Good morning everyone, and thank you for joining us today. First of all, let me say that I hope you and your loved ones have been keeping safe and well. It feels like the last time we did one of these calls was a long time ago and in a very different world. Obviously, an event like the COVID-19 pandemic changes priorities and inevitably makes individuals and companies like ours focus on what's really important right now. For us, that means running the bank safely and properly, helping our customers and clients through the difficulties they face, supporting the U.K. economy and the communities where we live and work, and taking care of our colleagues around the world. We've been able to do that because of the underlying strength of our business and the resilience of our diversified model.
I've been especially proud of the way my colleagues across Barclays have risen to the challenges of this extraordinary time. I want to start today by taking a few minutes to set out how we've been responding to the crisis. Our business touches half the households in the U.K. We know that some of our customers are facing very real and very daunting financial challenges, and this is a worrying time for the vast majority, regardless of their circumstances. We've moved quickly to give them the reassurance and support they need. To give you just a couple of examples, so far, we've granted repayment holidays on 94,000 mortgages and on over 57,000 personal loans. We're providing an interest-free buffer on overdrafts for 5.4 million customers. Beyond that, we've reduced and capped charges until at least July.
We've waived late payment fees and cash advance fees for eight million Barclaycard customers and granted some 87,000 payment holidays. 655 branches remain open across the United Kingdom, providing vital banking services while our teams are fielding around 260,000 calls a week. That's 44% higher than the typical volume. I'm really pleased that we've been able to proactively identify NHS and key workers among our customer base and move them to the front of call queues as their time is especially precious at this moment. Getting businesses through this period intact is crucial to give the best chance of a rapid and sustainable economic recovery, and is also in our shareholders' interest. The U.K. government has put huge resources into supporting that ambition, It's a central topic of every conversation I have with ministers.
It is an unprecedented effort by them and by the Bank of England, and we're committed to playing our full part to help get that support to the businesses that need it. We have now approved some 3,760 CBIL loans with a total value of GBP 737 million. We expect those numbers to increase rapidly in the coming weeks. Behind those numbers are stories of businesses and jobs surviving this crisis. Take the Titanic Brewery in Staffordshire, a local favorite selling three million pints in a normal year through its chain of pubs and beyond. We helped them secure a one million CBIL loan and put in place a 12-month payment holiday on an existing loan with us. That has allowed the business to keep producing and selling beers online, protecting jobs, and allowing them to pay their furloughed workers full wages.
Queensberry Hotel and Olive Tree Restaurant in Bath, which I've been to. This family-run four-star hotel has had to shut its doors due to the coronavirus. With our help, they were able to get a GBP 450,000 CBIL loan quickly. That loan means that they can cover running costs, their staff are able to be furloughed rather than laid off, and they'll be able to retain their hard-earned Michelin star, which would have been forfeited on closure. Make no mistake, interventions like these are making the difference between survival and failure for businesses, and we're pleased to be playing our part in keeping them going. We've also been central in helping larger businesses to access the Bank of England and Treasury's CCFF program, arranging GBP billions in commercial paper for U.K. corporates over the past few weeks.
In addition to our backing for those government schemes, we've also been able to provide significant help of our own to our business clients. For example, we've waived everyday banking fees and overdraft interest or charges until June for 650,000 of our small business customers. We've put in place 12-month capital repayment holidays for most SMEs with loans of over GBP 25,000. We're continuing to extend credit to companies, and there are GBP 50 billion of lending limits available to our U.K. clients. We're not stopping here, though, and we'll continue to evolve our approach in offering to clients, big and small, to help them through this crisis. It is crucial that we preserve as many businesses and jobs as we can to aid the recovery when it comes.
Barclays has deep roots in the communities where we live and work, and I'm proud of everything our colleagues do year-round to support their local areas, and never more so than now. That includes going way above and beyond for our customers to help them in any way we can. Whether that's our colleague, Glenys Wilson, who's in a contact center in Sunderland, helping a customer in dire straits to access charitable support and making a goodwill payment from us to see that customer through a tight spot. Or our colleague, Heena Mistry, in Hyde, ringing vulnerable customers to see how they're doing, and then getting an ambulance for a gentleman who was obviously having difficulty breathing.
Our colleague, Caroline Pearson, in the Harrow and Edgware branch, helping an 80-year-old customer keep a special promise to her grandson by guiding her through buying, on his birthday, a pair of trainers online. These are just three small stories in hundreds up and down the country where our people are working beyond their professional obligations to support customers. We are carrying on delivering our core citizenship programs such as LifeSkills and Connect with Work, with a particular focus now on helping mitigate the impact of COVID-19, but we're trying to do even more. For example, where we can, we're now offering colleagues four weeks paid leave to volunteer to support health and social care work, helping those impacted.
As you saw, we launched the GBP 100 million community aid package, made up of GBP 50 million in grants for charity partners in the U.K. and our international markets, and GBP 50 million to match colleague donations. That equates to up to GBP 150 million from Barclays and our colleagues deployed to help the communities and people hardest hit by the crisis, from providing food to vulnerable families to purchasing protective equipment for NHS staff. We understand that our fortunes are intertwined with those of the communities and economies we serve, and at times like these, more than ever, our obligation is to support them. We're going to continue to do that and prioritize that effort throughout this crisis.
In recent weeks, we've also taken a huge step towards ensuring our broader sustainability as we laid out an addition to be a net zero bank by the middle of the century. That means reaching net zero in terms of direct and indirect emissions by 2030. For the business activities we finance across the world, by 2050. We're going to align our entire portfolio to the Paris Agreement, starting with the power and energy sectors. We've also committed to increase our green financing to GBP 100 billion by 2030. This represents a comprehensive and bold package of measures, which we are putting forward at the annual general meeting on the seventh of May. Finally, before I hand over to Tushar to take you through the numbers in detail, I want to briefly set out some overall thoughts on our performance in Q1.
The impact of COVID-19 came late in what was, until that point, a very good quarter. That said, the performance of the business since then has demonstrated clearly the resilience of our universal banking model, rooted in diversification by business line, geography, and currency. While, as you'd expect, returns were down in Barclays UK and in Consumer, Cards & Payments, the Corporate & Investment Bank performed well, producing an RoTE of 12.1%, in particular, via support for clients in a period of extreme volatility in the capital markets, where our FICC revenues in dollars grew 98%. Sustained cost discipline and positive jaws in our CIB delivered a group cost income ratio of 52%. That's better than our target of less than 60% over time and our lowest quarterly group cost income ratio since 2011. Overall, the group Return on Tangible Equity for the quarter was 5.1%.
Given the uncertainty around the developing economic downturn and the low interest rate environment, 2020 is expected to be challenging for our business. That said, we continue to believe that a sustainable group RoTE above 10% is the right target for Barclays and attainable over time. We've taken in the first quarter a GBP 2.1 billion credit impairment charge, of which GBP 1.4 billion is a result of applying a very challenging forecast through our credit models. We think this is prudent. Even after this, Barclays generated GBP 913 million profit before tax in the quarter, GBP 0.035 of earnings per share, and attributable profit of GBP 605 million.
The group remains well-capitalized with a CET1 ratio of 13.1%. We will manage our capital position through this crisis in a way which enables us to support customers and clients while maintaining an appropriate headroom above our maximum distributable amount, which is currently at 11.5%. As you know, in response to requests by the PRA, we canceled the 2019 full-year dividend payment. The board will make a decision about future dividends and capital return policies at the end of 2020 when the full impact of COVID-19 on our bank is clear. To conclude, in summary, my colleagues and I are today primarily focused on what matters right now, which is supporting our customers and clients, our communities, and the wider economy to navigate the pandemic.
