Barclays Bank of America 31th Annual Financials CEO Conference

Yeah. Thanks, Perlie, and thank you for having us here. I'm going to be very consistent here and say that what we see is a very resilient backdrop for both U.K. consumers and U.K. corporates, and we shouldn't be surprised because nominal GDP is over 4%. It's the highest in the Eurozone, or certainly amongst the highest. We see real wages growing in the U.K., very low levels of unemployment, and that remains the case. So that performs a very consistent backdrop to what we're now seeing, which is quarter-on-quarter loan formation both in households and for corporates.

And I think it's really important to understand where the U.K. starts from. We shared a slide at our Q2 results, some of you won't remember it, but actually showing the relationship between debt to GDP for U.K. corporates, and that is at an all-time low, which shows you that the capacity to take on additional lending is really there, Perlie. The other thing I'd just call out is the necessity is also there because of this demand to increase productivity, the demand to respond to the technology that we all have in front of us. So we see good loan formation. What they're telling us is it's about technology spend. Then if I look more to the government, so far so consistent, very much a focus on growth and investment. We hope that continues. We, like everyone else, are waiting for the budget.

We've had a few interactions so far, and certainly the message seems consistent. But I'd just remind everybody that the surcharge is levied on U.K. profits, so to the extent that there is a change in the surcharge, which only generates GBP 1 billion of tax receipts for the U.K., so it's not a big number, but for us, each percent is worth about GBP 35 million. So it's not a significant impact to our returns at all in the U.K. or more broadly for the group. What's much more important, we think, is the signaling effect of the commitment to growth.

Okay. The first thing to say would be we don't observe any pull forward. So we continue to see very good loan formation. You can also see that in the Bank of England data that will have come out for July. So that confirms that the Q2 trends have continued. From our perspective, just as we look at the, so if I take it both sides of the balance sheet, if you like, both retail lending and wholesale lending, in some ways the thematics are the same, which is the story of self-help. So when we gave our target of greater than 5% CAGR, and in fact, when we gave our target of GBP 30 billion RWA, the rates in the U.K. were 5.25, and the levels of GDP were certainly not high.

This is a story of self-help, and the way that happens in retail is if you think about where we were and where we are now, we've gone from a single-brand entity to a multi-brand entity in 2 and a half years. We're using multiple brands across our businesses. Specifically in mortgages, the Kensington capability allows us to operate across a much broader spectrum of the market. We previously had a flow of about 13% of high loans value, now it's 21%. Higher margin, and a much broader customer proposition. That's also helped by the technology that we've put in place. That means that for the last 10 quarters, for 9 of them, our flow share has been higher than our stock share. We're taking share in mortgages because of what we've done. Same in cards. We're deploying both Tesco and Avios and Amazon.

Corporate, I think, is the piece that perhaps is most misunderstood for us. If you just, and I appreciate this is difficult to see because of the way we report, but Barclays has the highest level of corporate deposits of any bank in the U.K. Remember, our business is split between business banking in the U.K., BUK, corporate banking, and international corporate banking. We cover everything from the smallest organizations to the ones who need the most complex IB support. We are ideally placed to react to any increase in corporate loan demand, which is what you're now seeing. For us, what that means is that as we've changed our strategy here and sought to lean in, we've gone from a loan-to-deposit ratio in U.K. corporate from 31% to 35%.

That tells you that our opportunity set here remains very, very significant because most of our peers are operating between 50% and 75%. How have we done that? Again, it's technology capability. Again, it's change in process and a real focus on this part of the business. I want to be really clear, this is not a change in risk profile in either retail or in corporate. The amount of risk that we're holding on the balance sheet remains broadly consistent with where it was.

We did anticipate a competitive market in the U.K. in 2026. You might recall that we gave a range of GBP 8.1 billion-GBP 8.3 billion. Actually, we are bang in the middle of that range at around GBP 8.2 billion of NII for BUK. It was really the swing factor there was really how the deposit market emerged. It is broadly as we expected, but it is competitive. Why are we seeing that competition? It could be for one or two reasons or maybe both. The first is clearly fixed term deposits, which is where that intensity of pricing is, are used for funding. What we see is simultaneously high rates across the industry with also heightened levels of covered bond issuance across the industry.

That would tell us that there is a funding element to this, which again, is consistent with what I said about the lending demand more broadly in the market. For us, we are in a good position here because, well, firstly, you will note that our covered bond issuance has been around GBP 1 billion over the last few years. Secondly, from our perspective, the BUK loan-to-deposit ratio is less than 100%, it is 90%. We are really able to lean on the second factor, which is relationships. Our objective for BUK has been really to price and preserve with a relationship lens on it. Worth just thinking about, why is that retail relationship or that deposit relationship so important? Because that is the place from which you access everything for that customer.