Barclays PLC 2026 Q3 Earnings Call

Good morning, and thank you for joining the Barclays results call for the third quarter of 2026. In this call, and in our full year results discussion in February 2027, we will supplement our usual discussion with two features. First, we will explain the benefits of the investments which we have made to date, and which are delivering the results that we expected. Second, we will provide greater insight into the components of our cost profile and trajectory. This will illustrate the operational efficiency which we are driving for, particularly from technology, and it will show our future ambitions. I will commence with a brief review of results, followed by a detailed discussion from Anna, and then return to these two features. I am pleased with our year-to-date performance, and I am confident in achieving our primary financial targets.

Our income in the third quarter was £7.4 billion, up 3% year-on-year, and we reduced the cost income ratio to 62% for the quarter and 57% year-to-date. We grew profit before tax in the quarter by 12% to £2.3 billion, and we delivered an RoTE of 11.7% in the quarter and 13.8% year-to-date. Given our returns and our robust CET1 ratio of 14.2%, we are announcing a £500 million share buyback. This brings year-to-date distributions to £2.8 billion, up 47% from the same period last year. Our earnings per share is up 18% year-on-year for the third quarter and on track for a third consecutive year of 20% growth in EPS. We remain very confident in achieving the group RoTE target of greater than 12% this year, having achieved 12.4% in the last 12 months. Let me share four main reflections on this quarter.

First, the investment that we have made in and the repositioning of our UK retail and corporate franchises is driving above market growth. All three businesses had an RoTE of greater than 20% in the third quarter. Second, I am pleased to see the continued results of our investment in the equities franchise in the Investment Bank. Their strong revenues this quarter have helped balance the somewhat disappointing results from fixed income intermediation. Third, increased regulatory clarity is providing us with greater capital flexibility, and we will update on our expected CET1 operating level at the full year results. Finally, as I will discuss later, multi-year investments in our businesses are delivering consistent returns and growth. This is the alpha we are creating. Including these investments, we are going to provide you with a clear path for absolute cost and efficiency savings in 2027.

I will return to this at the end. First, however, Anna will take you through the financials in detail.

Over to you, Anna. Thank you, Venkat, and good morning, everyone.

With one quarter left in the original three-year plan, we are confident in delivering all group targets. As I take you through our results, I will focus more than usual on costs. Starting, though, with income. Group income grew 3% year-on-year in Q3, on track for the circa GBP 31.5 billion target in 2026. This implies full year growth of circa 8% versus the more than 5% CAGR target to 2028. We are building more consistent returns by growing stable income streams. These now cover 125% of group costs versus around 100% before 2024, having grown for six consecutive years. This is underpinned by group NII, which has been around 50% of total income consistently since 2023. We are confident in delivering the 2026 group NII target, with 7% year-on-year growth in Q3. We expect NII growth to continue, underpinned by two levers.

First, the quality of deposits, particularly in the U.K. These support structural hedge income growth until at least 2030, as I will discuss later. Second, ongoing lending momentum. Starting with U.K. deposits. Around 80% of group deposits come from U.K. clients, including in Private Bank and Wealth Management and the International Corporate Bank. We bring these together for the first time on the left, with total deposits up 3% year-on-year. Barclays UK retail deposits also grew 3%, as shown on the top right. Current account customers hold around 90% of Barclays branded U.K. retail deposits, with current account balances stable since 2024, as we show on slide 37 in the appendix. Given our strong funding positions, we take a relationship-led approach to savings, with Premier accounting for 90% of Barclays brand ISA growth year to date. Retail deposits are only one part of the story.

The bottom right now shows the corresponding spread to the U.K. corporate deposits. We are the U.K.'s largest corporate bank, with 220 billion of deposits across three divisions, Barclays UK Corporate Bank, and ICB in the Investment Bank. These have grown 4% year on year. Current accounts are stable and support deep relationships with around 80% of UK Corporate Bank clients banking with us for more than five years. The breadth and quality underpin the structural hedge shown on the next slide. The structural hedge provides stable income and predictable growth for all divisions. Average swap rates of 4.2% year to date exceed the 3.5% planning assumption, supporting additional NII in future years. Given prevailing and expected swap rates, hedge income is likely to grow until at least 2030, as you can see from the updated maturing yield disclosure on the left.

