Earnings Call: Q4 2020

Feb 18, 2021

Welcome to the Barclays Full Year 2020 Analyst and Investor Conference Call. I will now hand you over to Jeff Staley, Group Chief Executive and Tushy Al Mazari, our Group Finance Director. Good morning. We all know that 2020 was not a normal year. The pandemic has caused Fear and dislocation in societies around the world. And it's caused huge economic harm and uncertainty with hardship and stress for millions of people. And it has brought tragedy to so many families including among friends and colleagues. In common with others, it has tested our resilience as a business and our values as a corporate citizen. While we have faced significant challenges, I want to say, first of all, how proud I am of the way in which our colleagues at Barclays have responded to an extraordinarily difficult year. Their efforts have been the driving force that has enabled us to step up And play our full part in the battle to contain the damage that this terrible disease is costing all around us. That commitment from our colleagues and the core resilience of our business meant that we have stayed profitable in every quarter of 2020. And that strength in turn has allowed us to support our customers and clients and the communities around the world where we live and work. During 2020, we provided almost 700,000 payment holidays to our customers. We raised around £100,000,000 in overdraft interest and banking fees. And we have committed a further £100,000,000 to charity supporting the most vulnerable through our community aid package. We've helped our clients raise over £1,500,000,000,000 in the global capital markets and extended some £27,000,000,000 Our consumer operations felt the impact of the pandemic most acutely With Barclays U. K. Income down 14%, while our consumer cards and payments business was down 22%. But at the same time, in our Wholesale business, Corporate and Investment Banking income was up 22% for the year, Stabilizing group income at a time of extreme stress. Before provisions, we generated a profit Almost £8,000,000,000 for the full year. These were heavily tempered of course in the approach we have taken In terms of impairment charges driven by the pandemic, full year impairment charges were £4,800,000,000 to take the group's total impairment reserve to £9,400,000,000 reflecting our cautious view of the impact of COVID. However, we were encouraged that the 4th quarter charge was down 19% relative to the previous quarter at just under £500,000,000 and we expect 2021 full year impairment charges to be materially below The 2020 level. Overall group profit before tax is therefore £3,100,000,000 including generating a profit before tax of £646,000,000 in the 4th quarter. The drivers of that performance were in the Investment Bank, Where markets and banking both delivered the best ever income performances, up 45% and 8% respectively. It's important to note the standout markets performance reflects not only the significant growth in the global capital markets, But also material market share gains by Barclays. We have consistently grown share in markets over the past years moving from Market share of 3.6% in 2017 to 4.9% in 2020. And growth has been across macro and credit and equities. Markets and banking income together has grown 45% over the same period Relative to an industry wallet, which has grown roughly 20%. Together, these data points illustrate the tangible momentum We have built in our investment bank a business delivering improving returns year over year and producing A return on tangible equity of over 13% in 2020 despite a high impairment charge. While corporate income was down 13%, including the impact of lower interest rates, the CIB as a whole delivered income of £500,000,000 up 22% year on year and profit before tax of £4,000,000,000 up 35%. Our consumer card and payments business at Barclays International did however make a loss of £388,000,000 for the full year. This was driven by impairment charges, a fall in income caused by lower credit card balances, margin compression And reduced payments activity as a result of the pandemic. CC and P did however return to profit in the last two quarters. Barclays U. K. Profit before tax decreased 47% during the year to £546,000,000 The performance in the year impacted by a significant reduction in income and the COVID related impairment charges we took. We did however see growth in mortgages in 2020 and the business has done a little better since the apparent nature of the 2nd quarter. We saw our profit in Barclays U. K. In the 4th quarter £282,000,000 Lest we forget, Barclays UK is a business which in the decade prior to 2020 regularly produced high returns as did consumer cards and payments. These remain good businesses with strong fundamentals and I expect to see performance improve in both of them as the economy returns to normal. As said, beyond the immediate impacts of the pandemic, U. K. Retail Banking does face some strategic long term challenges. Near zero interest rates, Lower charges for overdraft in other services and the provision of many core banking services for free. In response, we continue to invest in our technology platform, offering digitized finance to enhance our relationships and experience for our customers. And we continue to focus on running the business Efficiently, so that we can generate appropriate profitability, while continuing to deliver support to our customers, clients and communities. Overall, group operating expenses excluding litigation and conduct rose 1% to £13,700,000,000 including roughly £370,000,000 of charges for structural cost actions. This translates to a group cost income ratio of 63% Flat versus 2019. We remain attentive to costs and continue to target a group costincome ratio of below 60% over time. 2020 Group RoTE was 3.2% and earnings per share were 8.8p. We expect to deliver a meaningful improvement in group RoTE in 2021 and remain committed to a target of above 10% over time. At the same time, as navigating the effects of the pandemic on our business and working hard to support customers, clients and our communities, We have continued to strengthen Barclays for the long term. In this respect, in 2020, we made particular progress on our approach to climate change, Setting an ambition to be a net 0 bank by 2,050 as well as a commitment to align all of our financing to the goals of the Paris agreement. In late November, we set out a plan and a methodology for how we intend to achieve this. Our own operations are already net 0 And our commitment extends to the financing we provide to clients covering capital market activity as well as lending. We will ultimately expand this approach to cover our entire financing portfolio. But we have started with Energy and Power, which between them account for up to 3 quarters of emissions globally. We've also set clear goals to help accelerate the transition to a green economy, including £100,000,000,000 of green financing by 2,030 and directly investing £175,000,000 and sustainability focused startups over the next 5 years. Barclays capital position strengthened significantly through 2020 With our CET1 capital ratio increasing by 130 basis points in the year, including 50 basis points in the Q4 to stand at 15.1% at year end. We anticipate some capital headwinds in 2021 From pro cyclical effect on RWAs, the reversal of regulatory forbearance applied in 2020 and increased pension contribution. Nevertheless, we remain significantly above our CET1 ratio target of between 13% 14% And well above our minimum regulatory requirement with prudent provisioning for impairments. Given the strength of our business, we have therefore decided The time is right to resume capital distributions. We have today announced a total payout equivalent to 0.5p per share for 2020, Comprising a full year dividend payment of 0.0 $0.01 per share and we will execute a share buyback of up to £700,000,000 We expect to comment further on capital distributions when appropriate. So in summary, Barclays remains well capitalized, Well provisioned for impairments, highly liquid with a strong balance sheet and competitive market positions across the group. I expect that our strong and diversified business model will deliver a meaningful improvement in returns in 2021. At the same time, we will remain committed to playing our part in supporting customers and clients, our colleagues and our communities as we emerge from the COVID-nineteen crisis. I'll now hand it over to Usher to take you through the results in more detail. Thanks, Jess. I'll comment first on the full year results, then summarize the 4th quarter performance. Our priority during the pandemic has been to The economy, serving our customers and looking after the interests of colleagues and other stakeholders. It's been a very challenging year, but the pandemic has shown Very clearly the benefits of our diversified business model. Despite the effects of the pandemic, we reported a statutory RoTE of 3.2% or $3,400,000 excluding litigation and conduct. Litigation and conduct was just $200,000,000 but we had a large PPI charge in Q3 last year, So I have still reference numbers excluding litigation and conduct. The impairment charge of $4,800,000,000 up almost $3,000,000,000 year on year Reduced PBT from €6,200,000,000 to €3,200,000,000 However, as you can see from this bridge, the increase in CIB income of 22% more than 19% decline in Consumer and Other Businesses. With income up 1% overall, we delivered neutral jaws and a costincome ratio of 63%, slightly in excess of the group's target of below 60% over time. TNAV increased from 2.62p to 2 over the year. Our capital position is also strong with the CET1 ratio strengthening further in Q4 to reach 15.1%, Up 130 basis points over the year. Under the temporary guardrails, which