The strength of our business and the resilience of our model means we can run this bank safely and profitably and provide that support until this crisis passes. I believe that we will emerge on the other side in a strong position to support the recovery and generate attractive returns for our shareholders. I'm going to hand over to Tushar to take you through the performance for the quarter in detail.
Thanks, Jes. I'll summarize the results for the first quarter, which as Jes's mentioned, demonstrate the benefits of our diversified business model. We are facing a period of great uncertainty, which make it particularly difficult to give forward-looking guidance. Where possible, I will try to give pointers for the coming quarters. Reported a statutory profit before tax of GBP 0.9 billion, generating GBP 0.035 of earnings per share. Litigation and conduct was immaterial this quarter, as usual, I'll reference the numbers excluding litigation and conduct for consistency with prior periods. Profits were down on last year, reflecting a material increase in the impairment charge resulting from the estimated effects of the COVID-19 pandemic. The RoTE of 5.1% is underpinned by strong income performance, which demonstrates our diversification. However, given the uncertainty around the economic downturn and low interest rate environment, we expect 2020 to be challenging.
We continue to believe that above 10% RoTE is the right target for Barclays over time, we need to see how the downturn plays out before giving any medium-term guidance. We grew income 20%, reflecting strong performance in CIB and resilience in BUK and CC&P going into the downturn. Costs are stable year-on-year, delivering strong positive jaws. As a result, pre-provision profit increased by GBP 1 billion to GBP 3 billion. However, the impairment charge increased by GBP 1.7 billion to GBP 2.1 billion. This increase comprised GBP 0.4 billion single name charges and GBP 1.35 billion net of IFRS 9 model driven increases, reflecting the effect of running a revised COVID-19 scenario as our base case estimate and an oil price overlay, which I'll come back to later. The forward-looking nature of IFRS 9 requires that we estimate expected credit losses.
We have taken significant additional impairment above that implied by current credit metrics, many of which do not yet reflect the effect of the pandemic. The CET1 ratio was down from the year-end level of 13.8% to 13.1%. This reflects strong pre-provision profitability and the cancellation of the full year 2019 dividend payment, more than offset by higher RWAs as a result of market volatility and increased client activity and the effect of impairment. It was a strong quarter for TNAV, which increased to GBP 2.84, reflecting GBP 0.035 of statutory EPS and net positive reserve movements of GBP 0.19. Before I go into the performance by business, a few words on income, impairment, and costs overall. The quarter showed the benefit of the diversification of our income across consumer and wholesale businesses.
The increase in group income reflected 44% growth in CIB, driven by a particularly strong quarter for markets, which was up 77%. While our consumer businesses showed resilience in Q1, with income declines of just 4% in both CCP and BUK, we expect those businesses to experience further material pressure on income as the effects of the pandemic feed into consumer behavior. On the next slide, I'll go through some of the income headwinds we have seen across these consumer businesses. We have seen interest rate reductions in Q1 in response to the COVID-19 pandemic, which are affecting both BUK and our U.S. consumer businesses. This will result in margin compression and lower contributions from our structural hedges. On spending, as you see on the right-hand chart, we have started to see significant reductions in spend on credit cards and across payments more generally in March.
We've seen a continued reduction in interest earning lending in U.K. cards, and now also in U.S. card balances, which will feed into lower income, although this may also be expected to mitigate the risk of increased impairment on extended balances. To support customers in BUK, we have taken specific actions that will reduce income, notably from overdrafts and support for SMEs, as well as starting to feel the effects of the lower spending on customer balances. Looking now at costs. With a 20% increase in income and stable costs, the group delivered strong positive jaws and the cost income ratio reduced from 62% to 52%. Given the income headwinds I've referred to, we don't expect the cost income ratio to remain at this level through the rest of the year. There are also additional costs relating to the crisis.
Excuse me, including the GBP 100 million community aid package, suspension of future redundancy programs, and incremental operating costs. On the other hand, travel expenses and marketing, for example, will be lower. We have relatively limited short-term flexibility in costs outside of CIB, particularly in the current circumstances. We will be in a position to implement additional cost plans if appropriate, as we get a clearer picture of the length and depth of the downturn. Cost efficiency certainly remains very important to us, whatever the environment, and we continue to target a group CIR of below 60% over time. I've mentioned the significant increase in impairment resulting from implementing the COVID-19 scenario and from single name losses.
As you can see, the increase was most pronounced in CIB as a result of the single name corporate losses and estimated effects of a sustained period of low oil prices, and in CC&P, where the U.S. unemployment assumptions have a significant effect on the ECL build. I've shown on the next slide a breakdown of how we built up the charge. The modeled impairment calculated during the quarter prior to running the COVID-19 scenario generated a charge of GBP 0.4 billion. In addition to this, we charged another GBP 0.4 billion in respect of single name wholesale charges in the CIB, some of which have been affected by the onset of the pandemic. The remainder of the increase reflects the GBP 1.2 billion net impact from using the COVID-19 scenario as our base case, reflecting forecast deterioration in macroeconomic variables.
We've shown on the slide some of the key U.K. and U.S.
macroeconomic variables used, including peak unemployment rates of 17% for the U.S. and 8% for the U.K. We've also included in this net impact the estimated effect of government support and central bank actions in both U.K. and U.S. We included an overlay of GBP 0.3 billion to reflect the increased probability of a sustained period of low oil prices. The GBP 150 million overlay for U.K. economic uncertainty held at year-end is absorbed within the COVID-19 scenario. The modeling is subject to inherent uncertainty with respect to forecasting incremental credit losses. There are likely to be further elevated impairment charges in the coming quarters, depending on how the economic downturn translates into cash losses. We'll provide an update at Q2. It's difficult to give more precise guidance at this stage due to the level of uncertainty.
However, I did want to highlight how the increased impairment provisioning has increased our coverage ratios. This slide summarizes the loan books, impairment build, and resulting coverage ratios for the wholesale and consumer portfolios. You can see that the impairment build in wholesale is largely driven by the effect of the oil price overlay and provision for Stage 3 single name balances. In unsecured consumer lending, however, I would highlight the increased coverage ratios for both Stage 3 and Stage 2 loans. Many of the latter are not yet delinquent, reflecting our conservative risk positioning over recent years. However, we have provided 19.4% coverage under the COVID-19 scenario and close to 23% on Stage 2 balances overall. Turning now to the individual businesses. BUK reported an RoTE of 6.8% for Q1, with income down 4%. I mentioned some of the income headwinds BUK is facing earlier.
Going into a bit more detail on these. In Q1, we saw further reduction in interest earning lending in U.K. cards. We expect the decline in spending to contribute to that trend. In addition, the expected headwind from the change in overdraft pricing will now be amplified by the suspension of certain overdraft charges to support our customers during the pandemic. The recent rate moves in response to the developing downturn also started to affect the latter part of Q1. This is expected to have a negative effect of around GBP 250 million for the full year. I highlighted at Q4 the debt sales in BUK, which were concentrated in the second half of 2019, with a total of over GBP 120 million across the year. We had immaterial debt sales in Q1. In the current environment, our program of debt sales planned for 2020 may be pushed into 2021.
