Thank you very much for joining us on the last day of UK Leaders and the first financial European conference. It's the first day, so it's the start of it. It's my pleasure to have Anna Cross with us today from Barclays, CFO. Good morning, Anna.
Good morning, and thank you, thank you for inviting us. What an incredible building. Thank you.
Thank you. And thank you for your great performance. We have you on an overweight. You're up almost 70%. So let's start there. You're still quite cheap on our numbers: 0.6 times tangible book, 12% RoTE is the target, RoTE plus 12% by 2026. So maybe you can give us an update, where you are now. It's nine months since you announced the investor update. Can you tell us a bit about your progress and how you get to that 12% RoTE plus, by 2026?
Yeah, thank you. And it does feel like a long time ago, but it was only the 20th of February, and we're three quarters into a 12-quarter plan. And really what we're trying to do is create a simpler, more balanced, better Barclays that generates a higher return on a more consistent basis. That's what the plan is. And in doing so, as you say, we're trying to get to more than 12% by 2026, deliver more than GBP 10 billion to our shareholders. And as part of that, rebalance the risk-weighted assets of the group, so that the investment bank is around 50% of the whole. And we want to do that by really leaning into UK growth, which I'm sure we'll come back to. So as at Q3, we feel like we're on track. We're on track for 2024 and 2026.
Our RoTE year to date has been 12.3%, sorry, 11.5%, 12.3% in the quarter. And really the things that I've been looking for, and they are the building blocks from here to 12, are really a stabilization and then a growth in income. And particularly within that income line, what we're looking for is what we call stable income. So income that's coming from our retail business, our corporate business, private banking and wealth, US cards, and our financing business for that to be more than 70% of the whole of the group by 2026. And actually in Q3 it was 74%. So that's providing real ballast to the business as we grow. And our income was up 5% in the quarter. And that gave us actually the confidence to upgrade our guidance around the UK and around the group on NII.
So the first plank is obviously income growth and really going for that stable income growth. The second plank is our progress on cost. And we set ourselves a target of delivering GBP 2 billion of gross efficiency savings between 2024 and 2026. We've actually front-end loaded that and expect to deliver GBP 1 billion of that in 2024. And by the end of the third quarter, we delivered 700 of the billion. So we've got really good line of sight of the billion, and then we're going to go again. So 2025 and 2026, you're going to see more and see us really focused on driving the cost-to-income ratio of Barclays into the high fifties from where it is now. The third plank is really credit.
And that's important to us because one of the things we want to do is grow and actually put down 30 billion of RWAs in the U.K. And the credit environment, particularly in the U.K., is incredibly benign. I mean, the loan loss rate in our U.K. business was three basis points in the third quarter. And we're seeing really robust performance both across consumers and clients. And similarly in the U.S., although delinquencies in our U.S. cards business are higher than they were last year, that's what we expected. We got ahead of it, and they're very stable now. So really the credit environment we think is good and a good basis for us to grow. And then finally, our capital position, you know, we're really pleased to see it in the top half. That really helps us, you know, deliver that commitment around distributions.
And we're delivering very strong organic capital generation, 125 basis points in the year to date. And that's really facilitating the distribution pathway. So all in all, we feel like we're really well placed both for 2024 and 2026.
Great. And maybe this overview, we can maybe take a step back, talk a little bit about also the macro environment, which clearly is a big factor in banking. And clearly we have a U.K. budget, but you're also very exposed to the U.S. We have to keep that in mind. 30% of your revenues come from the U.S., and in U.S. dollar terms, it's even bigger. It's 40%. So maybe you can talk a little bit about the dynamics. A lot of excitement about banking in the U.S. post the election. So maybe you can put those two together, U.K. and U.S. in particular.
Yeah, thank you. So you're right. The U.S. is really important to us, and important for investors to remember, to remember not only because our exposure to the biggest capital market in the world, but also the impact that FX has on our business. Clearly, a stronger dollar is a tailwind to our revenue and is a tailwind to RoTE. But at a high level, I would say both the U.K. and the U.S. economies have proved to be much more resilient than we planned for, and we see that both in terms of inflation and unemployment. They're both lower than our macroeconomic assumptions that we had in February. Actually, what appears to be panning out is that although the rate cycle has turned, rates are likely to be higher for longer than we originally planned.
