Good afternoon, everybody. Welcome. Thank you. Thanks for joining us today in person and on webcast for the Investment Banking Deep Dive. I'm joined today in this by our two co-heads of the Investment Banking division, Cathal Deasy and Taylor Wright, to whom I'll hand over shortly. Before that, I wanted to remind you of the key messages from our investor update in February as it concerns both this business and how it fits into the overall investment bank. You know, our investment bank has strong foundations with the right scale and breadth to succeed among the largest global peers. And we are very focused on our core strengths, driving diversified income across different products and geographies. Around 55%, as you can see, of our income comes from the Americas, which is the biggest financial market in the world.
We have top-tier businesses, and our strong global ranking reflects our status as the only non-U.S. domiciled investment bank that can consistently compete with the U.S. peers. We believe that our investment bank is both competitive and at the right scale. The resegmented investment bank, as we presented to you, accounted for 58% of the group's RWAs at the end of 2023, and it's expected to reduce to about 50% of the group RWAs by 2026. We will achieve this by growing capital allocation to other areas of the Barclays Group. In the investment bank's RWAs are expected to remain broadly stable at the 2023 year-end level, absorbing regulatory RWA inflation. A key priority for the investment bank is to improve RWA productivity.
And as you can see from the top left of this page, over the last few years, we've increased RWAs in the Global Markets business and kept the ratio of income to RWA relatively constant. In contrast, on the top right, the RWA productivity has declined as RWAs grew in investment banking due to income mix and other factors, which Cathal and Taylor will address. Going forward, we expect to deliver a high single digit income annual growth over through 2026 in the investment bank. We expect over half of this to come from execution of initiatives that we control, including over 700 million GBP of additional income from investment banking. We expect the remainder to come from a normalization of the industry wallet, where we believe our assumptions are realistic.
Over the past three years, we have invested deliberately in the investment bank, both in markets and in investment banking, to the tune of about GBP 3 billion of cash investment. In markets, the vast majority of which of this was in Technology spend. In investment banking, of course, is much more of the human capital business, and in 2023, we took advantage of a quieter business environment to reposition the business and to invest in talent in our focus sectors and products. We are now monetizing these investments and intend to grow future income with modest cost growth expected across the investment bank over the three-year period. We will continue to make focused investments in our client franchise and expect this to be self-funded by efficiency savings.
Overall, we expect to deliver an improved cost-income ratio for the investment bank from 70% at the end of 2023 to the high fifties by 2026. Let me now take a moment to remind you of our targets at the investment bank level, providing further context for Cathal and Taylor's presentation. We intend to improve the investment bank's ROTE to be in line with the group target of above 12% by 2026. Our high single digit annual income growth target is firmly predicated on well-defined initiatives which are in our control. The income growth target monetizes investments in cost and capital, which we have already made, driving positive operating jaws and resulting in a cost-to-income ratio in the high fifties.
We are keeping RWAs broadly stable over the life of this plan, thus limiting the proportion of the investment bank's RWAs to the rest of the group to around 50% by 2026. As you see, in the first half of this year, and as Cathal and Taylor will talk through the presentation, we are already making progress on this through disciplined management of the business. With that, I'd like to introduce our co-heads of investment banking, Cathal Deasy and Taylor Wright, to take you through the remainder of this presentation. Cathal and Taylor are deeply experienced leaders with M&A and ECM heritage, who have a disciplined and clear view of the steps which we need to take to run this business to meet our commitments to you, our shareholders. Cathal, over to you.
Thank you, Venkat. Good afternoon, and thank you for joining us today. Taylor and I look forward to updating you on the investment banking franchise, and we've got two key messages we'd like you to take away from today's presentation. Number one, we're disciplined stewards of capital... and number two, the actions that we are taking will increase the returns of the investment banking franchise sustainably, and importantly, in support of our investment bank and group targets. On the slide, you can see that the investment bank generated 11 billion GBP of income in 2023, 7.2 billion GBP from global markets and 3.8 billion GBP from investment banking, which is the topic that we will cover today. Now, let me draw your attention to the words at the bottom of the slide.
I cannot emphasize enough the significant and accelerating partnership we see every day across investment banking and global markets in support of our clients. You will see the handshake icon throughout our presentation, reflecting how fundamental this is to our success of the business and how deeply ingrained the partnership is across the investment bank. Taylor and I are focused on delivering for three key stakeholders. Our clients, being clear on who they are and being relentless in serving them by aligning the full capabilities of the firm behind them. Our colleagues, they allow us to differentiate with our clients. We want to provide them with a franchise that allows them to do so consistently, while also supporting them to grow and develop successful careers at Barclays. And importantly, our shareholders. For us, this defines our North Star of delivering attractive returns on a sustainable basis.
Now, just a word in terminology. We're going to use the term investment banking in a couple of different ways during the course of the presentation. First, in referring to the business that Taylor and I are responsible for, investment banking, and second, the activity of investment banking, which are the fee-based businesses of the firm. Taylor will take you through where we have come from as a business, as well as the challenges that we're proactively addressing. Taylor.
Thank you, Cathal. Before we get into the detail of the presentation, I want to direct your attention to slide eight. Here you can see that between twenty nineteen and twenty twenty-three, while the revenues in investment banking remained relatively consistent, income over average RWAs and investment banking fee share declined. During today's presentation, we're going to discuss how we intend to reverse these trends. In fact, over the past eighteen months, we've already made many of the changes required to do so. We're also encouraged by our first half performance, as well as some of the early proof points that we're seeing, and Cathal will take you through some of those as we go through today's discussion. All that having been said, we clearly have a lot of work ahead of us.
When Cathal and I started as co-heads of investment banking in March 2023, we inherited two businesses that historically had been managed independently. The first is a full service scaled investment bank that provides advisory, capital markets and risk management services to our clients globally, and the second is an international corporate bank, or ICB, anchored in the U.K. with a global footprint, serving financial institutions and large corporate clients. Each is a good business in its own right, but they were siloed. As an example, each business had its own set of priority clients, investment priorities, and balance sheet commitments. We've now brought these two businesses together, and by orienting around a defined set of shared priority clients, we're able to ensure that we're allocating our human, intellectual, and financial resources appropriately.