One positive in Q1 was the continuing growth in mortgage balances, up a further GBP 1.8 billion in the quarter, and pricing also improved compared to previous quarters. The downturn is obviously having a significant effect on mortgage applications, although we still have a flow remortgage business. Meanwhile, deposit balances continue to grow, maintaining the loan-to-deposit ratio at 96%. Overall, as I indicated at Q4, NIM was already expected to fall to below 300 basis points and reach 291 basis points for the quarter. We now expect the additional headwinds and further decline in interest earning lending on cards to take our full year NIM into the range of 250 to 260 basis points. Costs in the quarter increased 2%, reflecting higher restructuring spend.
While cost efficiency remains important, we have limited flexibility to reduce costs until we have a clearer picture of the nature of the downturn and also some additional costs coming in as a result of the pandemic, as I mentioned earlier. One of the effects of the current difficulties is to increase digital banking engagement. We remain committed to the digital transformation of the business, but we'll look closely at phasing of investment spend given the income environment. Impairment for the quarter more than doubled to GBP 481 million, reflecting the COVID-19 scenario. Although arrears rates at 31st of March do not yet reflect the developing economic downturn. The charge going forward will depend on the length and depth of the downturn, effectiveness of government support schemes. Turning now to Barclays International.
The BI businesses delivered an ROE of 6.5% for the quarter, down year-on-year as income increased by GBP 1.1 billion, more than offset by an increase of GBP 1.4 billion in impairment. We'll go into more detail on the businesses on the next two slides. CIB delivered an ROE of 12.1% in Q1, with a strong performance in markets more than offset the increased impairment provision. Income was up 44% at GBP 3.6 billion, while costs were up 4%, delivering positive jaws of 40%. Markets grew income to GBP 2.4 billion, up 77%. This quarter included some net benefit from hedging counterparty risk. The increase was driven by flow trading, with increased client activity and the trading businesses capturing a good portion of the widened bid-offer spreads as a result of the heightened volatility. Client flows have continued at healthy levels in April.
While it's too early to guide for the quarter or indeed comment on the outlook for the rest of the year, our revenue run rate for markets is well above that of the second quarter of last year. Both macro and credit had a strong quarter, with FICC income roughly double last year. Equities increased 21%, driven by flow derivatives, which benefited from high levels of volatility. Banking increased 12%, reflecting improved performance in DCM and advisory, despite a lower fee pool. Looking forward, the industry deal flow in banking overall has reduced as the downturn has started to develop. Although some areas, such as investment grade DCM, remain active. I've talked before about the effect of mark-to-market moves on loan hedges on the corporate income line.
This quarter, we have had significant positive marks on hedges, but also significant downward marks taken through the income line on our leveraged loan commitments. Overall marks on the leverage commitments were GBP 320 million negative, while marks on the hedges were GBP 275 million positive. Both these elements are likely to be volatile over the coming quarters, so I'll highlight them when material. The increase of 4% in CIB costs included an appropriate accrual for performance costs. Impairment increased to GBP 724 million, driven by single name charges and the effect of the scenarios modeled, including the low oil price overlay. RWAs increased by GBP 30 billion in the quarter to GBP 202 billion, reflecting the stronger dollar and both increased client activity, including drawdown of loan facilities, and the effect of market volatility. I'll come back to that when I talk about capital progression.
As a result of this, average allocated equity for the quarter increased to GBP 27 billion, which generated significantly improved RoTE. Turning now to Consumer, Cards and Payments. While income in CC&P was resilient in Q1, down just 4% year-on-year, the significantly increased impairment charge resulted in a loss for the quarter. U.S. card balances were down 5% in dollar terms. While the effect of the downturn is uncertain, with reduced spending trends emerging in March, it is unlikely that balances will grow over the coming quarters, and the income environment is expected to remain challenging. Costs are down 10%, resulting in positive jaws and a reduced cost income ratio of 52%. However, if further income weakness develops, there is a limited amount of further cost flex we can implement in the short term.
While arrears rates have not yet responded to recent sharp increases in U.S. unemployment, we have taken a very significant additional impairment provision, up almost GBP 700 million, as a result of running the COVID-19 scenario as a base case, including a peak unemployment rate of 17%. I'd also remind you that 84% of our U.S. card balances were above our 660 FICO definition for prime lending. The payments businesses experienced a reduction in income following growth in recent quarters as a result of the reduced spend levels, principally in the U.K. Turning now to head office. The head office loss before tax of GBP 99 million was down on the Q4 loss of GBP 167 million, and down significantly year-over-year. The negative income reflects the main elements I've referenced before.
GBP 30 million of residual legacy funding costs and residual negative treasury items. Hedge accounting this quarter generated significant positive income. This is expected to turn negative again in Q2. Q1 also included some mark-to-market losses on legacy investments. The Absa final dividend will come into Q2 rather than Q1 this year. Going forward, there'll continue to be quarterly fluctuations. The negative income run rate is likely to be clearly higher than in Q1. Cost of GBP 11 million contrasted with the usual GBP 50 million-GBP 60 million run rate, driven by provision release related to the historic sale of a non-core portfolio. Going forward, we'll also be accounting for the GBP 100 million community aid package within the head office cost line, which will take costs above that run rate in certain quarters. TNAV increased in the quarter by GBP 0.22 to GBP 2.84.
This reflected profits of GBP 0.035, despite the very significant impairment build, plus positive net reserve movements of GBP 0.19. The strengthening of the U.S. dollar contributed to a GBP 0.06 movement in the currency translation reserve, while the combination of lower interest rates but wider credit spreads had positive effects on the cash flow hedge and pension reserves. The fair value reserve was affected negatively by the fall in the Absa share price and the ZAR. On capital, we began the quarter at a CET1 ratio of 13.8% and had guided for a Q1 move towards our previous targeted level of around 13.5%, to be driven by the seasonal increase in client activity in the CIB.
We closed the quarter at 13.1%, as the expected seasonality was enhanced by the higher than anticipated client activity, both in markets and in drawdown of credit facilities, and the effects of market volatility under the Basel rules. Impairment took 69 basis points off the capital ratio as transitional relief on the charge for the quarter was limited and the rate of transitional relief on applicable impairment stock reduced from 85% to 70%. The downward pressure on the CET1 ratio was partially offset by the cancellation of the full year dividend, which added 35 basis points to the ratio. We expect procyclicality of RWAs to affect us further in Q2, and I'll say a bit more about the way we are looking at our capital requirement in a moment. First, I'll go into more detail on the RWA increase on the next slide.
Here we've broken down the elements of the 130 basis points effect from the increase in RWAs. Lending in March, including drawdown on revolving credit facilities, added GBP 7.2 billion to RWAs, accounting for 33 basis points of the ratio decrease. We've seen a material further drawdown so far in April. Counterparty and market risk RWAs each increased by around GBP 8 billion respectively from a combination of normal seasonal pickup and the procyclical effects of the Basel framework, plus some currency effect. The overall FX impact on RWAs is broadly matched by the effect on CET1 capital. We expect some further procyclical effects in Q2. Looking at the next slide at our capital requirement and how we are thinking about utilization of buffers through the developing stress.
We've shown here our current capital requirement and how it has reduced to reflect the removal of the countercyclical buffer by the Bank of England in response to the COVID-19 pandemic. As a result, our MDA has reduced to 11.5%, so our Q1 ratio of 13.1% represents 160 basis points buffer currently. As I mentioned, we expect some further procyclical increases to RWAs in Q2 as the downturn develops, which will take the CET1 ratio to below 13% in Q2. We also expect some further reduction in our MDA hurdle in percentage terms over the stress period through some reduction in our Pillar 2A ratio requirement. With regards to headroom, our capital ratio has been strengthened over recent years to put us in a position to absorb precisely the type of stress we are now experiencing.