So for example, back in February, we anticipated five rate cuts in the UK. We're still anticipating three, of which we've had two. So certainly higher there. And, you know, as we reflect on the UK, you know, we have no change in our view around the UK. We decided more than a year ago this was a market we wanted to lean into for quite a few reasons. One, I've already touched on, you know, that resilience in credit. Secondly, just the, I think the maturity of the regulatory regime feels like we're getting towards the end of the journey in the UK. And then thirdly, political stability and political clarity. And what we have now is a government which is clearly oriented to growth and particularly oriented to growth in markets that we feel that we can really operate within.
You know, our areas for growth within the U.K. are obviously our Barclays UK business. We see opportunities in the mortgage business in particular. You know, the mortgage market in the U.K. is larger and more stable than it has been more recently. And we are approaching that market with a much broader range of products, because we are now really putting our Kensington acquisition to work and taking on a higher proportion of high loan to value than we were previously. We obviously also see opportunities in cards. You know, we are now 20 days into the Tesco acquisition. We completed that on the 1st of November, and we're really excited about that as an opportunity. And there are obviously opportunities in corporate lending as well, where we have a low loan to value, low loan to deposit ratio, rather.
As I pivot to the U.S., it's interesting because clearly we're also ready for a change of power there, and although we haven't seen, you know, any detail in terms of policy, it also appears like that's oriented to growth, and we're seeing a market reaction to that, as you say, a lot of our income is coming through in dollars, but equally, you know, our investment banking business actually is a footprint geographically looks very much like yours or indeed any other U.S. bank. So 68% of our investment banking income derives from that U.S. market. So, actually any change in that sort of deal activity across the U.S. capital market, we are really well positioned to benefit from, and then of course there's our U.S. cards business, which is growing nicely.
You know, it's probably one of the leading partner cards business in the U.K., in the U.S. So that also gives us some exposure to the U.S. economy. So both of them feel for different reasons, like there's some opportunity there.
So maybe we can dive a little bit more into the divisions, and we can maybe start with the UK retail operation. You mentioned three rate cuts in the UK you're expecting. Clearly that puts pressure on net interest income, but you're actually forecasting net interest income to grow around mid-single digit, including Tesco, per annum or CAGR. Maybe you can talk about the dynamic, about headwinds and tailwinds, to achieve that.
Yeah, sure. So let me start with asset growth. You know, a very large part of that 30 billion of RWA we would expect to be deployed within Barclays UK. So, you know, expect even beyond the Tesco acquisition, which we anticipate will add around 400 million of annualized NII every year. You should be expecting growth in mortgages, organic growth in cards, and actually some growth in SME as well. So asset growth is a big part of that, but then there's the liability position as well. So clearly we've seen a stabilization of deposits in the UK. You know, we worked very hard last year in rebalancing our range and making sure that we were very consistently in the market on pricing. That's worked. So we're seeing a good deposit performance.
And even in a rate cutting environment, we've obviously got this momentum from the structural hedge. And what that's designed to do is really stabilize the NII of the business over time. So actually in a rising rate environment, the action of the hedge has actually delayed some of that rate pathway coming through. In a falling rate environment, it will do exactly the opposite. So, you know, we're going to see a hedge tailwind for some time here. And actually in Q3, what we called out is that across 2024 to 2026, we've now locked in GBP 12.4 billion of income. And the maturing rate on that hedge is around 1.5%. So as you can imagine with swaps where they are with every passing month, clearly the yield on that hedge continues to rise.
So, you know, we're not going to mark to market that every quarter, but as you can imagine, that's a really important part of the stepping stone to our, to our '26 targets. So, you know, we feel good about the UK bank.
In terms of trends on the deposit sides, going from current accounts into term deposits, is that continuing in terms of the U.K. market or do you see that stabilizing? How do you see that with a falling interest rate environment?
It's certainly stabilized. I would say, you know, we very rarely talk about it in the context of corporate and private banking. The same is true there. If anything in corporate and private banking, those trends were well ahead of retail. So there's certainly some stability. I mean, I think we'll still see some migration, but it's definitely slowed down.