the regulator announced in December, our statutory profitability allows us to distribute 5p In aggregate, by way of dividend and buyback, we plan to launch a share buyback of up to $700,000,000 by the end of Q1, Which is attractive for us from a financial point of view at current share prices and is equivalent to 0.4p per share. In addition, we are paying a dividend of 0.01p and reaffirming our intention going forward to pay dividends, supplemented as appropriate by share buybacks. The level and form of distribution was determined by the current circumstances and you shouldn't read anything particular into the level of overall payout ratio All the mix chosen on this occasion. We'll update the market further on distributions at the appropriate time. Few words on income, The TIB, our share gains in markets and the momentum across the businesses position us well for the future. However, conditions remain challenging for the consumer businesses The reduced unsecured balances and a low rate environment as we show on the next slide. We've highlighted in the chart from the right the continuing headwinds from balance reductions in U. K. And U. S. Cars. We saw some signs of recovery in consumer spending in both the U. K. And U. S. In Q3, The further lockdown hit spending over the Christmas period and this is continuing in Q1. As a result, credit card balances were down in Q4 in the UK And flat in U. S. In dollars, rather than seeing the usual seasonal increase. We've also put in the slide a reminder of the specific headwinds Interest rate is continuing. Looking now at costs. Full year costs were up 1% overall at €13,700,000,000 due to an increase in structural cost actions to around €370,000,000 but underlying costs were flat year on year. The bank levy increased, but is expected to be lower in 2021, the decreases in both the rate and scope of the levy. The COVID pandemic has resulted in additional costs for the group. For example, building out the teams to help customers in financial difficulties And this will remain elevated in 2021. However, the group will continue to drive cost efficiencies, while investing in the franchises where appropriate. You're already familiar with the increase of $2,900,000,000 in the impairment charge. This has been driven by deterioration in the economic outlook As a result of the pandemic and has led to significant increases in the charges in each businesses as you can see. However, this book up in provisions in Q1 and Q2 has not yet Being followed by material increases in defaults. As you can see, much lower charges for Q3 and Q4 in the second chart. We've shown the charge for each quarter split into Stage 1 plus Stage 2 impairment, mostly relating to balances which aren't past due, which I'll refer to as the book ups And the Phase 3 impairment loans in default. As you can see, most of the elevated impairment in Q1 and Q2 was from book ups, While most of the Q3 and Q4 charges were on Stage 3 balances, we've shown on the next slide the macroeconomic variables or MEVs we've used in the expected loss calculation. We've updated the MEV slightly in Q4. However, I would emphasize that with the reduction in unsecured balances and given the ongoing level of government support, the models on their own would have generated a significant provision right back in Q4. However, there is significant uncertainty at the level of default, we'll see as sports teams are worn down. We have therefore applied significant post model adjustments totaling €1,400,000,000 as you can see on the table. The increase in our total impairment allowance by €2,800,000,000 to €9,400,000,000 which broadly maintains our increased level of coverage as you can see on the next slide. Based on forecast unemployment levels, We would anticipate an increased flow into delinquency in 2021, but given our level of provisioning, we would expect a materially lower charge for 2021. Unsecured balances have come down significantly from €60,000,000,000 to €47,000,000,000 through the year and coverage has increased from 8.1% to 12.3% With even higher coverage in the credit card books. The wholesale coverage has almost doubled over the year to 1.5% and a large proportion of this In selected sectors, which we consider to be more vulnerable to the downturn. We include in the appendix the usual detail slides on unsecured coverage, Selected Wholesale Sectors and Payment Holidays. Turning now to Q4 performance. Q4 income decreased Costs increased to $3,800,000,000 including Q4 structural cost actions of $261,000,000 and an increased bank levy charge of 2.99,000,000 Impairment decreased €31,000,000 to €492,000,000 year on year, of which €444,000,000 was the Stage 3 defaulted loans. Despite the headwinds, Q4 was still profitable with a PBT of €700,000,000 and an RoTE of 2.2%. Turning to Barclays U. K. The headwinds we referred to in the previous quarters continued to affect BUK with income down 17% year on year. And the unsecured balances reduced further in Q4 with gross card balances down from £16,500,000,000 to £11,900,000,000 a decline of 28% over the year. Mortgage balances on the other hand were up €5,100,000,000 year on year With a net increase of €1,900,000,000 in Q4 and pricing continues to be attractive. There was significant increase in BUK Business Banking lending over the year As bounced back loans, NCIBills reached roughly €11,000,000,000 in aggregate. Loan balances grew by almost €12,000,000,000 in total to €205,000,000,000 Deposit balances also continued to grow resulted in a loan to deposit ratio of 89%. Q4 income included higher debt sales, which contributed to the increase in income compared to Q3. Q4 NIM was up on Q3 at 2.56 basis points, We expect a clear reduction in 2021 as secured lending continues to grow. This is expected to take full year NIM to around 2 40 basis points Absent any changes in base rate. So the income outlook remains tough with low demand for unsecured lending and the headwind from the structural hedge Despite an expectation of continued mortgage growth, costs increased 11% year on year as COVID related costs and increased Structural cost actions more than offset efficiency savings. The cost increase includes around €30,000,000 of quarterly costs in our partner finance business, Just transferred from Barclays International earlier in the year. Impairment for the quarter was £170,000,000 down slightly year on year and well below recent quarters. Arrears rates continue to be stable. Turning now to Barclays International. BI income was stable year on year at €3,500,000,000 The strong performance in CLA offset by lower income in CCP and RoTE was broadly flat at 5.9%. I'll go into more detail on the businesses in the next two slides. The Corporate and Investment Bank delivered an RoTE of 6.2% in Q4, Traditionally, the weakest quarter of the year, up from 3.9% last year with strong performance across markets and banking. Income was up 14% year on year at €2,600,000,000 on a flat cost base, delivering strong positive jaws. Markets income increased 19% in sterling, the best Q4 level since 2014 when the Investment Bank took its current form And up 22% in dollars. The full year markets income of $7,600,000,000 was also a high since 2014. FIC increased 12% with particularly strong performance in credit. Equities income was up 33% with strong growth in derivatives and cash equities. Banking fees were up 30% year on year with good performance across Debt and Equity Capital Markets and Advisory following some weakness in advisory earlier in the year. Corporate lending this quarter wasn't distorted by the volatile mark to market moves we had in earlier quarters. Reported income of $186,000,000 reflected limited demand for corporate lending With further pay down of revolving credit facilities. Transaction banking income remained depressed at GBP 344,000,000 with further increases in deposits more than offset by margin compression. CIB costs were flat reflecting tight cost control Reducing the cost income ratio from 80% to 69%. Impairment increased slightly year on year, but was well down on the previous three quarters at €52,000,000 We started the year in the Investment Banking franchise in good shape and are optimistic about the future. Turning now to Consumer Cards and Payments. Income in CCP was down 25%, principally driven by U. S. Card balances, which were down 22% in dollar terms. In addition to affecting balances, lower spend volumes were also a headwind for interchange in U. S. Cards And for payments income. In the payments businesses, although volumes were down, e commerce accounted for over 50% of the volumes. Card balances in the U. S. Ended the year flat on September in dollar terms, while then seeing an increase in Thanksgiving and Christmas spend. So the income growth we were hoping for in 2021 is going to be tough to achieve in the absence of significant improvement in economic conditions. Costs were down 4% resulting in a 64% costincome ratio. Impairment was €239,000,000 while down on the levels for Q1 and Q2 reflecting lower balances With arrears rates slightly up in the quarter, but still well below the level our provisioning assumes. Turning now to head office. The head office loss before tax was €416,000,000 reflecting 1 offs in both income and cost lines. The negative income includes a Q4 expense of €85,000,000 relating to the repurchase of half the outstanding Tier 2 contingent capital notes. This was roughly half the €100,000,000 or so annual legacy funding costs in head office We had guided for in 2021 2022. The other main income elements, residual negative treasury items and negative income from hedge accounting We'll continue in 2021 and are expected to be at similar levels to the past. That will suggest around €300,000,000 negative income in total In the absence of a resumption of the Absa