In this environment, we will manage our capital ratio through this stress period to enable us to support customers while maintaining an appropriate buffer above the MDA. We are comfortable operating below our previous CET1 ratio target as the stress evolves and will continue to manage capital having regard to the servicing of more senior securities. Our U.K. leverage ratio at the end of Q1 was 4.5% on a spot and daily average basis, well above our U.K. leverage requirement, which is currently just under 3.8%. I would note that we expect the advanced implementation in Q2 of CRR2 rules on treatment of settlement balances provide a meaningful benefit to our leverage position, which pro forma would have increased our Q1 ratio to 4.7%. Finally, a few words about our liquidity and funding, which position us well to withstand the stresses that are developing and to support our customers.
Our liquidity metrics are strong, ending the quarter with an LCR of 155%, close to the year-end level, with a liquidity pool assets of GBP 237 billion. This represents 16% of the group balance sheet, with 66% of the pool held as cash at central banks. Our loan to deposit ratio reduced further to 79%, with growth in deposits more than offsetting loan growth. On the loan side of the balance sheet, the main increase was in corporate lending, including drawdowns on credit facilities, particularly in March. Deposit base continues to reflect our diversified sources of funding, with most of the growth being in wholesale deposits, including some deposits by corporates following drawdown on those facilities. Our funding profile remains in good shape, with diversified sources and reduced reliance on short-term funding. We have issued GBP 2 billion equivalent of MREL debt in the year to date.
Although spreads reflect the current economic environment, we still plan further issuance of roughly GBP 5 billion-GBP 6 billion across the current year, subject to market conditions. Our MREL is at 29.3%, close to our expected end requirement. To recap, despite the initial effects of the COVID-19 pandemic, notably the elevated impairment charge of around GBP 2 billion, we reported an RoTE of just over 5% for the quarter. The performance from the markets business drove a 20% increase in group income on a stable cost base, resulting in strong positive jaws. Given the uncertainty around the economic downturn and low interest rate environment, we expect 2020 to be challenging. We continue to believe that above 10% RoTE is the right target for Barclays over time. We need to see how the downturn plays out before giving any medium-term guidance.
Our CET1 ratio of 13.1% reflected the initial effects of the downturn, and we expect some further procyclical increases in RWAs to reduce the ratio further in Q2. We plan to maintain an appropriate buffer above our MDA as we absorb the stress caused by the pandemic. Our funding and liquidity remain strong and put us in good position to support our customers and clients during this difficult period. Thank you. We'll now take your questions. As usual, I would ask that you limit yourself to two per person so we get a chance to get round to everyone.
If you wish to ask the question, please press star followed by one on your telephone keypad. If you change your mind and wish to remove your question, please press star followed by two. When preparing to ask your questions, please ensure your phone is on locally. To confirm, that's star followed by one to ask a question. The first question on the line comes from Alvaro Serrano of Morgan Stanley. Please go ahead.
Good morning. Thanks for taking my questions. Got one on provisions and another one on capital. Obviously, the provision taking the quarter is very credible and sizable provision, I was just asking for some help about how could we think about the next few quarters about the total provisions we might see this year. I don't know from here, if you can give us a bit of color of how the payment holidays are evolving, is there symmetry we should look at in terms of the leading indicator of what provisions might look like? Or should we look at unemployment? Also one there on the oil price overlay as a provision, what oil price are you assuming? The second question on capital. Obviously, you've said that you're going to dip below 13% in Q2.
During the quarter, we've had quite a lot of exceptions given by the PRA in markets, RWAs on VA breaches. There's also the IFRS 9 transitional sort of benefit. Can you help us quantify what the benefit was? When I think about the RWAs going forward, is there a risk that some of this mitigation comes back, and is 13.5 still your target? When I think about beyond this year or your discussions you might have at the end of the year around capital distribution, is 13.5% still you would want to build, get close to 13.5 before you distribute capital? Thank you.
Yeah. Thanks, Alvaro. It's Tushar here. Why don't I take both of those questions? On provisions first, then I'll come on to capital. Obviously it's very uncertain. We're only a sort of a month or so into this crisis. These are difficult to forecast paths. I think if our assumptions are correct around the economy, as you've seen on one of our slides, I think slide 15. If that holds to be true, I think in terms of where we should go from here, I'd first of all start with our current sort of pre-crisis existing run rate of impairments, and that was running at about GBP 400 million-GBP 500 million a quarter. Think of that as sort of cash losses in any one quarter. We've built a sort of IFRS 9 provisions, a sort of a book up of GBP 1.4 billion.
I think that's probably a reasonable proxy of additional cash losses that we would expect to have over the remainder of the year, if our forecasts are right.
What does that mean? That means sort of our run rate in provisions would be somewhere, I don't know, GBP 800 to GBP 1 billion, something in that sort of ZIP code. I'd caveat that quite heavily. One is, none of us know whether we've called the economic forecast correctly. B, we do have governments here acting to provide all sorts of measures of support. We don't know sort of the effect of them and how they'll play out. Of course, there are different programs in the United States and in the U.K. and across individuals and businesses. Lots and lots of caveats. If we've miraculously forecast this all correctly, that hopefully gives you a sense of the run rate from this point on. In terms of metrics to look at, I think unemployment is probably the most important metric for us.
Again, complicated because of the government support and furlough schemes here. Payment holidays are important, and payment holidays in our unsecured books, which is probably where it's most relevant, are about 3% so far. We'll see where that goes. I would say that, actually, in our unsecured books, spending, of course, is down. You see that in the GDP numbers. Alongside that, card balances are actually down. That trend seems to be quite prevalent in April. Not so great for income, but obviously helpful for impairment. Now, that may or may not change as consumer behavior sort of adapts. The final thing, Vara, you mentioned oil. We've assumed a 50% chance of $20 oil remaining for the rest of the year.
We've sort of took that assumption based on where we look at futures contracts in probably around mid-April something, where the futures strip was comfortably above that level. Obviously, that'll fluctuate as the quarter goes forward. In terms of capital, yeah, in some ways we're pleased that our capital ratio was above 13%. Obviously, there's a lot that went through our capital ratio. The impairment build itself was 69 basis points, lots of RWAs, inflation, revolving credit facilities, and so forth. I think as we said, we will expect to go below 13%. I think you're seeing the bulk of the procyclicality happen in Q1. There'll be some follow-through, but it'll be much more modest. Whether that's the low point in terms of our capital ratio, again, it's somewhat driven by the economic path that we may be following down.
We'll see where we go from there. I think if things go back to normal, then 13.5% sort of probably feels like the right level again. As on the basis that countercyclical buffers and so forth are sort of reset back to where they are. I mean, there'll be a natural sort of flow back in RWAs, I guess, if countercyclical buffers are phased back in. Some of the RWAs inflation that we've experienced will naturally ebb away as well. There'll be a sort of a calibrating effect back there. At all times, I think we'd remain very appropriate levels well above our MDA levels. We don't see ourselves going anywhere near that at this stage. Thanks for your question, Alvaro.
Thank you.
Yeah. The next question please, operator.
The next question comes from Jonathan Pierce of Numis. Please go ahead.
Good morning.
Hi.