And in terms of lending growth, you mentioned the GBP 30 billion in risk-weighted assets growth. Clearly if you add Tesco and see the growth you have achieved, maybe 40% of that is done. You know, that's our estimate. But you think the GBP 30 billion is inside considering it's quite a high growth rate that it would have to come out of the U.K. retail network?
Yeah, it's ambitious, but you know, we feel that we've got the opportunities to really deliver that scale of growth because in many instances, these are areas which either we've not participated in or we already have the clients. So for example, within mortgages, we've never really been a higher loan to value lender. We've very much played in the lower loan to value market, and then we bought Kensington. And the reason that we bought that was to give us the capability in order to expand our range in mortgages. So that's now what we are able to do. So that's a part of the market we've never been able to access before. Again, in unsecured lending, you're right, Tesco is a big part of that, but there are other plans there as well.
So what you should note is not only us stepping back into the acquisition market, and you can see that from, you know, the indications we gave around our lending trends in Q3, but really sort of expanding the way we think about cards in the U.K., a little bit like how we think about them in the U.S. So we've now got a partnership with Avios, we've got a partnership with Amazon, and now a partnership with Tesco. So we see this, you know, a spend and a lend business in the U.K. And then when I get to corporate or indeed SME, you know, our loan to deposit ratios are 30% broadly in both of those businesses. They're businesses that we know really well. We've got their cash, you know, business. We've run their current accounts for many years in many instances.
For many of them, we also have an acquiring relationship. So we know them really, really well. I would say there's more work for us to do there in both. There's some product capability. So, you know, when Matt Hammerstein, who runs our corporate bank, did his deep dive, earlier in the year, he was talking really about bringing those products digitally into the, into the corporate. That's showing some good signs as well. But at this point in time, what I'm really monitoring is what are the, how are the RWAs going? So, you know, what, what facilities are we extending to clients? And then there's some delay typically before they, they draw down on that. So I would expect more movement in retail and then perhaps a bit more lagged in SME and corporate.
A lot of confidence, both on RWA growth and also on the UK retail part in terms of NII growth. It's good to hear. Maybe we shift to the IB. The IB clearly should make the 12% plus RoTE target as well. You're now making around 10% in the nine months to date. Can you talk to us about the dynamics to get to this 12% that you envision?
Yeah. Well, on the one hand, it's very simple. It's about more effective and efficient use of resources in the IB. And I would say that's two things. The first is RWAs and the second is cost. So this is a business that we've deployed significant RWAs into in recent years, significant costs in recent years, both in terms of technology spend and you know in terms of talent. Really now is the time for us to monetize those investments. And I guess one of the biggest KPIs that I'm looking at is revenue over RWAs. And in the year to date, that's up by 30 basis points. So that's the one I've really got my eye on. Really, how are we using capital more efficiently and effectively within the bank, that part of the bank rather.
And a big plank of that again is investment banking. So when I look out over the last few years, as we've deployed RWAs into the business, actually markets revenue over RWAs has been pretty steady. So we're deploying more. They're clearly using those efficiently and we're not seeing any deterioration. That's not true of banking. So really in banking, what we're trying to do is have real capital discipline about the way we deploy capital to clients. Number one. Number two, really sort of focus on treasury coverage. And what I mean by that is ensuring that, for example, if we have debt, then we're also offering those clients and delivering to those clients other products.
And we're seeing some green shoots there, certainly an increase in deposits and particularly an increase in dollar deposits, which is really what we're looking for, that broadening of the relationship and expansion of the returns on the client basis. And then the third piece is really around M&A and ECM. Barclays has traditionally been very much either a fixed income business on the market side or indeed debt capital markets on the banking side, and really expanding out our capability and our progress in M&A. And what's been good to see is clearly in 2024, it's been an expanding banking market and they've either maintained or increased share. So that's it, good signs, but they need to do more. And then on the cost side, really what I'm looking for is positive jaws. So we won't see that every quarter.
That's clearly not going to be the case in this kind of business. But really more often than not, they need to be really driving gross efficiency. So a large part of that GBP 1 billion this year, a large part of the GBP 2 billion over the, you know, three-year period, it really dominated by two places. One is BUK, the other one is the IB.
My understanding is that, in terms of hiring process and staffing, you're basically done. You have done those investments. So revenue growth should come through to the bottom line with such over time operating leverage improving.