It also makes it simpler for clients to interact with Barclays, and over time, it will enable us to deliver more solutions, further deepening those client relationships. So our clients enjoy coordinated delivery of complementary products and services, and our shareholders will also benefit from growth and complementary income streams, consisting of the highly recurring income from the ICB and the fee-based income from investment banking, which, when paired together, reduce the overall volatility of the business, as you can see from the right-hand side of this slide. Now we'll look a bit more closely at the two individual components, beginning with Barclays' traditional fee-based investment banking business. Our geographic fee footprint is oriented towards the most profitable market for investment banking globally, namely the U.S., where we earn about two-thirds of our revenue.
As you can see from the right side of slide 10, on this basis, we look very similar to the top 5 U.S. investment banks. Moving back to the left side, you can also see that we consistently have the highest fee share of any global investment bank outside of these U.S. competitors. At the product level, we have a top 5 DCM franchise, and we've continued that momentum in 2024 with top 5 positions in both investment grade and leveraged finance. We also have a top 5 financial sponsors franchise. Maintaining leading positions in these areas is core to our strategy, but we need to grow other products around them. Specifically, our rankings of number 8 in announced M&A and number 7 in ECM year to date will need to improve as we aim to rebalance our business mix.
Importantly, as you heard from Cathal, and you can see from the handshake icons on the slide, the investment banking business is underpinned by a strong and collaborative relationship with global markets. Markets distributes the loans and securities that investment banking originates, and we jointly originate equity, rates, and FX derivatives, as well as equity financing transactions. Now let's look at the International Corporate Bank. The ICB provides corporate lending and transaction banking services to our financial institution and corporate clients globally. These products and services are core to how our clients manage, operate, and finance their businesses each and every day. They promote long-term sticky relationships, and over 80% of the related revenues are stable and recurring. ICB's footprint is global and aligned with that of the investment banking business.
In the U.K., where we serve FTSE 350 companies and multinational subsidiaries, the business is at scale and has the full suite of capabilities that our sophisticated clients both require and expect. In Europe and Asia, which are both much bigger wallets than the U.K., we're expanding our presence, growing regional capability and scale, and in the U.S., which is the largest addressable market, and where over 40% of our priority clients are based, we presently generate less than 10% of our ICB income, so this is a real focus area for us over the three-year plan. Here, we are building out our transaction banking capabilities to enable us to do more for our existing lending clients, delivering them more products and thereby improving returns. These capabilities will also help us win new clients, driving further income growth more generally.
Finally, our transaction banking capabilities span both the ICB and the UK Corporate Bank, creating platform synergies from shared technology and infrastructure across these two businesses. I'm now gonna turn to the four key historical challenges that we're focused on addressing, and I'll start now on slide 12. While we're presently at scale in the right markets and have strong foundational capabilities, the business has underperformed in recent years. First, from 2019 to 2023, we lost one hundred and ten basis points of global fee share. Over that period, M&A fee share declined by one hundred and thirty basis points as a result of a combination of attrition and inconsistent prioritization of advisory services.
ECM share also declined by thirty basis points, as our sponsor business was insufficiently integrated with our individual coverage teams, leading to less success than we would like in sponsor exits by IPOs. We're having a microphone problem? Okay, thought so. Sorry, bear with us. I'll just hold it. Is that all right? Is it on?
Yes.
Yes. You sure?
You're good.
Yes. Okay. Sorry. All right, second. Are they both on now? You're good to go. Is this mic working now? No. Okay. Sorry. Second, while we're proud of the strength of our DCM franchise, our investment banking fees are too skewed towards balance sheet-driven pro- products.
Although we earn our revenues in the same markets as the top five U.S. peers, our 54% share of revenues from DCM versus their 38%, means that we're earning those revenues in a less capital efficient way. Third, and moving to slide 13. We've not been sufficiently coordinated across clients. Today, only around one-third of U.S. investment banking's priority clients also use us for ICB products and services. Additionally, about one-quarter of investment banking lending RWAs are currently allocated to clients who use one or no additional products beyond the loan itself, and this typically yields an insufficient return. Separately managed loan books and client priorities across ICB and investment banking have also created unnecessary inefficiencies. Fourth, and finally, and as you heard from Venkat , you can...
And you can also see from the right-hand side of this slide, the businesses lack consistent capital discipline, with RWAs increasing 25% and RWA productivity declining eighty basis points between 2019 and 2023. So what's changed in the way that this division is now operating? The starting point when Cathal and I took over as co-heads was the opportunity we saw to bring these two businesses together. We have now done that. Aligning the businesses across the business across a shared set of priority clients allows us to put the full capability of Barclays behind them. We've hired strategically in areas where we want to grow, and that's a process that's largely complete, while also focusing on retaining our top talent within the organization.
We've empowered our bankers to succeed, while also giving them tools to more effectively measure their progress and performance against our targets. Importantly, we have a more disciplined and accountable approach towards how we allocate capital, and we're running the business more efficiently from a cost perspective, while also investing selectively in our ICB product offering and appropriately rewarding performance. Our North Star is delivering higher returns on a sustainable basis. So I'm now gonna turn it back to Cathal, who's gonna spend about 20 minutes taking you through the detail of our key initiatives before handing it back to me to wrap up.
... Thank you, Taylor. So building on the changes Taylor has described, let me take a moment to set out the four key execution initiatives we are implementing to achieve our objectives in investment banking. I'm going to describe those through the familiar lenses of simpler, better, and more balanced. First, we are simplifying our engagement with our clients through the creation of something we call treasury coverage. We've brought together DCM and risk management coverage, while also further investing in our ICB product proposition. Then, through the lens of better, the second initiative is to improve capital stewardship across the organization. And next is to better focus our client footprint to allow us to consistently align the full capabilities of the firm behind our priority clients.