Hello. Two questions as well, and actually they're again on provisions and then Risk-Weighted Assets. On provisions, just want to understand this transitional relief or absence of transitional relief in the first quarter. I think the stock is Stage 1 and Stage 2 having fallen below the IFRS 9 add back. There was a true-up as you went through Q1, and that's why you didn't get any substantive relief. What's the additional true-up that's needed before we start seeing any transitional relief coming through, whether to be further Stage 1 and Stage 2 builds in the coming quarters? That's question one. Question two, on Risk-Weighted Assets. I guess the exit Tier 1 dropping below 13% in the second quarter is probably pointing to, I don't know, maybe another 4%-5% increase in Risk-Weighted Assets over the next three months or so.
You sort of alluded to this in an answer to the previous question. Is that the right sort of ballpark we should be thinking about? Maybe you can talk a bit more about the quantum of credit risk procyclicality specifically within that. Thanks very much.
Yeah. Thanks, Jonathan. Why don't I take both of them? The transitional relief for IFRS 9 is, you're probably as familiar as most, Jonathan. This is a devilishly complicated calculation. There's a few things going on here. In some ways we got very little, as you rightly pointed out, transition relief in Q1. That's just the way the calculation sort of falls for us. Obviously Stage 3, as you know, gets no transition relief. Then Stage 1 and 2, you had two effects going on there. You had the stock of Stage 1, 2 provisions, transitional relief falling from 85% to 70%. Then as you pointed out, there's various thresholds in there. We've not called out sort of how that may play out in Q2 because there's such an interplay between the various stages.
Actually it's sort of more than one threshold, as you're familiar with DTAs and various other things like that playing around there. I don't think I can give you sort of just a single number that will be helpful, Jonathan. It sort of depends on the path, but I wouldn't be expecting a whole load of transitional relief going forward, if that's of any help. In terms of RWA inflation, again, very tricky to guide to this one for the second quarter simply because it's such an uncertain path that we're going through. All I would say, though, is we will definitely have some procyclicality flow through into the second quarter. I would say it will be much more modest than we've experienced thus far.
Of course, the other thing that I think we should also point out is our MDA levels are probably likely to go lower as well, even though our capital ratio is going to dip below 13. Over the course of this year, I think you'd expect to see another step down in our MDA, and that's just as you've seen in the Bank of England stress testing framework. The MDA levels get recalibrated in times of stress, and I'd expect the same again over the course of this year. I can't give you, unfortunately, Jonathan, a sort of a precise quantification into Q2, but hopefully it gives you a sense of qualitatively where we should be going.
Yeah, that's helpful. Thanks, Tushar. Sorry, can I just come back on the first question or the answer to it? Are you saying that even if there was a further sizable increase in the IFRS 9 stage 1 provisioning, maybe, I don't know, GBP 1 billion plus, let's say, over the course of the rest of the year? I know that's not your assumption, but were that to happen, we wouldn't get any transitional relief of size on that either?
No, that definitely wouldn't be as black and white as that. It very much depends on the scale of the 1, 2 provision build, stage 1, 2 provision build, as well as the interplay of various thresholds. It's not a straightforward. If it was a reasonable build, I do think we would get some transitional relief. If it were modest build, probably not so much.
Okay, great. Thanks a lot, Tushar.
Okay. Thanks, Jonathan. We'll take the next question please, operator.
The next question is from Joseph Dickerson of Jefferies. Your line is now open.
Good morning. It's Joe. Just a quick question on costs. You're annualizing at GBP 13 billion of cost pre-levy in Q1. I guess, what are the moving parts around that as we go through the rest of the year? I'm just trying to dimension where we think you could be at the full year. You've said some limited flexibility outside of variable comp, so just trying to dimension that. A very good performance in the card piece. Just on the regulatory capital ratio. I suppose given the commentary that you plan to dip below 13% in Q2, should we assume that as a trough in Q2, given you've called out in the several areas that you expect the maximum pressure economically to occur in Q2?
Yeah. Okay. Thanks, Joe. Why don't I start with the question on capital, then I'll say a little bit on cost, and I think Jes will have some comment on cost as well. On the capital ratio, Joe, it is difficult to forecast simply because of the uncertainty around the economic path that we may or may not be embarking, and also sort of the way in which impairments will play through as well. Anyway, on the assumption that we've sort of called it absolutely correctly, then I think it's a reasonable assumption to assume that once we get to whatever capital ratio we get to in Q2, we should be hovering around about those levels and perhaps even building up again over the rest of the year. I put lots of caveats around that. It really does depend on so many factors.
On costs, there's various sort of puts and takes. Look, I think first and foremost, you'd expect us to be as responsible as we can in terms of helping everybody get through very difficult circumstances. To the extent we were going to make future redundancies and sort of workforce changes, we will obviously delay that. We would expect ourselves to have lower attrition levels. Actually, some operating costs will increase. I'm sure Jes will talk about this, but you guys will be very familiar with this, but keeping a sophisticated financial institution running when virtually everybody's working at home, from consumer-facing customer outreach to just even capital markets activity, when we're trying to do capital markets raises when virtually sales forces, traders, and investors are all at home. I mean, it's incredibly complicated. That probably has a degree of cost associated.
Now, on the flip side, we're not traveling obviously. We're not going to be marketing as much. I think there's various puts and takes. At the moment, look, I don't think there's anything new to sort of say on costs from perhaps where we are. Jes, is there any more comments you want to add on to that?
Obviously in the first quarter, we landed a cost income ratio of 52%. That should underscore a certain degree of prudence well below where we were last year. I think the one thing I would repeat is we took a decision not to reduce our headcount, even though we had the opportunity to do that. I just don't think at this stage and in this current environment, we should be running down putting people out of work just to drive your costs down. I think you should look at a roughly flattish number for the year.
Thanks, Jes.
Thank you.
Can we have the next question, please, operator?
We have a question from Rohith Chandra-Rajan of Bank of America. Please go ahead.
Hi, good morning. I wondered if I could ask a couple around the cards and payments business, particularly in relation to the travel industry. I guess firstly, U.S. cards, a lot of the co-branding is with airlines, which you talked about in the past. I was wondering if you could remind us how much of the U.S. cards business balance is with airlines, and also a comment on what you're seeing in terms of volumes and the volume outlook and credit quality there. The second was really on the acquiring side. A lot of travel firms and airlines, for cancellations, are now offering rebookings or vouchers rather than refunds. Anecdotally, customers are now looking to get chargebacks on their credit cards as a result to recoup the cash rather than taking the voucher.
I was just wondering what you're seeing there in terms of that sort of anecdotal evidence, and what the impact is, I guess, particularly from an acquiring perspective.
On the travel side, in our U.S. card, you're right, we've got very strong co-brand relationships with American Airlines and JetBlue and Hawaiian Air and whatnot. Clearly you've got the issue of the consumer spending dramatically less money, our receivables going down, and we are connected to the airline industry. It does, however, these programs continue to be extremely important for the airlines. On that side, where we are as a partner is elevated. Also, you may have seen, because of the race with the airline industry, that we do a billion-dollar equity raise for United last week. Very involved in the Delta financing as well. You're right to point out, I think the U.S. card, it's going to struggle.
The flip side, because we had that concentration in the airline industry, that gave us probably one of the highest average FICO scores of any credit card company in the U.S. I think there's sort of a balance. I think we will be less hurt on the impairment side, but probably more hurt on the revenue side.