Yeah, that's largely true. I would say pockets, but we're pretty much there. And actually in 2023, we did quite a rebasing of the talent pool within our banking business, both in terms of the leadership, which changed. And now if you look at our leaders, Taylor Wright and Cathal Deasy, you know, their heritage is ECM and M&A. So it's quite different really from where we've been. And they've taken the opportunity to, you know, deploy new talent, both in terms of those two specialisms, but also sector focus in areas where we think there will be disproportionate growth over the next few years.
Talking about those subsectors where you want to grow, clearly in markets, I think you also mentioned 60% of the revenues. You gave some numbers in the investor update came from the Americas. If you take like an average over time. So you're well geared to the U.S. but you also want to gain market share in European rates, equity derivatives, securitized products and financing. Can you talk a little bit about how you achieve that? We hear that a lot from investment banks. They want to expand in these areas. But can you talk in particular what Barclays is doing to gain market share?
Yeah, sure. I mean, they were carefully chosen as areas. If I take the sort of what we call the three focus areas first, which is equity derivatives, securitized products, and European rates, they were chosen either because there are areas in the past where we've had good market share and that's deteriorated or where there's a clear adjacency to a very strong business. They were carefully chosen as areas where we really feel we've got the opportunity to succeed. Really, the way we've gone about this is even by the year end at 2023, we deployed the capital into those businesses. That's the first thing we've done. We've given them enough oxygen to grow.
The second thing was really replatforming either on a technology basis or indeed replatforming in terms of talent to rebuild those businesses where we felt like we'd lost, lost some ground. As I look at their performance year to date, it feels like equity derivatives has done pretty well actually. Equities as a whole has done pretty well. You know, for us, it benefits from its proximity to the Prime Services business. Through August in particular, obviously what we saw was a degree of volatility and the business really performed on securitized products. This was a business really where, you know, we had some capability, but weren't really in the on the sort of trading side of it. So we've really built that out. Clearly this year has been a good year for securitized Products.
We're still small, but we've been able to monetize it in a way that we've never been able to before. And that gives us some confidence to go from here. I think the one that's been more difficult and has probably been more difficult across the street has been European rates. I mean, macros had a harder year within markets and therefore the progress that we've made there still needs some focus. So that's the one I'd call out. On financing, we already have a very good business, you know, on fixed income financing as a legacy matter. This is a business that Barclays is very strong in, has been, you know, all the way back through to Lehman and before.
So that's typically a business that we are number one or two in across the industry, and the equity and prime, we're now number five. So this is a business that is very strong already. However, I recognize what you say about that, you know, the degree of competition within here. It's a highly competitive market. We feel like we're very well placed because of the way we run it. We run it as a single business across equity and prime. We think that speaks very clearly to the way that our clients run their sort of global multi-strat funds. We like it because we see risk all the way across their business. So we think we've got a slightly different approach to it. But you know, if you look at the last few years, our CAGR in that business has been about 13%.
What we're assuming over the period from here is five. So we, you know, we're giving some recognition to the fact that it's a great business with great momentum, but obviously a lot of competition.
I believe 60% of corporates only buy one to two products, based on the disclosure that you give. A lot of upside.
Yes, absolutely. Yeah.
So on track to get to 12% in the IB plus, even without a huge, market environment help, it looks like with your organic strategy.
Yeah, absolutely. We've been quite careful in the strategy overall to control what we can control. So that's why we had a really big emphasis on cost. That's why we had a really big emphasis on, you know, the structural hedge and the stability that that gives us. And we were very careful to ensure that all of the assumptions that we're making either about the market or macro were pretty conservative. So you're right, you know, in banking in particular, our assumption for the year that we're currently in was GBP 70 billion for next year. It's GBP 80 billion. And the decade average is GBP 84 billion. So, you know, any sort of upside to that market will be upside to the plan.
Moving to US cards. We get a lot of questions on US cards. Then, secondly, your ROTE was 8% in the nine months 2024. And, again, it's 12% plus that you want to achieve by 2026. Maybe you can run us through the dynamics there as well.