And finally, we expect our revenue mix to become more balanced by increasing our share in advisory and ECM. These execution initiatives underpin the delivery of our financial targets. Income growth of above GBP 700 million, excluding moves in the wallet. This income growth primarily comes from asset light, fee-based businesses and incremental revenue from existing clients. We will be better stewards of capital, and together with higher revenue, this will drive higher RWA productivity. Coupled with strong cost discipline, we expect this to drive higher and more sustainable returns in support of the investment bank and group target of above 12% by 2026. Now, taking each one of these initiatives in turn, starting with simpler. The rationale for an integrated treasury coverage is compelling. Given the breadth of our capability and our trusted relationships, we should be doing more with our clients.
As you can see from this slide, when our lending clients take one product, on average, they fall below hurdle rates. As Taylor said earlier, this currently comprises about one quarter of our lending portfolio, so there's a clear opportunity to do better. In contrast, a significant proportion of our clients already take four or more products. On average, this results in over three times higher income over RWA. As you can see on the right of the slide, there is also a geographic opportunity. Only one-third of our U.S. investment banking priority clients take transaction banking services from us. This represents an attractive opportunity and meaningful upside. As you would expect, we do this well in the U.K. We also do it well in Asia, where our capital markets and ICB colleagues work closely together, albeit with a smaller client base.
On the next slide, let me explain how treasury coverage is simplifying our organization and delivering positive outcomes. Historically, each product team covered the treasurer separately or in a silo, and now coverage is coordinated through the lead treasury banker. It is simpler for the client to have a single point of contact. And rather than focusing on one product, our lead treasury bankers are empowered and also accountable to deliver the entire franchise and deliver more products to our existing clients. It also helps our teams be more solution driven. We are early on this journey, but I wanted to provide one example of progress. We started expanding our liquidity offering in the US in 2019. However, through treasury coverage, the interaction between our investment grade team and ICB team in the U.S. has really come to life.
After implementing treasury coverage, we doubled our U.S. dollar deposits at our New York branch in 2023, and we have doubled them again to the eighth month, to the end of August of this year. This is an early proof point, and for us, it shows that U.S. treasurers want to do more with Barclays. They know and trust our teams. As you have heard earlier, over 40% of our clients are U.S.-based, so this is a significant growth opportunity. There is one further benefit I would like to highlight. Our bankers who cover the C-suite at the client now know that the lead treasury banker is delivering for the treasurer, so they can focus our full attention on providing strategic advice and thereby drive our advisory and ECM ambitions.
Now, let's turn to how we're embedding disciplined capital stewardship. Capital discipline is very important to Taylor and myself, and slide 18 outlines steps that we have taken that are already changing behaviors across the business. A focus on returns and improved executions means our colleagues are becoming better stewards of capital. So what has changed? We've tightened the approval process and raised return expectations within the organization. And as you can see from the bottom of the slide, if the hurdle rate is not met, we are saying no... and we recycle capital to higher returns as well. If the business case is above hurdle, as you can see on the top of the slide, the client team is still challenged on the robustness of future revenues. And this is resulting in a higher proportion of treasury coverage revenues, which are more stable and recurring.
By aligning the full firm behind the client with more episodic, advisory, and ECM transaction planning, the client returns move well above hurdle, rather than relying on these deals to earn an acceptable return as we did historically. Each of these individually enhances returns on the loan portfolio. Together, they make a meaningful difference. Our lending portfolio has an average life of about three years, so about one third turns over each year. Of the commitments we have reviewed this year, we have observed an increase in expected client returns. These changes are also impacting behaviors, with client teams being more proactive in engaging with their clients to identify incremental revenue opportunities in the ordinary course of business. Now moving to financial sponsors, an important client base and position of strength for us.
We have a top five global position with financial sponsors. Historically, this has been underpinned by the strength of our leveraged finance franchise and our leading credit business in markets. As you can see on the right of the slide, over the past five years, our leveraged finance fee share with sponsors was 6.4%, broadly in line with U.S. peers. But our advisory and ECM share has lagged. Given the strong connectivity we have with these clients, the opportunity is to grow share in these areas. However, we need to improve and deliver the holistic coverage across the entire bank, what we call our sponsor ecosystem. Let me outline what we've implemented. First, we changed the leadership of the Sponsors Group globally and in the U.S., while adding to the leadership in Europe.
Second, these individuals have reorientated the strategy of the sponsor group to focus on deal partners, to deliver differentiated industry insights, investment opportunities, and advice on transaction and process structures. This is to assist the partners at our sponsor clients deploy their capital and realize attractive returns. Our sponsor team is at the fulcrum of the relationship, ensuring Barclays consistently delivers across the ecosystem, leveraging industry, advisory, and ECM teams, which have also been strengthened to service this client base. So let me give you an example. Blackstone is the largest alternative asset manager globally. So far this year, we've announced seven M&A transactions and five ECM transactions with them, including two sell downs of their stake in the London Stock Exchange Group. It's worth noting that Barclays was the only lead bank on all five LSE sell downs, three of which were completed last year.
This coverage also extends beyond investment banking to the entire firm. We have completed a series of transactions across syndicate, equity derivatives, and financing in global markets, and partnered with Blackstone to execute the first credit risk transfer transaction in the industry for our U.S. consumer bank. This demonstrates why unified coverage with markets is increasingly important as these clients become more diverse and sophisticated. We believe our alignment across the ecosystem and coordinated coverage by the newly cast financial sponsors team will deepen our value proposition with financial sponsors and grow our share in advisory and ECM. Now, let me talk about how we've changed processes and made investments to strengthen our industry teams to support our advisory and ECM franchise.
Across our sector coverage, we have created 40 sub verticals for planning and review purposes versus 11 previously, focusing on clients, revenue, fee share, capital, and returns. This is to drive empowerment and accountability deeper into the organization. Over 60% of the managing director hires we've made since the beginning of last year have been to strengthen coverage, and in particular, industry coverage. The remaining hires have been primarily in advisory and ECM. We are particularly focused on four industry groups shown on the right of the slide, which represent almost 70% of the global advisory in ECM wallets. The Energy Transition Group, which we created earlier this year by combining energy, power, and clean tech, has grown share by 220 basis points since full year 2023. Industrials has grown share by 60 basis points and Healthcare by 40 basis points.