Yeah. I'd just add to that, Raj, I guess it's spot on. The FICO scores of the book, I think the standard definition of prime in the U.S. is 660. 84% of our book is greater than a 660 FICO. Although it's going to be obviously tough times in the economy, that's of some help to us. The other thing I'll say is credit metrics of course are evolving all the time as we go through the crisis. We have seen a tick-up in delinquencies, both in U.K. and U.S. cards. Quite modest. About 10 basis points in U.K. card delinquencies and 20 basis points in U.S. cards. Towards the back end of April, we've seen that level off. Again, remains to be seen. Although it's ticked up, it's leveled off already.
Again, I don't want to say that that's what's going to be the case for the rest of the quarter. We just don't know. Hopefully that's of at least some additional color.
Taking that 17% unemployment rate through three quarters. You can't get much more conservative than that and taking that provision in the first quarter. We shouldn't lose sight of that.
Okay. Thank you.
Thanks.
On the, sorry, on the acquiring side, in terms of the risks from chargebacks?
Yeah, on the acquiring side, I don't think there's anything specific I'd call out on chargebacks. There's nothing that's coming through in our metrics that stands out as anything particularly unusual. Obviously, acquiring volumes are obviously dramatically down. The GDP numbers sort of give you a good sense of that. In terms of other risks outside just lower volumes, there's nothing I'd call out.
Okay. Thank you.
Thanks, Raj. Can we have the next question please, operator?
Of course. The next question comes from Guy Stebbings of Exane BNP Paribas. Please go ahead.
Thanks for taking my questions. The first one was just on Barclays UK and the new NIM guidance. You've obviously given a lot of color on the different headwinds to get there, but could you give us a sense of the phasing? I mean, it sounds like quite a lot will come in Q2 given the actions taken to support consumers and obviously the timing of the base rate move, rather than sort of a steady decline. Is that fair? I don't know if you could give us a sense of how much that decline is coming from those consumer actions, which hopefully should reverse next year perhaps. That was the first questions.
Secondly, I just wanted to ask on the COVID business interruption scheme and some of the economics, in particular, the sort of risk rates on average you might have against those loans on either the 80% guaranteed or the 100% guaranteed loan scheme. From a leverage standpoint, presumably you have to recognize all the exposure, but if you could just clarify that'd be great. Thanks.
Yeah. Thanks, Guy. In the U.K., I would say you'll start seeing the full effect of all sort of, I guess three, possibly four components of revenue headwinds come through in the second quarter. We've got obviously the impact of rates coming through. What happens there is our assets reprice pretty much immediately. The deposits won't reprice until, I think from memory, July. Just the standard protocols we have in the U.K. of writing to customers to give them advance notice. In actual fact, you'll probably see NIM dip most in Q2 and then recover again in Q3 and Q4, everything else being equal. We are spendingIf you like discretionary amounts for ourselves just to help customers through difficult periods.
We think that's about GBP 100 million for this year, and then over and above that, as along with many other banks waiving various fees and charges, we think that's about another GBP 150 million. I think in terms of next year, again, it remains to be seen. This is a sort of a brave call on how the world will look next year, which is a quite hard thing to forecast only a month into this one. There is, I guess, a view you could take, which is the temporary suspension of fees and charges ought not to apply next year, as well as some of the more discretionary things that we'll do.
In terms of just for your own models, I hope it came through in my scripted comments, but just in case not, we would expect NIM in Q2 probably to dip again quite sharply simply because of the rate actions, and then to recover again over Q3 and Q4, probably for a blended average over the full year, a NIM rate of something like 260-- sorry, 250 to 260 is probably about the level to be thinking about. On CBILS, I'll hand over to Jes.
On the COVID-19, whether it's the 80% guaranteed program or 100% guaranteed program, there's a lot of discussion going back and forth. I must say that the British government, I think, is really trying. They are doing virtually everything they can to make these two programs successful, as are we. I think everyone realizes that the guarantee is real, and therefore the calculation of risk against that component of these loans that are extended. Certainly, the PRA is looking at that, I think you should consider that it'll have a very, very low risk-weighted asset to it. If any.
Thanks.
Could you clarify from a leverage point of view?
Yeah.
Did you still have an offset for leverage?
Yeah. The numbers here are quite modest, Guy. If you think about how much we've extended through the CBILS program, I think Jes will probably have literally the real-time number, but it's something like-
737 million.
There you go. GBP 737 million. It's pretty modest in terms of scale on the balance sheet. These are obviously relatively small individual loans. I think it's like 4,000 SMEs that these have gone out to. For the larger corporates, where numbers can get much bigger, we've been very active in getting people to the commercial paper program run by both the U.K. and the U.S. government. I don't think we're allowed to give precise stats, but we're comfortably the largest participant in that program. I don't know what the latest government published stats are, but we're going to be the largest.
I think we were very active in opening the investment-grade capital markets from the GBP 19 billion bond issue for the T-Mobile/Sprint merger to GBP 8 billion for the World Bank, et cetera. All these big capital market trades are also decreasing because it's much cheaper borrowing than going to your revolver. One of the issues that you'd want to look at in terms of our leverage, et cetera, is how much are our revolvers being used. With the opening of the capital markets as robustly, we saw last month some of the most highest levels of issuance that we've seen in decades, if not ever. That's taken a lot of pressure off the draw on our revolvers, which has pretty much been flat-lined, and so that will also take pressure off our risk-weighted assets.
Okay. Very helpful. Thank you.
Thanks, Guy. Could we have the next question, please, operator?
Your next question comes from Ed Firth of KBW. Your line is now open.
Yeah. Morning, everybody. I just had two questions. The first one was just bringing back to the CIB performance, and in particular, the FICC revenue. I guess just trying to compare and contrast the revenue and the cost performance. I know you said in the call that you felt you'd adequately accrued compensation related to that revenue, but the revenue is absolutely startling. Even if you compare it against peers, nobody's produced anything like that in terms of revenue performance. I just wondered if you could talk a little bit more about what was driving that and perhaps are there some one-offs in there. Is there a reason that you don't have to pay the people who delivered this revenue? Perhaps how we can imagine that might be going forward. I had a second question. Should I go straight ahead with that?
Yeah. Do you want to ask both of them, and we'll
Yeah, sure. Just back on the CBIL question, really. Not just both programs and the micro one. If I compare what's happening in the U.K. with, say, well, particularly the U.S., but also in Europe, that the take-up has just been incredibly low and incredibly slow. I can't imagine it's because our small businesses or our business community is finding life any easier, say, than the U.S. or anywhere else. Obviously, you guys have been taking a bit of it, not you personally, but the sector has been taking a little bit of incoming about delayed approvals and being difficult. What's your steer on how that's going now? Perhaps, the 330 billion total is the sort of top-line number. Are you imagining that over time we will get to something like that?
Are we really again talking about something, a scheme that's going to be GBP 10 billion at most for the sector, we could broadly ignore it?
Yeah. Thanks, Ed. Why don't I quickly say something on CBILS, and then I think Jes can add some more comments on that and talk about FICC performance.
Sure.
I think we'll have to correct your statement about we don't intend to pay the people that were generating that performance, but I'll let Jes do that. On CBILS, the only comment I'd make is first and foremost, the banks, I speak for ourselves, I'm sure I'm speaking for all the banks, though, are 100% committed to make these programs work. We are doing everything we can to extend credit, even in advance of sometimes going through the full plethora of checks and balances and Consumer Credit Act provisions and con. These are very complicated programs to administer. It's also a lot of pressure on the government who wants. We've approved an application for them to turn it around as well. First of all, I'd really stress that we are over 100% committed. We have people processing these things nonstop, talking to clients.