dividend, Q4 costs of CAD 222,000,000 were above the usual run rate of CAD 50,000,000 to CAD 60,000,000 Due to around $150,000,000 of cost actions and the inclusion of a further $22,000,000 of the community aid program we announced at the start of the pandemic. Moving on to capital. We finished the year with a very strong capital position. The CET1 ratio was 15.1%, up materially from 13.8% at the end of 2019 and an increase of 50 basis points in Q4. This reflected capital generation from profits across the year, regulatory support and the cancellation of the full year 2019 dividend at the start of the pandemic. The strengthening of the ratio was achieved despite the increase of €11,000,000,000 in RWAs. You can see the elements broken down in the bridge on the top half of this slide. IFRS 9 transitional release didn't move significantly this quarter as the bulk of the impairment charge didn't qualify for relief. In Q4, the main contributors to the increase were profits and 30 basis points from the new regulatory benefit of software assets. We're expecting the profit benefit to be reversed at some point this year by the PRA. And I'll say more about the flight path for capital on the next slide. We're happy with the headline capital ratio of 15.1%, but I wanted to remind you of some factors which will reduce the ratio in 2021, particularly in Q1 and why we are comfortable to run at a level materially below 15.1%. We've shown at the start of this bridge a couple of easily quantifiable factors, which will affect the ratio in the early part of the year. The proposed buyback of $700,000,000 is not reflected in the ratio And would reduce the year end ratio by 23 basis points. In addition, the temporary PVA relief brought in last year was reversed on the 1st January And the IFRS nine transitional relief reduces. So you could think of a rebased ratio at the start of 2021 of 14.7%. This is still well above our target range of 13% to 14%. I would remind you that our MDA hurdle is currently 11.2% We've included the usual slide in the appendix showing how that is calculated. Our target range is designed to allow for fluctuations in the MDA, For example, if a UK countercyclical buffer is reintroduced. Going forward, we remain confident of generating capital from profits, Although I'm not going to forecast a precise level of capital generation. We've shown here a number of additional headwinds to the ratio that we are aware of top of the expected reversal of the software benefit, the 2 that are most difficult to forecast are the migration of impairment into Stage 3 defaulted balances, which will not qualify for transitional relief and potential pro cyclicality, which could inflate RWAs. This didn't materialize during 2020 in the way we had We are likely to see some effect from credit migration during 2021. Nevertheless, we are confident that the balance of these elements will leave us With sufficient capital generation and continued distributions to shareholders and be comfortable in our CET1 target range. Both spot and average leverage ratios were at or above 5%. Finally, a slide about our liquidity and funding. We remain highly liquid and well funded with a liquidity coverage ratio of 162% and a loan to deposit ratio of 71%. This positions us well to withstand the stresses caused by the pandemic and to support our customers. So to recap, We were profitable in each quarter of 2020, generating a 3.2% statutory RoTE for the year, despite the effects of the COVID pandemic, which led to significant reductions in income in the consumer businesses and an increase of close to €3,000,000,000 in the impairment charge. I'll summarize on this slide the various comments on the outlook we've made. While the income outlook for the consumer businesses is challenging Given the economic environment, the CIB is well placed for 2021 and beyond. We continue to see the benefits of our diversified business model coming through, allowing us to take a measured approach to costs and continue to invest in the future of the group despite the difficult economic environment. We've taken very significant impairment charges in 2020, but with €9,400,000,000 in balance sheet provisions, we expect a materially lower charge in 2021. Distributing the equivalent of 0.05p per share by way of dividend and share buyback. Although we expect a reduction in our CET1 ratio in 2021, Our starting point of 15.1 percent should put us in a good position to pay attractive capital distributions to shareholders going forward. Thank you. And we'll now take your questions. And as usual, I'd ask that you limit yourself to 2 per person, so we get a chance to get around to everyone. The first question today comes from Joseph Dickerson of Jefferies. Please go ahead, Joseph. Hi. Good morning, guys. Thanks for taking my question. I guess just a couple of things. So on the capital distribution, The PRA was pretty clear in their December document that you could move away from these, I think they used the word temporary guardrails And return to more normal levels of Board decision making in respect of the half year. And when I look at where the pro form a CET1 is, in addition to the fact you generated 81 basis points of capital in 2020 with a 4,800,000,000 Impairment charge, it suggests on a fairly conservative basis, you've got somewhere between $1,500,000,000 plus of excess Capital, I mean, is that something you could seek to use for buybacks in respect of the half year? I guess, how should we think about the timing of further Buybacks, given that your shares are meaningfully below book, that's quite accretive. And then secondly, I guess just on The card outlook both in the U. S. And the U. K, you gave a great deal of precision around the outlook for the U. K. NIM, but a lot of that It's linked to Card Spend and Lend. And I guess what's the outlook there? Because you said you would need to see, I think Tushar, you said in your comments significant improvement in economic conditions, but we're starting to see that if you look The U. S. Retail sales data coming in for January at 5% versus 1% and the stim checks being dropped into people's Bank accounts in January, it seems like there's the setup is quite prime for recovery in spend, but you sound a bit more cautious. I'm just wondering what the delta is there. Thanks. Yes. Thanks, Joe. Good to hear from you. Why don't I Both of those questions. In terms of capital distribution, I mean, hopefully, you've seen this morning that It's very important to the Board here that we're in a position to return as much capital as we can into shareholders' And consistently and hopefully the actions we've taken this morning or announced this morning are a good demonstration of that. I think I'd also agree with you that we feel very comfortable with both our starting capital position, albeit we've called out Some natural headwinds, but you can even see that as you pro form a for some of the numbers that we can quantify, we're still in a very strong capital position. And we are capital generative. We expect to be more profitable this year than we were last And that will no doubt help. In terms of announcements for further buybacks or dividends or anything, I think that's probably something To talk about at the right time, today, I don't think we're in a position to make any announcements on that. Of course, The guardrails are in place. The PRA will do their reverse stress testing. They'll come up with their conclusions thereof. But Ethan, I'd agree with you that getting capital back into shareholders' hands is a priority for us and the actions that we've taken today demonstrates our sort of focus on that. And we have a very strong capital position to be starting from in our view. In terms of Card balances, U. K. And U. S. Yes, I think look, I think you're right in the sense that spending I think as spending recovers, That will be helpful in the U. S. In the sense that we start benefiting from the interchange fees that are available there. And also actually even In the CCT segment, we do include our merchant acquiring business as well. And of course, that will respond very quickly To the increases in spend level. I could think that the growth in card balances themselves may lag that a little bit. Obviously, folks have been saving and acting very rationally. And it remains to be seen just sort of their propensity to Take unsecured credit on while there's still a reasonable amount of cash on deposits in bank balance sheets. So look, I think it's a very sort of difficult judgment. We've tried to be sort of cautious. You'd expect us to be cautious. But As the world moves on and vaccines have their desired effect quicker than perhaps was anticipated and spend levels recover, That ought to be a benefit, of course, yes. But it's difficult to be precise in that judgment just given where we are at the moment. That's fair. Would you agree that the recovery in spend and connecting that to Lend is probably driven more by Improvement in mobility and reopening is non essential, spend picks up where there's probably a greater propensity to revolve a balance. Is that kind of The goalpost that we would look for? Yes, definitely, Joe. I mean, usually on essential spend that tends to be driven more by debit card transactions and non essential Spend tends to be more where credit cards are deployed. So I think that's a good lead indicator. We've seen non essential spend tick up. There's more propensity And sorry just one more thing just to make sure that We both agree that the PRA has said that you can return to more normal level more normal board level capital decision making in respect to the half year unless With normal caveats around the economy not falling apart etcetera. Yes. Look, I yes, and we'll talk about more of that when the time is right. I think Let's get through