Although there's more work to be done to increase our absolute share. In technology, we changed leadership and have strengthened the team by adding several proven coverage M&A bankers across a number of the tech sub verticals. These teams are gaining traction with clients, and we are confident in their future performance. It's also worth noting that each one of these industries is a collection of subsectors. We enjoy leading positions in many of these, such as midstream energy, power, transportation, semiconductors, and healthcare services, to mention just a few. Now turning to advisory and ECM, where increasing our share is one of our key execution. This year, M&A activity started much like 2023 ended, large corporate transactions driving volume, particularly in the U.S.
As we progressed through the year, activity broadened to transaction sizes of less than $10 billion, and activity rebounded in Europe. We consider the advisory wallet to still be below what we would expect as mid-cycle, particularly given sponsor activity is still yet to fully recover. Our advisory revenues in H1 are up in the second half of last year, and our share of 2.9%, as you can see on the slide, has grown from last year, taking into account deals that have been announced but are yet to close. It's important to acknowledge we're early in the journey to improve our advisory franchise. It will require sustained and consistent execution. We are confident we have the right strategy, people, and processes in place to win with our clients and drive the necessary gains.
In ECM, the annualized wallet is ahead of last year, but remains below 2019. IPO volumes, which disproportionately drive revenue, remain materially below recent years and our expectations. As also shown on the slide, to date, we have taken 150 basis points of share versus 2023. Our IPO franchise will benefit from our investments in industry coverage, particularly tech and healthcare, which represents around 45% of the global ECM wallet. ECM and advisory are both capital light businesses, so driving share and revenue gains disproportionately enhance the returns to business. Importantly, these businesses also drive additional opportunities across event financing, Deal Contingent FX, and other risk management solutions, as well as equity derivatives and margin loans, all of which are executed in partnership with markets.
Before handing back to Taylor, let me highlight our UK investment banking franchise as a proof point of success, and where key elements of what we've discussed today have been embedded for many years. We integrated our treasury model back in 2018. We pivoted our U.K. advisory team to be more origination focused, aided by the strength of our leading corporate broking franchise, which is now ranked number two in the FTSE 350. Our total UK investment banking fee share has increased from 7.3% in 2019 to around 10% in the first half of this year, and importantly, our rank has remained consistent throughout this period. Acting as only one of the two underwriters on the National Grid's GBP 7 billion rights issuance is a particular success for our U.K. franchise this year.
National Grid is a good example of a long-standing and trusted relationship in the U.K. The relationship with the company goes all the way back to nineteen ninety. It started in the corporate bank and developed from there. In twenty ten, they appointed us as their corporate broker, and since then, we've announced several multi-billion GBP M&A transactions for them, as well as the rights issuance earlier this year. Nonetheless, we continue to have an opportunity to grow in the U.K., particularly in M&A with sponsors and non-broking corporate clients. With that, let me hand it back to Taylor to pull these initiatives together and conclude.
Okay, thanks, Cathal. I'm just gonna take a couple minutes to summarize, and then we'll turn it over to you guys to take questions. So our journey for improving the investment bank begins with foundational strengths, an at scale, full service platform in the right markets, now being managed and operating as an integrated business. As we've discussed in the presentation today, we've taken deliberate actions, we've established Treasury Coverage, we've changed processes and made investments to drive increased M&A and ECM revenues with our sponsor and our corporate clients, and we've instilled capital stewardship, excuse me, at all levels of the organization. All this is being done with a deliberate focus on alignment and execution, primarily around, particularly around clients, while also embedding accountability at the banker level. These actions are all aimed at driving revenue growth with cost discipline to deliver higher returns on a sustainable basis.
While it's only been six months and there is some seasonality in the business, we can see early evidence of the benefits of our approach in our first half results. During the first half of this year, investment banking revenue grew 7% year over year, of which fee-based investment banking was up 21%. We generated 100 basis points of improvement in income over average RWAs versus year-end 2023, and we gained 50 basis points in global investment banking fee share again versus year-end 2023. Cathal and I are confident that all of these actions will enable us to deliver the targets that we set for our division, and these will in turn support the broader investment bank targets that Venkat referenced at the start of the presentation.
Just to reiterate what they are, to generate over GBP 700 million of incremental revenue from management actions by 2026, so that's excluding movements in wallet. To improve income over average RWAs above the 2019 level of 5.4%, and to rebuild fee share back to the 2019 level of around 4%. Importantly, we have already made most of the operational changes and hires necessary to achieve that this year. It's all about executing consistently, and we clearly have more work to do, but the improved first half performance is an important first step as we continue our journey towards achieving this, our three-year plan. With that, I'd like to invite you to ask questions. Please do say your name and limit yourself to two each, so we have a chance to get around to everyone. Thank you.
Hi, good afternoon. It's Raul Sinha from J.P. Morgan here. If I can have two, please. Just the first one on slide 13, where some of the numbers obviously you just referenced. I really wanted to ask you about what you think is the long-term right number in terms of income to RWA for the investment banking franchise? Because obviously you've improved to 5.6% in the first half of the year. That's already better than 2019. Obviously, you're flagging, you know, there's a significant pickup still to come. So how do we think about, you know, where is that eventual target getting to? And then the second one is just on the sectors. You very helpfully provided us the market shares across the sectors that you're doing quite well in.
I was wondering if you could pick out for us maybe some of the sectors that are the drag on the franchise, and maybe if you could talk a little bit about how easy is it to come back in the sectors where, you know, because if you look at your overall market share and you compare them to the sectors where you're doing really well, the market shares are very high in the sectors you do well. So that must imply that there must be some sectors there, perhaps, that require a lot of work. So if you could give us some sense of the turnaround needed in the challenging areas from a sector perspective, that would be very helpful. Thank you.
Do you want me to take the first one, and you take the second one?
Oh, good.
What was your name again? I'm sorry, we-
Raul, Raul.