Remember, we're not in our headquarter building anymore. Everybody's doing this in a distributed way, in different parts of the country, with compliance officers removed away from bankers that are doing the underwriting, from risk managers that are approving the lines of credit, et cetera. No doubt there's been some glitches in the operational efficiency of getting these done. I think you're seeing the pace of the program really pick up, and it's getting quicker and quicker. Final thing I'll say, then I'll hand over to Jes, is the GBP 330 billion headline number, I don't think is just-
as I understand it, just CBILS. I mean, it's a full suite of whether it's the commercial paper program, CBILS, and furlough schemes and various other things like that. One thing that we're very instrumental is in terms of making those payments on behalf of HMT for furloughed workers and all that. Actually, that's Barclays. We're the bank for HMT on that. That's actually working remarkably well in terms of administering those payments. Why don't I hand over to Jes to finish that and talk about FIC?
Yeah. There's a tremendous amount of dialogue between myself and the chancellor and the head of the Bank of England, et cetera, going through how do we evolve these programs to make them more and more effective and more and more efficient. This is a very new frontier, so it takes us a while to get there. GBP 330 billion, that was like a first stated indicative number. I think it's pretty clear if you read what the British government's up to, they're willing to go well beyond that. Tushar is right. We're all in this together, and we shouldn't underestimate the economic commitment that the government is making, and we need to partner with that. vis-à-vis-
Sorry, just to clarify then on the CBILS. In the context of the U.K. economy, you would expect those three guarantee programs to end up being material in the context of the total U.K. economy?
Yeah, I don't ignore the commercial paper program as well, which will be sizable.
they've asked not to give that number out, but that'll be a sizable number.
Okay.
Yeah. I think this will make a material impact on the economy and should run for a good period of time. As Tushar said, don't underestimate the economic impact of the furlough program, the economic impact of giving money to local municipalities to deal with the leisure sector. As I said in the press call this morning, what we're seeing is two tsunamis hitting itself at one time. You've got the tsunami of an extraordinary economic contraction with the tsunami of an extraordinary government response.
Okay. Thank you.
vis-à-vis FICC. We've talked about that a lot this morning. Obviously very pleased with how the team did. Our numbers are not a function of going in with one position or not. It was very much driven by how we stayed very much engaged across all the asset classes with all of our clients. Obviously, what happened for a period of time around liquidity and what that did with the most liquid markets from U.S. rates to currencies was extraordinary. To then the liquidity response from the governments and how that led to the buy side rebalancing their portfolios, which then led to an opening in the capital markets. As I said, you've had some historically high numbers. We've said also that the first three weeks of April, we've continued quite a strong trend versus last year.
I also say, everyone here is committed to making sure that this bank is a firewall as we go through this economic crisis, and that we'll look back in time and be very proud of what we've done. Bankers do things not just for compensation. We'll deal with that issue at the end of the year.
Thanks, Jes.
Thanks so much.
Appreciate the question. Could we have the next question please, operator?
The next question is from Chris Sheridan of Autonomous. Please go ahead.
Good morning. Both, thank you for taking my questions too, please. If I could just round out the discussion on the Barclays UK piece. Just crunching through some numbers very simplistically here. Your GBP 250-260 million guidance for the full year, if I apply that to your 1Q average interest earning assets in BUK, that points to an NII number of about GBP 5 billion, which is obviously down very material last year. Can I just confirm that's the number that you're looking for there? Trying to round things out, you've given us these numbers in terms of the different impacts from regulatory change and rates and things like this. I guess some of that is in the fee line. How much revenue pressure do you expect to see in other incomes, specifically in the UK please?
I'm just trying to get a sense of how much further that 6.9 billion consensus revenue number needs to come down. If I could follow up the previous brief discussion on leverage, please. You've talked about being comfortable to run below your previous CET1 target. In the past too, Sha, you've talked about expecting to run with something like a 5% U.K. leverage ratio, I think, at some of the analyst meetings. You just printed 4.5%. Are you concerned or are you content for that to fall further? How low are you willing to go there, please? Thank you.
Yes, thanks, Chris. Why don't I take both of those questions? In some ways, I'd let you and everybody else do the math as however your models are set up in terms of projecting just the split between NII and other fees. I'll give you the building blocks for that which hopefully you caught in the script, but just in case others may not have. I think you're probably a little bit low in the way you're doing that arithmetic. I think NII would be a little higher than five billion, but let me give you the building blocks. It's probably more direct. The way we think about it is for the rest of this year, assuming the rate curve is where it is, we'd expect about another GBP 250 million of headwind on the top line just coming from rates.
We'd expect about another GBP 150 million headwind coming from the temporary suspension of overdraft fees, charges, business banking fees, penalties for taking out cash from fixed deposits, all that kind of stuff. then probably another GBP 100 million coming from other discretionary things that we're doing for our customers. I think, in terms of the NIM shape, as I mentioned, you'll see probably at the low point in NIM probably in the second quarter and recovering again in Q3 and Q4 as deposits reprice. Hopefully that's helpful, but I think the way you get to GBP 5 billion is probably a bit lower than I would guide you to. Probably a bit slightly above that. I'll let you-
Just in terms of
Run that through your model
the GBP 5 billion, I'm just taking your GBP 195 billion of average customer assets for three months and applying your 255 or 250- 260 NIM guidance. Am I misunderstanding something there in terms of how you calculate your NIM?
Yeah, Chris, I won't go through the arithmetic in how you're doing it, but hopefully by giving you all the individual components of, I think, the income headwinds and letting you know that I think NII itself will be a little above five billion is of enough help there. On leverage, Chris, your other question. Yeah, you're right. I think if you like, in normal circumstances, somewhere around a 5% UK leverage ratio felt right to me approximating to, sorry, accompanied with a 13.5 or so CT1 ratio. As you pointed out, we're running at about 4.5 now on a daily average basis, same as we were in Q4. our leverage ratio actually is on a daily average UK basis, has been pretty stable both Q4 and Q1. Obviously our CT1 ratio has gone backwards.
I think you don't suffer, as you're more than familiar with, you don't suffer the level of procyclicality as you do in CET1, as you do in leverage. Obviously, our balance sheet has got larger, but a lot of that's just a function of things like low rates rather than asset inflation in a more traditional sense. I think somewhere around four and a half probably is the level that we'll continue to run. Again, I've put huge caveats on that. We are living in a difficult to forecast sort of path. It may bounce around there. You're probably also familiar that there is probably an accelerated change coming through the U.K. leverage ratio with respect to settlement balances. That will improve the ratio marginally on a like-to-like basis in Q1 and will be helpful for us in Q2.
Okay. Thank you.
Thanks, Chris. Could we have the next question please, operator?
Of course. The next question comes from Andrew Coombs of Citi. Your line is now open.
Hi. Good morning. Two questions, please. The first, in your opening remarks on payment holidays, I think you said 94,000 for mortgages, 57,000 on personal loans. Could you just give us an idea of what proportion of the book that is? Also to what extent those customers were up to date with payments prior to taking the holiday? I'd assume it's the vast majority, but if you could just confirm. Second, a broader question on strategy. You've always talked about the benefits of business diversification, different parts of the bank performing differently in different parts of the cycle. Do you think the current quarter vindicates your argument? Do you remain happy with the size and shape of the respective divisions? Thank you.