Yeah, so it's a really important business, for a few reasons, in part because it clearly gives us a geographical diversification and gives us access to 20 million retail customers in the U.S. It's very closely aligned to our investment banking business. The way we think about this is we've got 20 million customers, but there are really 20 clients. And those 20 clients are essentially in large part our investment banking clients to whom we are providing, you know, consumer finance essentially is really how we think about it. So there's a synergy there between those two businesses. We're very focused on getting this business to a position where it can deliver a RoTE of around 12% and then beyond that, because historically this business is run mid-teens. And so we're very focused on getting it back to that position.
It then has a broader structural benefit to us as a business because one of the things that's important to us, not only sort of commercially in terms of revenue, but also in the way we manage our capital is diversification within geography. What I mean by that is, you know, as we build our U.S. business, it's really important to us that we have a retail presence and a wholesale presence because as we go through the stress testing process in the U.K., in the U.S., the CCAR process, which is very exacting, that really benefits us. We have a very good CCAR result as a result of that diversification. Because of that, the amount of capital that we have to hold within our IHC is lower than it would otherwise be.
The structural advantage of when you put the US business together as a whole is an important thing in our mind. But clearly we've got some steps to make between here and that kind of teens RoTE that I talked about. The moving parts really are around impairment normalization. We booked a lot of impairment last year. That was really a reflection of us coming out of COVID. You've seen that year to date, you know, the impairment charges have been lower this year than last year. We expect them to be lower in the second half than the first half. The loan loss rate is coming down. We expect that to be a long-term average of around 400 basis points. That's roughly what we've run at historically.
And certainly delinquencies and the way that we managed the book last year, we got ahead of what we expected to be, you know, an increasing unemployment level in the U.S. So we cut credit lines last year, and that's definitely helped us in the current environment. The second thing though is NIM, and there's a few things there. So we have a 12% share in sort of travel and entertainment, but a 2% share in retail. And those two businesses in terms of partner brands are broadly the same scale of market in the U.S. So we're underweight retail and that gives us a real opportunity to grow. It typically has a higher risk-adjusted return, a higher NIM, and you can see us starting to execute on that strategy already with a GM portfolio. So that's a big part of it.
We've also gone through a repricing exercise in the U.S. That's actually complete, but it relies on customers making purchases on those new terms and conditions, really. So you're going to see it flow through over time. And then finally, funding within NIM is important to us. So, you know, our bank in Delaware is completely ring-fenced. So it raises its own funding. A large part of that is retail, but we want more of it to be retail. We want 75% or more of it to be retail. And it's around 67% right now. So more to do there. And so we're building out the retail savings platform, launching tiered products, bringing more sophisticated products to market, really to drive that. The third thing is cost, and really driving efficiency in this business. It's been quite a high-touch operational business for us.
That's fine when you're doing airline files with, you know, thousands of dollars in a you know for each individual file, not so much in retail. So really digitizing that and taking the learnings that we have from the U.K. and running a really digital retail operation to the U.S. So that's going pretty well and you'll hear more about that in time and then finally, capital efficiency. So, you know, credit cards is a capital dense product and we're really mindful of the changes that we have coming with, you know, advanced modeling, particularly in this business. So really important that we can take the opportunity to share that risk where appropriate. So we did our first transaction in the first quarter of this year with Blackstone and that's something that you might expect us to do ongoing.
When you put all of those things together, there are lots and lots of pieces. This is going to be a gradual moving feast. Don't expect that it's going to be a big bang in this business. There's lots for us to execute, but we're on track.
Improving capital, improving revenues and clearly also the absorption of 16 billion of regulatory risk-weighted asset inflation should be all part of still reaching that 12% plus.
Absolutely. The one change that we articulated at Q3 was really that we expect the movement to AIRB to be later. Because with the announcement of the final Basel III rules in the UK, what we're doing now is delaying the implementation of that model so that it will be a Basel compliant model. So expected to follow on, but even, you know, on the same basis, I would still expect 12% and then beyond.
So putting the divisional numbers into the group numbers, your target is to make GBP 30 billion of revenues by 2026. Latest consensus that I've seen, at least, is around GBP 29.2 billion, something in that range, below GBP 30 billion. Moving parts, putting it more from a group level perspective, as well as between NII and non-NII. So net interest income, non-net interest income.