Raul. Okay, thanks for your question. So look, on the income to average RWAs, look, our target is to exceed to deliver average income over average RWAs in excess of 5.4%. As you point out, we're already above that. That is gonna modulate, it's gonna move around a little bit. And really what we're trying to do is deliver an outcome from a return perspective, taken together with the revenue generation that we're committing to, the cost discipline that we're implementing, and the RWAs, basically flat for the investment bank, that contributes to the group ROE of greater than 12% in 2026.
Above 5.4% does that, and, you know, we'll, we're our process of recycling around RWAs around the higher performing clients and higher performing opportunities will drive that as high as we can. But the commitment that we're making today is to bring it back above that 5.4% level in 2019.
Very good, Raul. So I'll pick up the industry. Maybe we'll get the industry slide back up, on the screen. It'll be great. So, Raul, the industry groups we have here are the industry groups that represent the largest parts of the wallet. So, we didn't cherry-pick. It's probably evidenced by our technology market share going in the wrong direction here, for example. And but look, I think that's a good example, maybe, and I'll use that as an example, you know, use that to answer your question. We changed leadership in the technology team after Taylor and I came in, and it was clear we also needed to invest in the quality of the bankers, particularly in certain areas. We do well in semiconductors, but we've added particularly in software and we've added in AWS.
And we feel very good about those people. And we did that on the West Coast and the East Coast, in particular, in the United States. So, that loss of market share of 80 basis points we've put up here, we're not hiding away from it, but we'd look to reverse that in you know, relatively strongly. I would say on industrials, even though we're taking share, the rebuild in that team is ongoing. We hired a new head of our industrials team, Spyridon Svoronos. So that market share, I would say, actually maybe stutters a little bit in terms of the upside. But again, we feel very good about the team.
The other point I would make is that our healthcare and our energy transition groups have both benefited from consistent, leadership from before Taylor's and my time and now our time. So that consistency of leadership and consistency of execution is most important. But I think what you should take away is that, you know, when we try to add talent, we're successful in adding talent. We've got a deep bench, as we did in the energy transition group. We brought many people to the organization and gave them more accountability, and you can see the results on the screen. And then there's our FIG franchise is not on the page, but it enjoys a market share of 4%. It's one of our higher market shares after energy transition.
I think this is represented on the screen and I hope that gives you the color that you're looking for. That's very helpful.
Thank you. Guy Stebbings from BNP Paribas Exane. I've got two questions, one really around slide 16 and one around slide 17. So on slide 16, I think you referred to about one quarter of lending client RWA, which doesn't meet the hurdle rate. I'm just interested as to where that number might evolve to over time, where does one quarter effectively go to? What sort of timeframe are we looking at? I think you talked to a sort of three-year type lending cycle, so just how that should evolve. And then the second question was on slide 17. In terms of that doubling of deposits and then doubling again, could you talk to some of the sort of economics around those deposits, how sort of profitable they are?
What could we be looking at if we were to roll forward a few more years in terms of the size of that deposit base? Thank you.
So I'll pick up on those ones, Sarah. Um, so first of all, on the, the RWAs, look, um, clearly the objective is to get it lower, and they will... Very good, thank you. Um, and I think it's happening in two ways. We have to wait for the, um, you know, to have a look at a commitment, and that's through the three-year period and one third a year on average. And the second one is that, you know, we're driving discipline through the organization today. So as I mentioned with Fair Dramat, what we're finding is that, you know, transaction teams are looking at the commitments they've got out to their clients. Uh, it's obvious we know where there's, um, you know, capital loads that's not generating the returns that we would want, and they are working hard with those clients today.
I think there's two ways this is moving. We're moving because we're adding incremental revenue ahead of maybe reviewing the commitment, in addition to waiting for the commitment, then making a decision to recycle capital. I'm not gonna give you a target as to where we're going to move it to, but I would say that clearly there's an ambition to move that number down. But importantly, across the rest of the 75%, there's also an ambition to drive income, you know, more products into our existing client base over our existing capital, which is incremental revenue over our existing capital base, and that's across the other 75%. We have a client that's got three products, we're gonna do four. If they got five, we're gonna do six. And we're very optimistic by that.
Actually, before you hit the second one, Guy, just to clarify this, the statistic is actually 25% of the lending RWAs in investment banking, the client has one additional or no additional product, right? So almost by definition, that has to be below returning. As we are able to sort of bring the treasury coverage model to life with those clients, as we are able to sort of focus the more consistent and systematic strategic coverage of those clients, the intent is to drive more clients over that capital. So obviously, we'd like more clients to not be in that bucket, but those clients in that bucket, you know, this process is designed to sort of elevate them anyway by driving more products over that capital.
And maybe we'll flip to the next slide 17, just so we can get to Guy's second question. So, Guy, look, I'm not gonna get into... So, the first point is that the deposits are valuable to the franchise. There's no doubt about that. These are deposits we wouldn't put them on the balance sheet if we didn't feel that they were accretive to the economics of the firm. So this is part of us driving improved revenue and improved returns for the firm. So that's our North Star. We wouldn't be going through the effort if we didn't think that was the case. That's number one. Number two is, I think we will continue to grow that. Our investment bank or our corporate banking offering in the U.S. is not as mature as in the U.K. or continental Europe, for that matter.
So we find the liquidity offering, alongside basic and more basic cash management services and payment services we can have in the U.S., is, you know, is important, because we take a relationship that's very strong, particularly through our DCM franchise. We're top five in the U.S. with U.S. corporates in DCM. So really broadening that relationship to Treasurer, this is an opportunity to do that. And then as we continue to invest in our ICB product proposition in the U.S., that gives us the opportunity to put those products into that client. So it just helps us to mature and evolve that relationship as and when the product comes. So, so this is very much us using our existing capital and our existing clients in the U.S. to roll out a corporate banking product set.
You know, its products are known well about this in the U.K. and in continental Europe, giving them to clients who know us well in the U.S. So that's what makes us confident around that rollout. Thank you.