Whilst higher rates undoubtedly help structural hedge income, we are also diversifying NII by growing lending. Total U.K. lending grew by 7%, consistent with a more than 5% target from 2025 to 2028. With one quarter to go, we have deployed GBP 28 billion of U.K. business growth RWAs towards the circa GBP 30 billion target for the three years to 2026. Mortgages grew by 7% year on year with GBP 11 billion of gross lending in the quarter. Corporate and business banking lending grew 13% year on year, excluding the run-off portfolio. Above-market growth in UK Corporate Bank reflects investments since 2023, helping to attract 1,500 new clients with around 40% borrowing from us. More on this from Venkat later. In summary, our progress in both deposits and lending is driven and sustained by investment in the business in both service and capabilities. Moving on to costs. When we think about costs, we distinguish running the bank from investing in the future.

In running the bank, we aim to drive as much operational leverage as possible by delivering gross efficiencies to offset costs from business growth, inflation, and BAU investment. We distinguish this from strategic investment to increased returns. Run the bank costs have increased by GBP 3.3 billion, of which GBP 0.2 billion relates to the acquisition of Best Egg and GoHenry. Put differently, gross efficiencies have meaningfully offset additional costs from business growth, inflation, and BAU investments. This is despite GBP 0.3 billion of additional performance costs given 8% year-to-date income growth in the Investment Bank versus the low single-digit target. We also increased investment by GBP 0.2 billion year on year to harmonize systems and processes and growing fee businesses. This results in exit rate costs of circa GBP 18 billion for 2026.

As outlined last quarter, we are also deliberately spending an additional GBP 0.3 billion in half two to structurally reduce costs supported by technology deployment. Inclusive of this, the Q1 motor finance provision and the change to material risk-takers compensation mix, we expect circa GBP 18.5 billion of costs in 2026. This is consistent with the high fifties cost-income ratio target. We said in February that costs would grow modestly from 2025 to 2028, and the group would deliver positive operating jaws each year. These expectations are fully intact based on statutory total costs. So what drives this? For the group, we expect run the bank costs to be flat or lower in 2027 versus 2026, reflecting higher anticipated gross efficiencies. This creates capacity for GBP 0.4 billion of planned additional investment within our modest cost growth guidance. In absolute terms, we expect statutory costs to fall to circa GBP 18.4 billion in 2027.

Cost income ratio remains our North Star, so we would expect to flex business growth costs to the extent that income is higher or lower than expectations. As a result, we are confident in making meaningful progress next year towards the low fifties cost income ratio target in 2028 from high fifties ratio this year. Our confidence in delivering these commitments is underpinned by the generation of cost efficiencies. In the past two years, we have delivered around GBP 0.7 billion of gross efficiency savings annually, facilitated by GBP 0.3 billion of SCAs in the prior year, driving positive operating jaws each year. This was our planning assumption for 2026 to 2028. Having increased this for 2026 alone, we expect more than GBP 1.1 billion of gross efficiency savings in 2027. These actions involve an expected reduction of circa 5,000 full-time employees.

Around 60% of the group actions relate to support functions, including fewer developers as AI makes our people more productive. Nowhere in the Bank is this more relevant than in Barclays UK, where we have taken more structural cost actions than planned in 2026. Whilst this acceleration means I no longer expect Barclays UK costs to fall in 2026 versus 2025, we are more confident in reducing 2027 and 2028 below the 2025 level. This is enabled by improved customer-facing technology, which has reduced call center volumes by 10% in the past year, while technology improvements within call centers have increased colleague productivity. Changes to the branch staffing model have also reduced employees per branch by around 10% in the past year, with colleagues focusing on higher value support.