs, Chris?
Chris Lucas - Group Finance Director: Cost to achieve targeted for the current year is a GBP1 billion, of which as you’ve said we spend GBP514 million in the first quarter, the remaining GBP500 million will be over the second, third and the fourth quarters.
Christopher Wheeler - Mediobanca: So just to go back there, Antony, I think you said the 30, the mid-30s comp ratios for the whole Group. I think if you look to the slide, I think it was 44 in your Strategic Review specifically focused on the Investment Bank?
Antony Jenkins - Group Chief Executive: Yes.
Operator: Fahed Kunwar, Redburn.
Fahed Kunwar - Redburn: So I’ve couple of questions on capital. The first question is on the PRA and the FPC, obviously the GBP25 billion capital shortfall identified. I was just wondering where in the process you guys were with the PRA into discussions around filling that shortfall and if you expect that number kind of allocate you to increase, obviously it didn’t test creating but risk-weighted ex-Basel 4, but do you expect it to increase once they’re doing or the timeline is on that? The second question is following up from earlier and are there any other netted items within the kind of fully loaded Basel 3 ratio and obviously, they are non-significant holdings as a netted item, but certainly I was wondering there are were any other nettings in the kind of detail you gave on Page 31?
Chris Lucas - Group Finance Director: The answer to the second part of the question first is no. So there are no other nettings that we’re aware of and looking at that, there aren't any concerns of why they are more generally on capital. We speak as you expect to the regulators on a process continuous basis about a lot of things including capital plans, including capital raising, including distributions and that has continued and I think if we had anything specific to say to you, we'd have said it. I think we have otherwise (indiscernible) dialog with the regulators and we will update you as and when it's appropriate.
Antony Jenkins - Group Chief Executive: Thank you very much everybody for joining the call. We really appreciate the time. Thank you.