Hi, Alvaro Serrano from Morgan Stanley. A couple of questions, please. In terms of your market share wins that you've seen so far and where you wanna go, can you sort of maybe give us a bit of color who you typically take market share from in the segments you've described? What I'm trying to get a picture of is these are... Are you borrowing market share, or we can sort of be reassured that it's sustainable? A bit of color there would be appreciated. And the second question is, I see one of the points you make is 64% of USD in coverage sectors. What's the typical lead time between the hirings and when they become producing? Thank you.
Or cruising speed may be the right question. Thank you.
You want me to go with that one?
All yours.
All right, fine. So who are we taking share from? I mean, look, I mean, it's a very competitive business, right? So in certain of these sectors, we're competing, you know, our largest market's in the U.S., and so the top five American firms dominate the U.S. market. So as we're growing share in the U.S., we're taking share from those firms in certain instances. Sometimes we're winning from by a boutique in an M&A situation, and the Europeans are a bit weaker there. So there's nobody specifically that we're taking share from. If you look at the share changes over that period of time, that there are a couple of the Americans have lost some share and a couple of the Europeans have gained some share.
But you know, it's a competitive market and we'll take share from wherever we can get it. Look, I think on the new MDs and coverage, we have very good people in the building to begin with. And really what we were focused on was hiring in areas where we wanted to grow and rebuild a little bit. It's reasonable to assume for strategic products, that it can take twelve to eighteen months for somebody to become, you know, truly productive on the platform. Having said that, we can point to various MDs that we've hired in the last, you know, twelve months or so, who are already quite productive. And so it's gonna be case to case.
And we're very pleased with the team that we have on the field, as of today.
Thank you.
Sorry, I missed your first name.
Alvaro.
Alvaro. Alvaro, maybe I just allude to the first part. So Alvaro, just, we talked about how we're focusing our client footprint, okay? So we're very deliberate in terms of where we believe we've got a right to win with the client, and that's bringing the full capabilities of the firm, whether it be on the investment banking or on the corporate banking side. With that, we're looking to win with those clients on a consistent basis, and then that aggregates up into a view that gives us the market share, right? So what I want you to take away from that is that we're winning with a client by client in a very disciplined and deliberate manner.
The way we're running the business, and the way we broke the coverage footprint down into 40, call it performance cells, think of it like that, okay, rather than 11 previously, is to drive that accountability, and that's what gives us the confidence that when we win with clients, that it will be durable and will be sustainable, and we believe, based on the work that we've done, that focused client base, if we win with them, and we achieve our objectives on a client by client basis, that rolls up into the market share gain that we've outlined here today.
Thank you. Good afternoon, it's Andrew Coombs from Citi. If I could ask three questions, please. First, you had mentioned specific to the investment banking business, the average RWA has gone from 84 to 79. Can you just clarify the £5 billion decline, exactly which businesses that specifically has come out of? Secondly, you have provided your ECM and M&A market share on slide 21. I've attempted to back it out on your numbers, but would you just mention your comments on your DCM market share, given all the changes you've made? And then finally, and this might be a bit unfair, because it's in the appendix, but on slide 26, on the wallet assumptions, I would suggest that your £1 billion recovery for this year is actually now quite prudent, given the uptick in DCM.
But many would argue the 10 billion the next year is quite ambitious and needs quite a big uptick in ECM and M&A. So anything you can say in terms of your updated thoughts on those wallet assumptions, and also the mix between the three categories?
We'll split this one between us, I suspect.
Okay.
I'm happy to kick off, start on RWA. Okay. And then maybe you pick up on the DCM market share, and you can pick up on slide 26. So on the RWA, so look, we're on a three-year journey here, and we're kind of two quarters in, so, I would love to say that, you know, we've got a trend here, but we're not gonna say that. The discipline in the organization that we have is coming through, right? And we can see that day in, day out, right? What's important is that from a RWA perspective, we're focused on the GBP 200 billion across the investment bank, and there is, we would consistently challenge ourselves to ensure that we're deploying that capital, where we see the highest returns across the investment bank.
So I wouldn't over-index on the eighty-four versus the seventy-nine. In any case, I don't think you'd expect me to go into individual business in any case. However, I would say there is real discipline in the organization now around capital, so it gets laser focused on myself. I'm gonna ask you to repeat your question on M&A and ECM. I just wanna make sure that I got it right.
Just very simplistically, the DCM market share, because you provide ECM and M&A explicitly in slide 21.
Well, you want to pick up on that, Taylor?
So look, I think. And again, I think remember, the intention here is to drive a higher returning business across the portfolio, right? So if you look at our DCM business, which is leveraged finance and investment grade, that business typically ranks top five, occasionally top six. And top five or top six in any given year, the fee share can be 50 basis points of difference, okay? So we don't really focus that much on the actual fee share, but we wanna be in that zip code. The one thing I didn't mention when we're going through some of the historical challenges is, a contributor to the 110 basis points of loss of global investment banking fee share over that 2019 to 2023 period, was a loss in DCM, which really occurred in 2023.
And it was basically leveraged finance that drove that loss. We actually finished 2023 with our lowest fee share in leveraged finance in a decade. And why was that? There was a decline in LBO activity generally, and we were driving a lot of change through the organization, not just in the leverage finance business, but also the way sponsor- we were running the sponsors business, and the investments we were making in the industry groups. The good news there is that I also mentioned; we're back to a top five position in that business this year, and we've gained 80 basis points of fee share in the first six months of the year from where we finished at the end of the year. So hopefully that gives you a sense.
And then do you wanna do the wallet or you want me to do the wallet?
No, I can pick it up. So we'll pick up the slide, Andrew. I'm going to, so we have overall share here from investment banking, which is the bottom line. And that includes advisory, ECM and DCM. So I just want to clarify your question.
Yeah, no, the point I was making is, given the magnitude of improvement you've seen in the DCM wallet this year, you'd argue actually that 69%-70% looks probably overly conservative. But on the flip side, if you fast forward to 2025, you probably need a big uptick in ECM and M&A to come through as well, which is lagging this year. So it seems that you haven't changed any of your wallet assumptions to date.
Yeah.
So just kind of your thoughts, I guess, more broadly on the industry wallet landscape.