this season. Let's get through the reverse stress test and various other things. But look, getting capital back to shareholders, Hans, it's a clear objective for the Board here and hopefully our actions this morning are a good demonstration of that, where we've This should be key. I think the maximum that was allowed under the existing guardrails. Great. Thanks. Okay. Thanks, Joe. Can we have the next question please, operator? Sure. The next question comes from Jonathan Pierce of Numis. Your line is now open. Good morning all. 2 from me as well please. Firstly, the NIM in the UK Bank. Could you give us a sense Of the trajectory of the NIM as the year goes on, I presume we're just stepping lower and lower through the year such that we probably exit below 2.4%, would that be correct? And maybe as part of that, can you give us an idea of what you're thinking on mortgage Margins as the year goes on. I noticed you're leading the charge back down in terms of some of your headline rates. The second question is on just a technical one, I guess, on capital headwinds. In the Q1, you've got Still quite a big unhedged bond portfolio and looking at the report and accounts, 25 basis point shift up in the yield curve hits you by £4,000,000 or £5 £1,000,000 which fits capital as well. So based on where curves are at the moment, given the big move up in the last few weeks, is there another headwind coming in Q1, maybe 15, 20 basis points from the bond portfolio revaluation. Thanks a lot. Yes. Thanks, Jonathan. Why don't I Take both of them as well. NIM trajectory, yes, it's actually quite a difficult one for us to forecast, because You've got a few moving parts on that. You've got the yield curve itself. Now that's obviously been steepening in recent times. That probably wasn't put When we are sort of running our own projections and who knows if that continues to steepen or flattens out again, we don't know. Obviously, steepening It's helpful to us. Probably more helpful in the out years, but we'll have some benefit in current year. Front book Mortgage margin is, of course, another one that's going to have be driven by sort of dynamics of supply and demand in the mortgage market. It's held up actually reasonably well and some of the headline rates that you see that I know people do Just got to be careful that you correlate that to where most of our production has been and is likely to be. So We do expect in the forecast we gave some moderation to front book mortgage margin, It's actually probably held up kind of okay actually a bit better than perhaps we might have forecast. Now again, The real thing here will be what happens on the other side of the stamp duty holiday, if you like. The chance will announce what these plans are around that at the March budget. So I think we'll have a better picture then as well. Volumes also, I guess, is another one that's not that straightforward to forecast again in an uncertain year. Mortgage volumes have been actually getting pretty robust. So I think that's probably helpful. And the earlier question, Jonathan, on the recovery in unsecured balance, of course, it's a very high Margin product, if there is an increase in non essential spend then you'd probably see an earlier recovery in unsecured balances and that may be helpful in the margin. We try to be cautious in all of these and things have moved pretty fast. The yield curve Speaking a lot probably since when we were doing this and quite frankly the pace of vaccine rolled out has probably surprised us a little bit as well. So Yes. Let's hope that optimism continues, but we shall see. So, Sat here today is the message then actually you think All else equal, based on what you see right now, you could do a bit better than 2.4%? It's possible. Of course, it's possible. The bright person sitting here in the sort of 6 weeks in February is forecasting the next sort of 46 weeks or something of NIM. But Yeah. At the moment, look, the dynamics are probably marginally helpful. I'd agree with that. In terms of just the other point, Jonathan, on mortgages, the trajectory. No, I wouldn't expect us to be below well below 2.40 basis At the end of the year, we'll be sort of gradually grinding down on the current Your second question, is there another headwind due to sort of AFS or fair value of OCI? Not really. It's significant. If it was, we'd have called it out. And the other thing, of course, is when you have significant moves in currencies and yield curves, Typically, that's a reasonable trading environment for the other side of the businesses. And that's obviously a very important part Well, that opportunity is set here. So no, I wouldn't call that a headwind. Okay. Thank you. Thanks, Jonathan. We have the next question please, Operator. The next question comes from Jon Pease of Credit Suisse. Your line is now open. Yes. Thank you. So my first question is, could you help us maybe size the material improvements and impairments you're expecting for 2021. A few European banks have suggested that the impairment level might come back close to a through the cycle rate. If I annualize your second half twenty twenty, that's probably similar a little bit above your through the cycle rate. I mean, could do you think you could Sustain that H2 2020 run rate and impairments to this next year as you think about things. And then If I could just ask a little bit about the Investment Bank and how have you started the year in 2021? I think you mentioned You were well positioned. A few of your peers have talked about revenues being up year over year. Has it been the same for you? Thank you. Yes. Thanks, John. John Peace and Jonathan Pierce. Well, this is going to be a tongue twister for me, but hi, John. The impairment and where we are, yes, I mean, you're right to point out we've also been running at a relatively low Run rate both in the Q3 and Q4. Really the big wildcard here is When or if do we get to see the defaults that our models are forecasting? And we're not seeing it yet. You could make the case that there's going to be plenty of government support out there in which case we don't get to see those levels unemployment or that degree of consumer stress and we may end up being over provided. But we're trying to do this As straight as we can. So we've actually even called out in our slide this morning, have we just let the models run By themselves, we would have had a lower impairment balance as a result of that by about $1,400,000,000 We've taken called a post model adjustment to supplement where the models were. And that's really because The models just can't cope with this sort of very unusual sort of economic picture that we're in at the moment with sort of big some quarter on quarter in economic data. But look at the moment, it's fair to say that the impairment Picture the underlying credit picture looks incredibly benign. You can see that in our corporate. For example, the 4th quarter tends to be the highest quarter For corporate defaults, and you can see we only had €52,000,000 in the 4th quarter. I mean, that's extraordinary when you think about all the headlines that you're reading. Arrears rates Haven't really barged on our unsecured credit. So look, it looks pretty benign, but I think we need to wait and see when we're on the other side, if you like, if the economy is reopening. Jess, you might want to add anything on that. On your second question, John, about the IB in the Q1, we don't comment during A quarter. But I would say, or highlight a couple of things. 1, last year was a very robust market For the capital markets, we underwrote about £1,500,000,000,000 worth of debt for sovereigns and corporates. That's in the public inventory now. And the corporate bond market itself grew by 40% over the last 2 years. And that drove a lot of the secondary market activity Underscoring the market's performance last year. Also we grew our markets business last year about 45%, whereas the overall industry grew about 20%. So we continue to Capture market share. I'm sure you saw the commentary this morning from Credit Suisse and Deutsche Bank. So I'll sort of leave it there. Thanks for taking questions, John. Yes, the next question please, operator. The next question comes from Alvaro Serrano of Morgan Stanley. Please proceed with your question. Good morning. Thanks for taking my questions. Just one follow-up question on the NIM guidance in U. K. Please. The 2.40, so that's 16 basis points reduction versus the Q4 level. Can you maybe I don't know if it's a little bit quantifying in terms of your assumptions and the way you think about the guidance, How much of that reduction is structural hedge versus consumer sort of or lending mix? So we can maybe Sort of draw our own conclusions around the recent steepening and views. And second, On the cost outlook, in the past you've given more specific Guidance, I realize you've taken some restructuring charges and you've also called out that COVID expenses will remain elevated, I think is the word Maybe you can give more a bit more detail. It's easier to give detail by division. I don't know if you can comment on BUK outlook And versus the overall group? Thank you. Yes. Thanks, I'll borrow. Well, I can handle both of them. In terms of NIM in the U. K, I mean, the first thing I would say is just to sort of contextualize this, of course, one of the You probably picked up from our really to this morning in our slide where is net interest income for Barclays It's somewhere around 35%, 36%, 37% for the group of the U. K. Net interest margin is only a portion of that. So it's a relatively small part of our top line. And the bulk of it is A small part of our top line for both the villages is in sort of fee and other types of activities, but nonetheless Of course, an important area. In terms of the mix of that and the structural