Yeah, sure. Well, clearly a large part of it is NII and particularly around the UK. You know, we talked about mid-single digit CAGR, and that really speaks to all of the things I've talked about, which is loan growth, but you're going to see that in private banking and wealth, and you're also going to see that in corporate in the UK, so NII growth is a big part of that and really forms part of that stable basis of income, and then of course, underpinning that is the structural hedge, so asset growth and the structural hedge, so you've got asset income growing and liability income growing sort of simultaneously. That's really what the hedge is doing for us.
And we gave some simple maths at the time that really would have got you to around GBP 2 billion of tailwind from that structural hedge. Outside of NII, there are a few things we talked about Markets. You know, really within Markets, we're looking for around GBP 1.1 billion of growth. And that's coming both from the focus businesses that I talked about and also financing. I think of that as broadly evenly split between those two big planks. And then on our banking side, about GBP 700 million of growth. And that's really coming from what I talked about before, which is, you know, this broadening out into M&A and ECM, but also the ICB income. And that's really important. You know, the International Corporate Bank is a significant part of the IB, of the IB complex.
And as I said before, our wallet assumptions are relatively modest. So we're trying to keep as much of this as we can, you know, within our own control. So there are a few building blocks there for us to keep our eyes on, but so far, so good. And really one of the benefits that we have is that as a diversified bank, of course, there will be some areas which overperform and some that underperform. You know, we'll see that in any particular passing year, but really our focus on those five different divisions we think will get us there.
Clearly the analysts always like to look at the downside risk and cost, of course.
Well, you and me both.
Yes. Me even more so. So, if we look at the cost, you mentioned the cost income guidance, high fifties, is your ambition. That calculates to roughly GBP 17 billion of cost. But clearly the question is a bit, what's the flexibility? You have a cost program, as you mentioned, and if revenue should not come through, can you talk about cost flexibility in that context and how should we think about the high fifties? Yeah.
Yeah, sure. So the North Star of the business is revenue, and therefore the North Star of cost is cost income ratio. And that's really how we think about it. So if that GBP 30 billion is higher or lower, then the GBP 17 billion will be higher or lower. And they should move in line with one another. You know, our motivation around cost across this entire plan was to drive the cost, the gross efficiency program to give us the opportunity to invest in the businesses, to invest for growth. This was not a shrink to higher revenue strategy. This is a business where we are continuing to invest, but trying to do that within a relatively contained cost footprint by driving these cost efficiencies.
So of that GBP 17 billion that we set out on the day, about GBP 1.7 billion of it relates to that business growth. So that's the number that I think of as, as flex, and really what we're trying to do here is on a very granular level look at each individual business and drive the efficiency of that business. So every single one of them has got a cost income ratio target, because clearly they are very different businesses. You'd expect your cost income ratio to be higher in private banking and wealth than you would in the U.S. cards business, for example. So we feel like we're making progress on all of those individual areas, but more to do. And that's really what the further GBP 1 billion across 2025 and 2026 is about.
Really, how I think about it is in 2024, we've spent a lot of time on people, property, infrastructure. As I look forward into 2025 and 2026, it's much more about the efficiency of the client and customer journeys that we affect through all of our businesses.
So maybe at this point, we take questions by the audience. Yep. There's a hand up.
Thank you very much. It's Gigi Sparling from J.P. Morgan. Can I ask, on any M&A ambitions in the UK outside of Tesco, please, given the ambitious growth targets?
Yeah, thank you, Gigi. I mean, fundamentally this is an organic plan. That, that's the way we're setting about it. Having said that, you know, we have taken the opportunity both with Kensington and with Tesco to acquire either capability or scale. In doing that though, what we don't want to do is distract from the execution of the plan that we've already set out. And that's really, really important to us. So execution is number one. So we won't do anything that either distracts us operationally or distracts us from the distribution pathway that we've given of greater than GBP 10 billion. So, you know, we will continue to look and observe the market. And if we were to do anything, you should expect it to be in our three high returning businesses and for it to be relatively small, bolt on.
But fundamentally it's an organic plan. We really want to focus on delivering the plans that we've got. But, you know, what was really good about Tesco is it's clearly GBP 8 billion of lending, but without some of the complexities that you might get with a broader retail bank. So, you know, no branches, no current accounts, a very, very, very clean integration. And that's really what was so attractive, plus the opportunity to run a partnership. So, you know, we'll be really thoughtful about the things that we do.