Sure. So I'm happy to do that. I'll put the disclaimer out there that, you know, we are in a closed period, so any comments I make have, you know, no reflection on Q3, because we're not providing guidance. So the wallet is annualizing today at around $80 billion. So it's ahead of where we were forecasting for this year. I think that's a reflection of the conservatism that we've applied to our forecasting, and our intention is not to update our wallet assumptions on an ongoing basis. So this is purely a reflection of what you saw on the twentieth of February. Within the IB this year, the M&A wallet is coming in at around about, you know, we would expect somewhere around that kind of $30 billion range, which is actually in line with ten-year averages.
And investment grade is actually ahead quite a bit, with leveraged finance in line. And within leveraged finance, kind of best efforts has been higher and LBO activity has been a little bit lower. So the mix is different to what we saw historically, but the totals are in line. And then the one that's been lagging behind is on the ECM side, and in particular in IPOs, and fees from IPOs are, you know, 40% lower. Now, what I would say, if you look at M&A volumes to start with, while it, you know, we still think that they're below mid-cycle levels, probably if you look at ten-year averages, somewhere in the mid-teens, and if you market cap adjust that, it will be a larger number, right? In terms of current activity.
So, I'm not going to just put a pin in terms of where that would go, but if you look at the historical, that's the buy for the upside and similarly on the IPO side, where current volumes are below what we would expect, and we would expect to rebound, so we're 80% for next year. That's where the wallet currently is. The mix may change, but we didn't see any need to change these assumptions. Is that helpful?
Thank you. Very good.
Hello, it's Carly Monk from Bank of America. Just two questions. First on, RWA and capital management, do you currently use any SRTs? And if not, would you consider using SRTs as part of your RWA, optimization tool? And that's the first one, and the second one is looking at slide nine. I think it's pretty clear that too when rates are coming down or rate expectations are coming down, you see, the corporate bank income come down, and then you see activity levels from investment banking income go up, and that's obviously been reversed more recently. Just thinking sort of in the context of falling rate environment and, you know, people are talking about lower neutral rates, et cetera. So how quickly can we see those two elements moving? So how quickly will we see activities pick up?
How strongly, and, to what extent would the corporate bank income from NII, I suppose, come down? I mean, we've heard a lot, we've discussed a lot about the retail bank, structural hedge and for the migration, et cetera, but just a bit more on the corporate side will be helpful.
Sure. Carly?
Carly.
Carly. All right. Thank you for that. So just, and I'm actually gonna ask Anna to comment on some of this, 'cause it gets into sort of group strategy. From an RWA standpoint, in the relationship lending book, we do use SRT. That's part of the SRT program, okay? And the hedge ratio of that book is similar to the hedge ratio of the group. So there's really no difference there, but it's part of that program, so there is some risk management that goes on there. And then as it relates to the, as it relates to basically the complementary nature of the, of the business, the business incomes, you know, Carl kind of touched on it, right? The wallet recovered this year to a greater extent than we assumed, obviously, in our plan.
It may or may not, you know, continue next year or the year after that, but that's kind of. As that wallet improves, you know, we would expect the investment banking revenue to improve with it, right? You're correct on the ICB side, as rates come down, the rate-sensitive products will also see a reduction in income. But what we're trying to do in terms of the alignment around clients is join up the full coverage with those clients, right? So not just the deposit, but the transaction banking, the FX, the trade finance. There's more that we're doing with that client. So even as the NIM driven income from just rate sensitive products comes down, we're doing more with those clients, and so we're maintaining a higher level of revenue.
Thanks, Carly. Let me add a couple of points. So, what we use within the ICB is exactly the same as the UK corporate bank. So they actually share a program called Colonnade. That is our SRT program for the corporate bank. That's been in place since 2016. It's actually a very mature program, so it's one that's completely up and running now with a very established sort of demand and client side, and not one that we'd see expanding much beyond where we are now. Just to remind you, we did quite a lot of disclosure on this in our fixed income presentation at the half year, and we can direct you to that, and that might help you a bit more. Taylor is exactly right on the interest rate sensitivity here.
Clearly, as a deposit, are impacted by falling rates. But just to remind you again, this business also has an element of structural hedging, both on the product side and also on the equity structural hedge, so it does have a degree of protection. So again, you know, as rates start to come down, that structural hedge really kicks in and protects the NII to the downside, just as it would in the corporate bank, just as it would in retail, but probably just to a lesser extent, and of course, what really matters here is their ability to sort of grow and deepen those relationships and build deposits.
Yeah, and maybe at the risk of breaking all the rules and having three people answer one question. You know, our income in the ICB or in transaction banking, half year over half year, was down approximately 9%, but I would point you to the fact that you know, half year and half year, second half last year, and then the first half of this year, actually income is up, right? We've actually seen much of that migration from NIBCA balances through to managed rates, through to term deposits. We've seen much of that coming through the book already. Then I would ask you to just keep in mind that a large part of our income in the ICB is FX payments, trade, working capital, just not liquidity.
And those businesses have been very robust and will grow strongly as we push those products and develop our product setting into our existing client base, where we have existing capital. So we'll grow that fee-based aspect of the ICB as we roll out corporate treasury coverage to those clients that we referred to earlier.
Hi, it's Edward Firth here from KBW. Could you just repeat your presentation? I mean, it seems to me that the sort of key areas of growth, and tell me if I've missed this or got this wrong, but abroad, the ECM and advisory and the US. I guess one of my sort of concerns or questions is that those are possibly the most competitive parts of the market, and I would guess just about any investment bank you speak to is looking to grow those areas.
And so I'm just trying to get from a customer perspective, you know, what is gonna make the average CFO or CEO, you know, say goodbye to relationships that they've had for many years, and they are hanging on to them for dear life and move to Barclays? That's my first question. And then sort of related to that, would you ever consider, you know, there are obviously boutiques around this sector. Would you consider adding to the franchise through acquisition in terms of... You know, if the opportunity is there through the cross-selling, why would you not look at perhaps picking up boutiques that would give you those relationships immediately, and you could then put them to work? Thanks.