hedge contribution, I guess, two comments I'd make on that. As I mentioned a little bit earlier, Alvaro, we haven't captured in sort of latest yield curve moves and probably I'll take your question. So the steeper curve, how much of that might influence? And then the only thing I'll do is that there's a slide in our appendices, which I'll get the IR team to point you out. You haven't already come to it already. Well, we've given a sort of a sensitivity of slide to net interest income for Upward shift in the yield curve and downward shift in the yield curve. Now these are I'll be careful with these because we're seeing parallel shifts and it's very complicated Soft cleaning slides are steepening and shadowing and various other shapes, but at least it gives you a sense of the sensitivity. It tends to affect more the outer years, but there will be a if there's a steepening as we've seen and it stays or continues to Steep, and it will have some benefit into this year as well. I'll probably leave it at that, O'Bara. The other thing that may be helpful actually is from our margin You'll be able to see the notional of the hedges that we run and the contribution that the gross fixed leg has. So you'll get a sense of the oil in yield And you can make your own assumptions as to what that might refinance and model that accordingly. The final comment I'd say is we do expect balances to grow this year interest balances to grow and they did grow last year as well. So NIM of course is one part of the equation for an interest income. And I know you guys know all this, but Just for the fear of stating the obvious. You did need to take a view on balances as well. And there we do expect a decent growth in the mortgage business. And We like to see growth in the unsecured business. We haven't seen that yet. To the earlier question from Joe, I think it will really be predicated on where nonessential Spend returns and how quickly that transmit into revolving credit demand. Costs, Yes. Structural sort of cost actions is a way of life for us. We don't call it restructuring. We don't put it below the line. It's something we do every single year. We've given you some In the past, we will do some more again in 2021 and we'll include it in our overall cost line and not try and Be clever about reporting things above and below, so you can see the full effect of that. I think the good news is given the diversification The top line, particularly some of the strength we've seen in the CIB and we're optimistic about that as we go into 2021, that will give us the capacity to, 1st of all, continue to invest in some of our consumer franchises. We really like those businesses. We'd like to diversify. For example, U. S. Card portfolio, we're very excited about the U. K. Mass affluent wealth proposition. We like transaction banking. We think we've got very good positions there. And the diversification of top line does allow us in addition to the efficiencies that we will naturally create and capacity we will create in our cost line every year to continue to invest. I haven't given guidance by division. And I don't think we'll do that at this stage. It is again It's an uncertain world and I think it's difficult to give precise guidance because look we don't really know when economies are coming out of Lockdown and what the economy is on the other side of lockdown. We're probably feeling more optimistic than we were when we were probably writing a lot of this. But it's sort of a fast moving picture, so probably more to come at the right time. Thanks for the question. Thanks, Alvaro. Could we have the next question, Please, operator. The next question comes from Benjamin Toms of RBC. Please go ahead, Benjamin. Good morning. Thank you for taking my questions. The first is on the CIB. So it's performed well this year and the market share has materially increased. Do you see yourselves continuing to take the same market share gains in the IP? Or is it a lot harder work to win share from here? And then secondly, just on real estate optimization, which you've spoken about before. There's not much detail about that in the slides. Is that because it's 2022 thing, is now not the right time to get faster and harder on branch reductions? Can you just give some more color around real estate optimization please? Thank you. Yes. Ben, on the market share side, obviously, we have Good momentum in the IB through every quarter of last year. And across equities and macro and credit. So, We hope to continue to gain market share. And also We do expect the size of the market to continue to grow and that supports the financial performance Of that business. In terms of branch closings, The consumer in the U. K. Is definitely moving to interactions with Barclays Through our digital channels. Our sales through the Internet and our payments business were up Over 30% last year. And the usage of our mobile banking net for instance also It was growing at a very robust pace. So as that transition happens and our consumers engage with us digitally and we advance our digital offering, Branches, he'd use less. And we're going to be very prudent And how we deal with branches, we still have over 700 in the U. K. But I think you'll gradually see that number go down as we have over the last couple of years. So yes, I mean, there will be for the branch quotas. Thanks for the question, Ben. Can we have the next question please, operator? The next question comes from Rohit to Rajan from Bank of America. Please go ahead. Hi. Thank you. Good morning. My first one, sorry, it's Another follow-up on the BUK NIM. The slide that you mentioned before on the structural hedge rate sensitivity Would suggest something like a potential €100,000,000 uplift from the move in rates that we've seen in recent weeks. So I just wanted to check that that's roughly the right ballpark. And in that $240,000,000 guidance for BUK, what are you assuming in terms of cards balances, I guess, On average through this year. And then second one was on CC and P. I guess there are obviously 2 parts That business, so in your in reference to an earlier question, I think you suggested that the payments part of the business should So the track spending trends, is it fair to assume that the mix of the cards business probably means that that lags the broader Trends in the U. S. Card balances given the sort of a bit more exposure to travel and leisure? Yes. Thanks for your questions. Why don't I take them? In terms of the structural hedge potential upside From the sort of recent peaking in the curve. I don't want to sort of quote too much around whether it should be €100,000,000 The reason I say that is Yes. The slide you're referring to is sort of parallel shift rather than steepening and 5 year rates and 10 year rates for all of us. So It's directionally positive, but I'm reluctant to give you a sort of precise number on that. But it's a positive and I'll leave it at that right. The 2 40 basis points NIM guidance, we actually assumed U. K. Card balances Would be flat to maybe even down slightly. Now that's obviously when we're making all of Projections, the world moves so quickly that may be too cautious and maybe economies recover Quicker and nonessential spend picks up quicker. So we'll have to see. I mean, As you know, right, it's a sort of it's a twofold thing. First of all, you've got to have the spend sort of in the right categories, the Demand, if you like, and then the credit appetite as well. So we'll see how that goes. But we were rather cautious in our forecast expecting card balance to be flat to maybe even slightly down a little bit. In the CCP segment, in terms of the U. S. Card balances. Yes, I mean it will follow spend. So again, in some ways the good news about The U. S. Market is people value these rewards and they're not just spending because they need unsecured credit. They tend to value these. So it's a very slightly different dynamic. And of course, the cards that we have are very much non essential Travel, entertainment, hospitality, leisure, etcetera. So if spending in those categories were to come back and in those cases we may that it ought to start coming Over the course of this year, then you'll see some benefits flowing through. Probably in the second half of the year rather than the first There is a timing sort of thing when sort of people start booking their travel and holidays and all that. By the time it ends up when your card balances, There's some sort of lag, but probably be a bit more quicker to see that recovery in the U. S. Just the nature of the business in the U. S. And our partnerships in the U. S. Relative to the U. K. If you see the payments business in the U. K, We've made a significant investment in the technology which runs the merchant acquiring business and are starting to see that have an impact Particularly as I said through Internet sales and whatnot, we're also connecting all of our that run our Small Business Banking Group with our Merchant Acquiring Group and that will also have I think an impact on the growth of our Merchant Acquiring Business particularly in the small business space which is where the profitability really lies. Thank you. Can I just clarify on the U? K. Cards balances? When you say you flat to down year on year, are you talking about the year end position or presume you're talking about the year end position rather than the year end. Yes. So by the time you get to point to point, 30 1st December, 30 December, we thought it would be flat, maybe marginally down. And hopefully better than that. Thank you very much. Thanks, Rohit. We have the next question please operator. Sure. The next question comes from Ed Firth of KBW. Your line is now open. Good morning, everybody. Hey. Just a quick question on the capital headwinds. The Two areas, but I was just wondering