There's a question over there. There are mics on the table, so please raise your hand and.
Thanks for your time today. It's Pascal from PGIM. In terms of capital optimization, it's obviously an integral part of the way you run the balance sheet. How do you decide how much to do? Is it kind of mainly led by investor demand, or do you have kind of internal parameters of in a given year, we don't want to do more than X, or we don't want to have more than a certain amount of CET1 benefits from, from those transactions?
Thanks, Pascal, but I divide what we do into sort of two broad camps. On the one hand, we have an SRT program called Colonnade that is very focused on our corporate business. And actually it runs from our UK corporates all the way into the International Corporate Bank. That's a very mature program. It's been up and running since 2016. It's a little over GBP 50 billion in terms of its scale. And we see that as mature. So that's a program that we would expect to run at its current sort of level. We do it very programmatically. Now it's at scale. And actually what you see is, or what you should see is that we managed it such that it does operate within very tight risk parameters.
That's how we think about it, because fundamentally for us, our primary motivation with these things is not capital, it's credit. And capital is really an output of the process. But we do, we are mindful of the sort of reinvestment risk of that. So we manage it so that on the Colonnade program, no more than GBP 2 billion of it needs to be refinanced in any particular quarter. So if there were a position where, you know, the market was shut because of some kind of market-wide stress, you know, it would never put more broad stress on the business. So that's really important to us. But I would say that that particular program started off as singular transactions with investors.
And now, given its kind of profile in the market is now sort of, you know, very, very popular. It is a bit more like a book build, but think of it as very programmatic. If I then go to the other things that we do, which are really, I would say more opportunistic, true sale type risk transfers. So think of what we did in US cards. Think of what we've just done in UK mortgages. They have typically been single investor transactions. And there, they are one-off commercial decisions where we're taking a decision that basically says, actually this, there is an opportunity for someone else to hold this risk more effectively than we can. So less programmatic, more sort of individual commercial decisions. Now in those, they are true sales. So, you know, the assets leave our balance sheet.
And, you know, obviously, for all of them, we're doing a very robust RoTE calculation, but really the difference in sort of capital between us and our investor set allows that to happen, but think of them very differently.
There's a question.
Yeah. Thank you. Can you talk about the competitive landscape in investment banking currently relative to previous cycles? Has capacity come out? Can it come back quickly?
Yeah, sure. It's quite interesting because over the last few years, clearly what we've seen is a real focusing, particularly from our European peers, much more focused businesses there, whereas we've kept a bit more breadth. In terms of the market, it's competitive. It always is. And it is as much in a down market as it is in any sort of period of growth. So, you know, no particular change in dynamic. And actually we're really mindful about that as we put our plans to work here.
We've really openly said that what we're trying to do in banking is the hardest part of the plan, because really what we're trying to do here is establish, you know, a greater market share in M&A and ECM away from both the larger U.S. banks, but also in terms of some of the boutiques who've taken some share over the last few years. We feel like we're doing the right things, but it's competitive. It always has been. One of the things that we're obviously mindful of is the changing regulatory environment and the flavor that that might put into this world. We've got more clarity in terms of regulation in Europe and in the U.K. yet to come in the U.S., but we're well used to sort of traversing regulatory differences between different geographies.
So we'll wait and see.
Maybe we can take one very quick question, very quick answer, please, because we're running out of time. Yeah.
Okay. Yeah. Okay. For those of you who didn't hear the question, it's from Alex at Aberdeen, and he's asking really about the drag from head office. So I just remind you, Alex, that at this point in time, some of our inorganic activity has been transferred into head office before it then leaves the group. So, you know, what you're seeing going on in there, particularly in the current year, is the exit of our Italian mortgage business, which has clearly generated a headline loss, but broadly capital neutral. You've also at the moment got our German cards business within there. And then finally you've got our merchant acquiring business, which is one that we still continue to review partnership. So that is a really meaningful part of the drag that you're seeing in the current year.
Thank you very much, Anna, for coming, and hopefully next year again.
Yeah. Thank you so much, Kian. Really appreciate it.
Thank you.