Yeah. So maybe we'll start with the first question. So look, you're right, this is a competitive business, and, you know, nobody is shying away from that. What I would say is that, keep in mind that our plan is to return to our market share that we had in 2019. And Ed, I'm struggling to spot you in the crowd. If you stick your head up. There you are. Okay, very good. So, so it is competitive, but you know, we feel very good about our presence in the US. Let's just start there and deal with that aspect of your question. As Taylor said, you know, two thirds of our revenue is in the US, so this is not a franchise where we're looking to make a beachhead and build it. We're very, very strong there.
And it is through better execution that we're looking to increase our share and get back market share with clients, particularly corporate clients, that we've done business with previously, quite frankly. And then, I think we've been very detailed in our how we're looking to do more with financial sponsors, and create that ecosystem in terms of how we've retooled our financial sponsors team, number one, and then number two, how we've built our industry teams. And then it's that collaboration with our colleagues in markets, particularly as these sovereigns grow, and they want to be covered from both sides of the firm, from the private side and from the public side. And you heard that through the example of Blackstone.
So I think, you know, that really gives us that confidence to be successful in the U.S., both on the M&A side and on the ECM side. And this is not a movie that's new for Barclays. This is a movie that Barclays has seen before. We're getting back to very disciplined execution, and that's what's going to drive the share and gives us the confidence that we can take the share. So hopefully that answers your question, both on ECM and the advisory side. And I even notwithstanding our market share in the U.K., I think we can do better in the U.K. as well, and there's two areas that we pointed out, non-broking corporates and financial sponsors. Look, maybe then, Catherine, the second question is one more appropriate for you to address.
Thanks. So I completely second what Carlos said to the first question. On the second question, we've been very clear in laying out our capital plan, that we have a waterfall with three objectives in order of priority. The first objective is that we are going to remain a well-capitalized bank, so a CET1 ratio of 13%-14%. Having achieved that, the second objective is the shareholder return that we've put out, greater than GBP 10 billion, including share buybacks and dividends by 2026, 2024, 2025, 2026. And after that, investment of RWAs from the returns which we have generated, with a focus of GBP 30 billion in Europe, in the U.K., and U.K. related businesses, the corporate bank and retail bank. That's the game plan we're going with.
I would say you take that statement, or those three statements, along with the execution focus that we have here, returning to our 2019 market share, improving revenues per unit RWA, and broadening important franchises. I think you get the answer to your question.
Thanks so much. Any additional questions?
Good afternoon, it's Christopher Cant from Autonomous Research. I guess one of the things that comes up a lot, and this is a broad IB question across the broader division, but also specifically here, a lot of investors struggle with the idea of driving revenue growth whilst holding RWAs flat, and I guess sort of coming back to your comment about 25% of lending clients being below hurdle, could you give us a sense of the gross RWA churn that you anticipate over the plan period? So I'm just conscious that there could be quite a lot of paddling beneath the surface of that flat RWA trend, and I think that would help give people a better sense of where the sort of revenue growth is coming from, if you could give us a sense of what's actually happening within that RWA number.
How much is churning, both in terms of the investment banking sub-segment, but also the broader division, the two hundred billion that you referenced in relation to the earlier question on the eighty-four and seventy-nine?
Sure, I'll take that. You can feel free to add.
Oh, sure, sure.
So just on the revenue growth point, it's important to realize that the discipline and the execution points that we've laid out in this presentation, the 40 sub-verticals, the accountability at the banker level, that's a change to the organization. And so in terms of, like, how people spend their days, that's a change in the organization. Treasury coverage is a change in the organization. It deepens clients' relationships, and it also creates more capacity for strategic coverage and strategic dialogue among the more traditional investment banking coverage officers. So there's that. On the RWAs, the slide, I think it's the slide that shows sort of the hurdle rate with the... Dan, if you could flip to that slide. Not just the 25% number, but basically... Nope, not that one. That one.
So a third of the portfolio comes up roughly every year. So whether you're low returning or you're not low returning, we're looking at that relationship loan basically every three years. And whether you're low returning or you're not low returning, we're always now gonna be asking ourselves, "Are we doing everything we can be doing with this client?" And so if you're above the line, we're gonna be pushing the client coverage teams to think about, is there more transaction banking we can be doing? Are we getting deposits from these clients? You know, are we positioning ourselves around certain other opportunities? And then if you're below the line, obviously, it's kind of an up or out sort of exercise.
That's why we are confident that we actually can drive the returns and drive the revenue growth on the same RWAs, because there is RWA inefficiency historically in that loan book, which we are trying to wring out through this deliberate focus on execution and clients.
Great.
Slightly, just take us back to where we were on the twentieth of February. We talked about a number of income streams or revenue opportunities actually across the IB more specifically. So, you know, ECM and M&A, which the guys have talked today about being inherently more capital light. You might recall that when Adeel spoke about markets on the day, he also talked about, an increasing focus on our financing business, which again, is relatively capital light, higher RoC. So a large part of the revenue pathway here is towards less capital-intensive businesses, which you then combine that with what they're talking about, which is increasing the capital productivity of, you know, the capital we've already got, deployed in our lending businesses in the IB.
Plus, for these guys, the ICB, the transactional banking income, FX, trade, all of these things, again, tend to be capital light. The other thing I would say is, you know, what we've talked about, particularly in our, in Adeel's business, is that we'd already deployed that capital as of the end of 2023. So you might recall that when we talked about our three focus businesses, they were businesses where we felt we'd made the technology investment, we'd made the talent investment, and we'd also deployed that capital in advance. So this is, you know, a number of different steps here. And then across the IB on a more fluid basis, as a team, they are very focused on deploying capital proactively towards the best possible client returns that they can. So there's a lot of steps that underpin it.
Anyone else? Going once. Okay, I think there are no more questions. Thank you very much for your time.
Thank you.
So thanks, everybody, for coming. Just to remind you, we have our third quarter earnings call on the twenty-fourth of October. We hope to talk to you, many of you then, and we'll follow up in the days after on the road. And more immediately, there's coffee and cookies right around the corner, so please join us. Thank you.