Barclays PLC Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Q1 Financial Performance: Barclays generated a 14% return on tangible equity in Q1, with total income at £7.7 billion. The quality and stability of income continue to improve, and guidance for 2025 NII has been upgraded for Barclays UK and the group.
• Efficiency Savings: Around £150 million of circa £500 million growth cost efficiency savings were released in Q1, structurally improving the cost base.
• Business Simplification: Announced a long-term partnership with Brookfield to transform payment acceptance business and completed the sale of the German consumer finance business.
• Income and NII: Group net interest income increased 13% year-on-year to £3 billion. Barclays UK now expects over £7.6 billion of NII in FY '25, driven by stronger deposit trends.
• Capital Position: Ended Q1 with a CET1 capital ratio of 13.9%, top of the 13%-14% target range, supported by strong liquidity.

Segment Performance

• Barclays UK: Q1 RoTE was 17.4%, total income rose 14% year-on-year to £2.1 billion. Net interest income in Barclays UK is expected to be over £7.6 billion in FY '25, up from circa £7.4 billion previously. The integration of Tesco Bank is progressing well, with improved deposit mix supporting higher NII.
• Investment Bank: Q1 RoTE was 16.2%, total income increased 16% year-on-year, total costs rose 5%, resulting in a cost-to-income ratio of 54%. Markets' income was up 16% year-on-year, with FICC rising 21% and equity's income up 9%.
• U.S. Consumer Bank: RoTE was 4.5% in Q1, though operational performance is progressing. The business is focused on increasing digital adoption and driving efficiency, with net receivables growing.
• Private Bank and Wealth Management: Q1 RoTE was 34.5%, client assets and liabilities grew, income growth exceeded cost growth, with a cost-to-income ratio reduction to 68%.
• UK Corporate Bank: Q1 RoTE was 17.1%, income growth 12% exceeded cost growth 3%, leading to an improved cost-to-income ratio of 53%, with NII up 23% year-on-year.

Guidance

• Upgraded 2025 NII guidance for Barclays UK and the group due to favorable deposit volumes and mix.
• Expect net interest income to grow further, with market revenues roughly commensurate with volatility.
• Reiterate 2025 guidance of approximately 11% return on tangible equity and a progressive capital distribution.

Risks

• Current market volatility and its impact on economic growth and business activity.
• Potential for transactional and lending income to slow as companies and individuals become more cautious.
• Uncertainty around macroeconomic conditions affecting credit performance and impairment charges.

Question and Answer

Q: Guy Stebbings from BNP Paribas asked about U.S. consumer bank impairment and growth strategy.

A: Anna Cross and C.S. Venkatakrishnan responded discussing consumer behavior, macroeconomic forecasts, and growth plans, emphasizing the robust performance of the U.S. consumer bank portfolio and continued growth intentions.

Q: Benjamin Toms from RBC asked about SRT transactions and ring fencing regulations.

A: Anna Cross and C.S. Venkatakrishnan responded on SRT concerns, stating Barclays does not finance its own SRT programs, and on ring fencing, reiterating opposition to relaxation to maintain deposit protection.

Q: Chris Cant from Autonomous asked about RWA developments and U.S. tax impact.

A: Anna Cross responded on RWA management within the Investment Bank, emphasizing nimble deployment within target ranges, and on U.S. tax impact, noting short-term and long-term nuances with deferred tax assets and ongoing uncertainty.

Q: Amit Goel from Mediobanca asked about 11% RoTE guidance and hedge benefit.

A: Anna Cross reiterated the 11% RoTE guidance as unchanged, and discussed the hedge benefit beyond 2026, noting expected continued momentum in hedge income but no specific disclosure on 2027 yields.

Q: Alvaro Serrano from Morgan Stanley asked about U.S. cards targets and IB performance.

A: C.S. Venkatakrishnan and Anna Cross responded on U.S. cards growth strategies, emphasizing organic growth, risk transfer, and portfolio diversification, and on IB performance, highlighting market revenue strength driven by investments and stable risk management.

Q: Chris Hallam from Goldman Sachs asked about initiatives and U.S. transaction banking deposits.

A: Anna Cross and C.S. Venkatakrishnan responded on cost initiatives and focus on cost income ratio, and on U.S. transaction banking deposits, noting growth from client choice and cautious cash deployment.

Q: Perlie Mong from Bank of America asked about U.S. cards margin and 2026 guidance.

A: Anna Cross discussed U.S. cards margin hedging and income offset, and reaffirmed 2026 guidance with confidence in operational execution and diversified income streams.

Q: Edward Firth from Citigroup asked about UK non-NII and RWA trends.

A: Anna Cross and C.S. Venkatakrishnan responded on UK non-NII guidance and RWA stability, noting no material story in UK non-NII and stable RWA management within target ranges.

Q: Jonathan Price from Jefferies asked about capital and IFRS 9 sensitivity.

A: Anna Cross and C.S. Venkatakrishnan responded on capital generation and prudent management, and on IFRS 9 sensitivity, stating it as a downside bias sensitivity not predictive of future outcomes.

Q: Robin Down from HSBC asked about Barclaycard UK revenue and structural hedge reinvestment.

A: Anna Cross responded on Barclaycard UK revenue as a lead-lag effect with interest earning lending expected in later years, and on structural hedge reinvestment, noting a circa 90% reinvestment rate with stable hedge notional.