that. One is post cyclicality. I think in the past, you talked about €5,000,000,000 or something at the half year as a sort of proceeds to the orders of magnitude number. Is that I remember that wrongly, that was the first one. And then secondly, you highlighted in your words regulatory forbearance that would be coming back This year, can you just remind me roughly what we're talking about in terms of numbers for that as well? Thanks. Yes. So on the second part of your question, It's relatively for Brent. A good example is PVA, which was sort of granted in the I think it might have been the first Quarter of last year and it reverses on the 1st January. So that's one example. I think Software capitalization, I'd probably put as a similar example where PRA has been quite straightforward in saying all along that they never Consider it to be good capital, so they'll no doubt reverse it. And it looks like they'll do that during 2021. So those are probably the 2 clear examples that come to mind. I think all in all, though, Reg, I'd still sort of come back to the broader point I just wanted to be help you with your modeling. There are headwinds out there, but we're still well above our So the guidance in terms of target ratio and we expect to be generating capital net capital over the course of the year. So Just all in the round, we're still pretty comfortable with everything. And it's the closest accounting number, if I remember that correctly. I'm not saying I want to put that in my model or anything, but just to get a sense of Yes. We called out the number we called out was €10,000,000,000 Of price cyclicality that we've seen in 2020, if you I can get the IR guide here sort of just pointing to the right direction. The table, the RWA table will Probably you can sort of disentangle that and get to that number. What it will be from this coming year? Crikey, that's Tough one too to forecast. It's actually surprised us on the downside a lot. I've guided to this sort of procyclicality kind of Coming in Q2, Q3 and Q4, I guess I'm going to stop guiding at some point because it hasn't happened yet. But if you believe sort of conventional thinking that at some point The stress in the economy results in default. You ought to see some price, Scotty, but it hasn't happened yet and it's Not happening in the near term, put it that way. Sure. Okay. Thanks so much. Thanks, Ed. We have the next question please, operator. The next question on the line comes from Jason Napier of UBS. Please go ahead. Good morning. Thank you for taking my questions. The first one, I guess for Tushar, just coming back on the Commentary around costs. You've retained your sort of medium term 60% cost income Objective. And I guess where consensus is now is that costs are going to be broadly flat this year with revenues down 5%. I would have thought that Coming into 2021 with probably a higher headcount than planned and those strategic costs for last year and COVID costs in the base that better than flat would have been consistent with what Jes has said in the past about delivering a sort of a stable cost income ratio in CIB over time. I just wonder whether you might give a bit more concrete guidance on the direction of travel for costs It doesn't seem sensible unless there was an awful lot of investment that didn't happen last year as a consequence of COVID Not to have better flex in costs if revenues are going to be down as consensus expects. So that's the first one. And then secondly, As you already highlighted, the risk overlays that you've had to apply throughout last through the second half of last year are mammoth. And everyone continues to be positively surprised on the lack of movement into Stage 3. I just wonder the coverage levels you've got are huge and rising still. How confident are we given how long this has been going on Perhaps that the stage splits are right. If we can be sure that Stage 2 is as big as it ought to be and perhaps we can think about What provision releases might be sensible into the second half? Do you have a good handle on which of your customers are Recipients of furlough aid and so on because clearly the payment holidays are almost all gone now and yet things continue to proceed really very strongly from a credit So I guess if you could just talk to confidence around staging splits and coverage that would be helpful. Yes. I'll do them in reverse order Jason, so in terms of staging splits, on many of our customers, they do have Current account relationships with us, of course, for those customers, we have a lot of insight as to the specific situation And I have a sort of high conviction on sort of staging. Of course, there's a it's an open market product that we have in our unsecured books. So you don't have to be a current account customer to have a credit card with us. And if you're not, obviously, we have less visibility in your I would say though, I think at the end of the day, we don't have any historical sort of data Calibrate this to Ita. So we are being, I think, in our words, appropriately cautious and you can see that in the words you used, the risk overlay. If this turns into a relatively smooth adjustment, and I think the real unknown here is, of course, the involvement government and the fiscal response and what will happen here. There's I think Paco, I think, announced their report this week already talking about staging out Furloughs and things like that to kind of make a smoother transition as possible. If that were to be the case that unemployment levels really don't go anywhere near where our mix Are currently being modeled then as a case to say, we may be over provided. We'll know in good time, but We've tried to be as transparent and as open as we can. I mean the other thing I think that's in there as well that is again a very hard thing for the models to pick up is the glut of savings. So consumers are in you may have higher unemployment levels, You've got a lot of cash sitting in deposit accounts and that may lessen the stress and balances have fallen as well. So look, I think this has all surprised us as to sort of when I look at the sort of Q3, Q4 and even into Q1 how benign credit is looking. I think it's surprising all of us. But We'll be on the upside of the lockdown. It feels like early enough and we'll know for sure. On costs, Yes. I think for us, Jason, is that we the costincome ratio is an objective for us and it's something that we manage sort of not We're not trying to rush to get to any one particular year. We try and manage the company for the medium term. And so it is important that we continue to invest. And cost to income ratio is as much a function of income as it is costs. And we have some areas of growth on the top line that we are very excited about. You've seen that in the CID. I think in terms of market share pickup there, there's potentially more to come. We've been really well in some of our electronic Trading capabilities doing really well in securitized products with a relatively small product set for us, but growing extremely quickly. In equities as well, you've seen probably the last 6 months of the year, probably outperformance in our equities trading line, which Just being quite interesting for us. Equity Capital Markets is another really interesting area for us in building out that franchise that's doing really well at the moment. And in the consumer businesses, we'd like to diversify our car portfolio, AARP, the American Retirees and portfolios coming online this year. Jess talked about some of the investments we're making into our payments business. So I think it's important for us to continue to invest and focus on the top line as well. And with the way we're able to do that is We can generate capacity through our ongoing efficiencies during the course of a year like last year and a year like this year to Sort of fund that without expenses sort of climbing in a way that doesn't make sense. But That's how we think about it. And ultimately, to get to a the right sort of shape of the company, we've got to think about the And that's not just the cost line when we look at costincome ratio. And then, is there anything more you want to say on that, Jess? Let me just add. Another Line of growth that I think we'll start to articulate more explicitly relates to our point of sale financing. We have a terrific partnership with Amazon in Germany. That's their 2nd largest market. They have 40,000,000 We have a great partnership with Apple in the U. K. We fund all of the iPhones and tablet sales on an installment basis And those are just two examples. We are rolling out our quarter sale financing as we build out the payment space. Thanks for your question, JP. Thank you very much. Thank you. We have the next question please operator. Your next question is from Guy Stebbings of Exane BNP Paribas. Please go ahead. Good morning. Thanks for Taking the questions. Firstly, I just wanted to come back to costs and then I had a question on sort of longer term consumer balance outlook. So on costs, just focusing firstly on the CIB, costs were broadly flat this year despite the very strong revenue performance. I know in the past you've talked about your cost base being less variable on the COB than some U. S. Peers, but even so one might have expected a higher cost. If consensus is right for 2021 and CIB revenues are markedly lower in 2020 in 2021 or 2020, appreciate that might not be your view. But if that was the case, should we expect a reasonable drop in costs, especially given some of the FX movements as well? And I appreciate it's hard to guide on cost income this year Given the uncertainties on top line, the previous questions on sort of efficiency gains, perhaps structural cost charges are flat or down this year on last year, Perhaps the levy should be lower. I mean, I think that the absolute cost base should be near 13.5% or perhaps lower in 2021 and consensus somewhat higher. And then the second question was just on consumer balances longer term. I mean, we've seen your U. K. Consumer balances decline over 30% since the start of 2020. They're still declining and not the similar situation in the U. S. As we look further ahead, I'll be interested to get your views on how many years it takes to recover those balances. Would your central assumption be that we just model low mid single digit as the recovery takes hold per year, Which would take 10 years to get back that balances or given the very unique nature of this crisis, it could rebound much sooner than that. Thanks. Yes. Why don't I have a stab at both of them. Cost in the CIB, look there is of course, there is flex there in terms of the bonus pool. And we've made that given the sort of framework that we're operating in the sort of the bonus cap I guess still for us in the U. K. As flexible as we can. We made some changes I think when Jeff first arrived to give us that. There is some flex there. And we'll be judicious about the pace of investments and all that. But I'll go back to your earlier comment Guy. We probably You have a different view of the income outlook than you may have. I mean, not you specifically, but others in general may have. And I think the investments that we've been putting into the CIB have been rewarding us quite well. And we'll continue to balance that appropriately. In terms of consumer balances, I can't imagine it's going to take that Long to recover. I think we're living in very sort of a weird sort of contraction that's been very dramatic. I don't think you'll see Sort of steady sort of multi decade build up as we've seen in the past. I think the other thing, as Jeff mentioned, unsecured balances, cards are important, but Point of sale financing, customer behavior is changing, particularly younger customers much more Into the sort of installment financing at the point of purchase, it's a great business for us. Just mentioned the Apple partnership in the We've got a tie up in Amazon in Germany and there's various other things that we'll talk about at the right time. So I think it will be a more rapid recovery than that, albeit You've got to see an economy that's sort of back to a sort of a more quote to normal level, whatever that is these days. I think you'll see a relatively quick recovery. I think When they reverse the lockdown and all the shops and restaurants and stores across the United Kingdom open up, think the spring back in spending is going to be to the upside. So I would echo what Tushar said that this is not going to be a sort of Low single digit grinded out over a decade. I think the response to the pandemic being over given how aggressive the fiscal and monetary policy has been It's going to be strong and we'll feel it in our numbers. Again, I go back as well. For the last decade, both our consumer businesses in the U. K. And in the U. S. Were generating consistently Mid teen to high teens returns on capital. I think that is more a reflection of the fundamental strength of those two businesses and what's happening in a once in a century pandemic. And going back to the cost income ratio or whatnot, We get any sort of recovery to what those businesses look like in 2018 2019 and we hit our financial targets. Thanks for your question, Guy. Could we have the next question please, operator? The next question comes from Robin Down of HSBC. Please proceed with your question. Hi. Yes. I just wanted to Come back on the impairment side. I'm a bit sort of confused if you like as to what you've done because You've increased the macro or you've moved the macro assumptions more positively since Q3. And then you've also Change the weightings of the scenarios towards the sort of upside scenarios and away from the downside scenarios. And yet at the same time you've applied £1,000,000,000 for the management overlay. It just feels somewhat inconsistent. I suspect we're not going to get the answer to this, but are there any particular trigger points that you're looking at? Because I can't help but feel that as we kind of run out of Come out of lockdown running through this year that we should be looking for net releases to come through at some point in the second half. So that was just one question. Is there any The trigger that you're looking at in terms of that because I can't really see why you put the extra billion aside. And then second question on structural costs. Apologies if this was asked earlier on, but any kind of view as to What those look like in 2021? And what the payback might be from them? Thank you. Yes. So Robin, On the first question on impairment, the formal technical point, the weightings on the scenario, Actually, it's a function of GDP actually. So the way these models work is they will take Economic outlooks and baseline economic outlook and then project scenarios either 2 up, 2 down and these are model driven weighting. So it's just a function of the model. That model is based on historical data and how economies and the sort of Confidence level of different projections of baseline to actual worked out. So that's purely just Mathematics, if you like, behind the scenes. The PMAs, what that indicates is that It's a view of trying to the challenge we have at the moment is the way the models were written were calibrated of previous Business cycles, previous business cycles, you never had such rapid expansion and contraction in economic data. And so what you tend to have is the model just exaggerates those moves. So when unemployment starts growing, it massively overshoots. And when unemployment sort of Stops and starts falling. It just thinks the recession is over and it just releases everything immediately. And I think we'll all probably At the moment, that it's just hard to know for certain how the economy will adapt To a sort of post lockdown world. I think we're close to that point. The early signs are that credit looks incredibly benign and governments are Looking to do their best to smooth the transition. With that to be the case, then we probably won't see Levels of unemployment that sort of the models are working off and we may be over providing. But we'll know in good time, we've tried to be Somewhat transparent about these are how the models are currently working and what we're having to do to try and counteract the exaggerated moves the models may have. On costs, we haven't called out specific sort of structural cost actions for 2021. We do this every year. If there's anything sort of meaningful and important and we'll call it out as we go along, but nothing to say specifically at the moment. Going back to the impairment, when the crisis began, we wanted with the financial resiliency that the bank Was showing in the level of capital that the bank was accumulating, we wanted to be prudent In the impairment line and obviously got our impairment reserves to £9,400,000,000 which given the size of our balance sheet is a Very strong position to have. And then I think all of us are positively surprised by the degree of the government Both here and in the U. S. And in Europe indeed, response to try to maintain the economic damage Being caused by the pandemic and that is encouraging. And if we are coming to mass vaccine rollout that we've seen in the U. K, That's going to make the credit picture much brighter for us. If I could just come back and I appreciate Fully that you want to be prudent. And I think if we were all in charge of Barclays, we'd be doing the same thing. But the reality is If the economic sort of outlook is as you forecast and we forecast and consensus forecast, It just feels like you've just sorted away another GBP 1,000,000,000 that you didn't need. Well, Robin, I mean, We're trying to do what we think is the right level of provisioning for what We think we have it right, but you can certainly make the case that credit will turn out better than his forecast. And I'll I'll leave that to others' judgment. We think we've got it right, but look we're all looking at crystal ball that we've never had experienced before. And you saw all the Almost all the U. S. Banks released in the Q4 and that's not because they got it wrong in the Q1 of last year. It's just They're reflecting what they're seeing on the ground. Yes. Okay. Thanks, Robbie. Can we have the next question please, operator? The next question is from Chris Can't of Autonomous. Your line is now open. Good morning. Thank you for taking my Questions. I had a bit of a couple of on costs and then one on FX, So the 60% costincome ratio target has been a medium term target for a while now. What's the time frame to hitting that? And in terms of the mix of the business, how do you see the shape of the group In terms of profit splits going forward, when you're thinking about that 60% costincome ratio, because if I look at controllable costs and income, So parking litigation conduct and the levy. In 2019, the 2 consumer divisions generated €5,500,000,000 of profit and the CIB was 3.3. And for 2020, those numbers have basically flipped on their head and it's now €3,400,000,000 for the consumer facing businesses and €5,800,000,000 from the CIB. From your commentary, it doesn't sound great in terms of the consumer outlook. And so what are you assuming there in terms of the longer term structure of the group? Because The CIB cost income ratio in 2020 was at the very low end of the industry, 55% for the full year, I think it was. So the is that actually sustainable? You've never delivered that in the CIB in any Previous year, it would seem necessary to assume that you can maintain that costincome ratio to be able to get the group below 60 If the mix of the business is now so skewed towards the CIB. And then in terms of FX, you've talked in the past about 40% of revenues being in dollars. That was back in 2019, I think you gave that remark. What was that number In 2020, please, given the skew towards the CIB? And related to that, how much of your cost base, I'm just trying to think about the FX headwinds you're facing for 2021, which looks like it's going to be about 7% to 8% Year over year dollar headwind. Thank you. Thanks, Chris. Why don't I take them? Look, the 60% cost income Objective is something we've had for, as you say, some time. I think we were getting towards that sort of zone in 2019. In fact, we want 1,000,000 miles away in 2020, but obviously 2020 was a year that none of us forecasted would be what it was. We feel we have the diversification in the company. We've obviously seen a fairly sharp decline in the consumer facing businesses and a big Tickle up in wholesale, that no doubt we would expect to see an improvement in the consumer facing businesses As economies recover and we'd like to continue to think that we can consolidate and continue to improve even The contribution that our wholesale businesses have. With that mix in mind, we still believe we have a path to a 60% Cost income target, it's very hard to be precise on it can only work if you've got this percentage in consumer, this Percentage in wholesale, you have to manage it on a sort of a variety of outcomes and we believe we can do that. We can't give you a year on it. Obviously, this is It's a very uncertain world we live in. So I think it's very difficult to forecast with any degree of precision at the moment. But we still feel that That's an achievable objective for the company in a reasonable time frame, albeit we won't give you the sort of the precise time frame at this point in time. In terms of foreign exchange, yes, you're right that we called out approaching something like 40% of our income was in dollars 2 years back or so. It's been a mixed bag this year, of course. So the investment bank has done real well. And our cards business in the U. S, of course, has Some office balances have come down. So there's sort of pluses and minuses there. It's fair to say A stronger pound is a headwind for us because we are profitable in dollars and that is just who we are. So we don't give sort of a cost breakout dollars because we obviously have folks in India. We have folks in all different parts of the world, so it's not quite as straightforward as that. But yes, it's a headwind. The other sort of I guess, if you're going to model FX across all lines, Chris, impairment as well, I guess, ought to be a tailwind. Obviously, the consumer cards and payments a lot of that's U. S. Card driven and even on the investment banking sort of credit component of our credit books that's very dollar denominated as well. So, but net net is a headwind. We're going to keep the diversified model, Chris. And again, the pandemic will get behind us and the consumer business will start to grow again. And we'd like to keep that balance between the Investment Bank and the consumer businesses. And in a normal economy, I think the 60% cost income ratio It is very achievable given that we delivered 63% in a very abnormal economy. If I could just follow-up on the FX Point, please. I mean, could you help us out a bit there? This does feel like quite a big effect for you year over year. You're not willing to comment on the outlook CIB revenues, you don't want to comment on group level costs. It would be really helpful if you could give us Some breakdowns in terms of allowing us to get a sense of the currency effect. I mean, is it more than 40% of revenues in $20 in dollars I suspect it is. And I guess the percentage of cost is higher than the percentage of revenues given that you're a UK domiciled Bank with a group center cost base, which is going to be presumably more in sterling. I mean, am I along the right lines there? Is it 45% revenues, 6% costs, something like that. Chris, I'm not going to comment on your numbers. We haven't disclosed that. I don't want to be disclosing stuff like that on the fly on a call like this. But suffice to say that we are Profitable in dollars, a stronger pound is a headwind, but I'm not going to give you any more color than that. Maybe in the future we'll maybe break out the geographic splits or something like that. But that's all we'll say at the moment. We have the next question please operator. The next question comes from Rob Noble of Deutsche Bank. Please go ahead, Rob. Good morning all. Thanks for taking my questions. Most of them have been answered, so just one quick one. You highlighted it would be tough to grow Income in CCP. Do you think you can grow non interest income in the UK this year? And how's the lockdown experience in January, February in terms of Ben, I mean, real brief, Rob Ron, sorry. But We'd like to think so. I mean, again, it's a little bit of a call on economic activity, but we'd like to think so. I mean, Focusing on some of our fee generating opportunities is important to us. We've given you some of the ideas where that is certainly in the world Payments certainly in the world of some of the wealth activities that we have. So yes, yes, I think we it's a priority for Yes. And depending on if we've got the right economic circumstances, there is possibility we could do that, yes. Thank you. Thanks, Ron. Could we ask the I think we only got one question left on the queue. So we'll just take the last question please operator. The final question we have time for today comes from Martin Light Gebb of Goldman Sachs. Please go ahead. Good morning. Firstly, could I ask on your market share ambitions in Barclays U. K. And this related to cards and mortgages. And on cards, Barclays UK card balances were down more than that of peers and more than that of the system in 2020. And equally since 2016, there has been a deemphasizing of card growth in the UK at Barclays UK. How should we think going forward? Should we think your kind of market share and credit cards to stay roughly stable? Or should that increase or decrease From here, given up the price and opportunity. And related to that, similar question for mortgages. It seems like you are growing your flow share slightly ahead of The stock share in the U. K, I know that the comparatively high excess deposit base now within Barclays U. K, does That gives grounds to maybe faster growth and share gains in mortgages going forward. And second question, if I may, more broader, just the regulatory framework in the U. K. Post Brexit, how should we think on a kind of a medium term basis the regulatory frameworks To evolve, we have seen software intangible treatment being slightly tougher compared to some of the other regulators. Is that the direction of travel? Or could they equally be items and elements where the regulatory framework could make things easier from a Barclays So I don't know ring fencing. Was there anything other way around it? Is there anything you would wish for which would change in terms of regulatory framework going forward? Thank you. Yes. Thanks, Martin. I think in terms of market share of our consumer businesses, cards and mortgages, Karl, we still have said quite openly that actually this is going back a long way, but from the time of the Brexit referendum we were taking a very cautious approach in U. K. Credit. So, we're probably a little bit early, but Glad we were cautious sort of leading up to a pandemic, which of course none of us forecasted. It probably does turn into a better Net P and L outlook for us because late vintage lending is where you typically take most of the pain. I think from this point on, now we're on a different part of the cycle, I think you'd expect us to, if anything, possibly even lean into risk. As If anything possibly even lean into risk as you sort of go into an upswing. So I certainly wouldn't expect Our market share to diminish if anything, I think we'll be focused on increasing it again. Mortgages is likewise. We are running our natural stock of mortgages. We're running well above that at the moment. And I think that's something we would be reminded to continue to do As long as the returns are there, we're very focused on the risk reward balance at the moment. I think it's a very attractive business from our vantage So we'd like to increase market share probably in both, but probably slightly different reasons. Mortgages were probably already doing that. And I think for Unsecured credit, I think we're at a point in a cycle where we'd want to be leaning into that. And again, as Jess mentioned in the past, it's not just cards. Unsecured credit And take different forms of lending. So we'd look at that in the round as well. I'd also add that If you look at the challenger banks and the digital banks, they clearly have headwinds And challenges. And I think that always makes our market share More defendable. And I think you'll see that happening over the next couple of years. Thanks for your question, Martin. And I think that's all we have at the moment. On regulation? Sorry. Okay. Real brief on regulation. I'm not sure there's much insight I can give you on that Martin. The PRA We're very involved in, I think, influencing the European rule book. So I think there a lot of what they would want to They probably made into the rule book and the bits that they probably didn't agree with, for example, software capitalization, they've been pretty open and straightforward about. I'm sure things will evolve over time. I think they're a very sophisticated, very extremely Responsible and balanced regulator and I expect they'll be continuing that thing. But I don't have any sort of greater insight as to any big changes that They will do or not do. I'm not sure I've got anything to comment on that. Okay. With that, thank you all everybody. I'm sure we'll get the