Yeah. Thanks, Andy. Why don't I cover payment holidays and ask Jes to talk about the diversification and whether the current quarter is a vindication, as you put it, on the strategy. Just in direct response to your first one, for mortgages, payment holidays represents about 10%. The vast majority of those were paying customers. I think you've just seen a big rush forward for people just to take a three-month holiday. We're not overly concerned on that one yet. I don't want to be too sanguine about these things, but that one I don't feel so nervous about. On cards, which is perhaps a slightly more sensitive one. It's about 3% on cards, which may be helpful. The reason why I'm a little bit more sanguine on mortgages is, of course, the amount of over-collateral in our mortgage book is very substantial. We'll see where house prices go.
any forecast that we're seeing at the moment will be substantially over-collateralized on our mortgage book. Cards, obviously, is slightly different. Jes, do you want to talk about diversification and maybe talk about-
No, just saying that I think having many of us have lived through a number of economic cycles, at least what we've witnessed before, is that there is a certain counter cyclicality between a consumer business and a wholesale business. We talked about that in March of 2016 when we rolled out the universal banking model that we wanted Barclays to pursue, and we've been a defender of that ever since. What you're seeing here is, you're seeing a radical economic cycle happening in about a month. Who knows? There's a lot in front of us. Yeah, I think we very much are happy that we have this diversification, and do believe that the wholesale business will continue to offset to a certain degree what we're probably going to face in our consumer business for the rest of the year.
Yeah, I think Jes is right. Let's just remind people, Chris' question earlier, there are definitely income headwinds on the consumer businesses that I called out. On the sales and trading top line at least, we think or we stated in our formal outlook that April's running at a level much better than Q2 last year. I think you're seeing the offsetting effects going on there, at least for the moment. Thanks for the question, Andy.
Thank you.
Could we have the next question please, operator?
The next question comes from Robin Down of HSBC. Please go ahead.
Good morning. I think it's still good morning. Two questions, please. Can I come back to the RWA question? I think you said there's more procyclicality in Q2. I guess just looking further out to the second half, I assume that we're not anticipating a great deal of loan growth and loan books might even shrink. I assume that the market volatility would presumably ease in the second half of the year. Are you anticipating that risk-weighted assets might peak in Q2 for this year, but we could finish at a lower level at the end of the year? The second question, I apologize if I've missed this somewhere in the statement, but I couldn't obviously see it.
From the oil perspective, if I think back to your disclosures in your ESG reports, you have a relatively modest drawn exposure with a fairly substantial undrawn exposure to oil, and clearly you've had some quite big drawdowns at the end of March. I just wonder if you could give us a kind of updated picture as to what the actual drawn oil exposure was at the end of the quarter. If I could sneak in a third one, likewise, for the leveraged loan positions, I think you said you took a GBP 320 million mark there. Could you just give us the size of the leveraged loan positions?
Yeah. Why don't I answer those ones, Robin. In terms of pro cyclicality of RWAs, yeah, we will see some follow through into Q2. Many of the models are based on a rolling average. As much as you'll see some follow through from Q1 into Q2, it doesn't necessarily reverse back very quickly as well. It will very much depend on where markets go in the second half of the year. I don't think I would say there'll be an immediate deflation of RWAs in the back half of the year. I don't think you'll also see, if you like, in inverted commas, the excessive pro cyclicality that we've picked up in Q1. I think it'll be much, much more modest into Q1, and we'll see where we go in the back half of the year. I don't expect to see anything quite like that.
I was thinking more in terms of balances might start to shrink-
Yeah, I think-
rather than pro cyclicality elements.
Yeah, look, it's very hard to guide on that, Robin. I know the temptation is to think everything will go back to normal and the averaging will start unwinding. It's quite hard to guide just so far away from that. There's so many different components to this, and the averaging sometimes is actually not just on a rolling three months. Some of these are 12 months averages and what have you. It's quite hard to guide on that. What I would say is that the amount of Q1, I'd be surprised if we see anything like that coming through. Certainly not in Q2, I'm not expecting or even beyond that. I think we've seen the bulk of it. Does it flow back? Maybe. I think it's a bit too early to guide to that.
The one thing I would say, though, actually is, you've seen it on our bridge. Revolving credit facilities did build up quite rapidly, about 33 basis points. If anything, we're seeing a net negative revolving credit. We've seen marginal pay downs back in April. I think that gives you some comfort that at least that component won't be there. In terms of oil, we actually have something in the appendix. We have a slide on our drawn and undrawn oil exposures. We're GBP 3 billion drawn. We've got some commentary as to where that's coming from. Most of that's with oil majors, investment grade, and of course, such a decent amount of the drawn exposure is also secured against various assets as well. Of course, we've taken an overlay in our IFRS 9 provisions, assuming a likelihood of a $20 oil price.
We feel reasonably well provided there. Leverage loans. We haven't given a slide on that. You're right that we took GBP 300 odd million of marks, almost entirely offset by hedges that performed well. Again, if anything, when I look at April, and Jes, you may want to comment on this, the leverage loan market has probably calmed down quite a bit, and capital markets are certainly much more functional than they were when we were closing the books at the end of March. I'd say the risks are probably subsiding rather than increasing there and our book's well contained.
The high yield market has reopened quite comfortably and the equity markets have reopened. I think the risk of the lever loan markets that we may have seen about a month ago has definitely subsided. We feel very comfortable with the book that we have.
Can we have the next question please, operator?
The next question on the line comes from Martin Leitgeb of Goldman Sachs. Please go ahead.
Yes. Good morning. I was just wondering, one broader question, if you could comment how severe a credit cycle you would expect to unfold from here. Just looking at your assumptions in terms of the COVID-19 overlay of GDP contraction, this seems more severe compared to prior cycles we had. On the other hand, the recovery seems to be faster and equally, there's government guarantee schemes in place and support schemes in place. If you take all of this into consideration, how severe a credit cycle would you expect?
Martin, that's such a difficult one to answer. We've tried to give you what we've used for our own forecast in terms of GDP and unemployment and what have you. That's what we've assumed. It's out there on one of our slides. Whether that's what it turns out to be, it's only one month into this, so we'll see. I would say the reason why it's so hard to really accurately forecast this is, as Jes mentioned, you've seen an enormous amount of government action stepping in to do everything they can to backstop what they can. We'll see how successful they are. I think you've got to believe that if there's a will, there's a way when governments are involved. We'll see if that plays out. There's not much more I think we can add other than show you the data that we're basing our assumptions off.
Thanks for your question, Martin. Operator, can we take one more question and then I think we'll wrap up the call then. The final question, please, Operator.
The last question we have time for today comes from Fahed Kunwar of Redburn. Please go ahead.
Hi, Tushar. Hi, Jes. Thanks for taking my question. Just a couple of points of clarification and one question. On clarification, Tushar, you said you're looking at kind of GBP 800 million to GBP 1 billion run rate for impairments going forward. I know how extremely hard that is to forecast. Is that kind of on that number, a GBP 5 billion impairment number based on all the uncertainties that are around right now? Is that how to read that? The second question of clarification was on cost. I think, Jes, you made a point saying costs were flat. Is that flat on the Q1 run rate or flat on 2019? I think 2019, GBP 13.16 billion extra levy. Is that the kind of number we should be thinking about? Was it more the Q1 run rate? I think it's kind of the GBP low 13s billion.
Yeah.
The question I had was on the U.S. credit card. I think everything you've said is on U.S. so far. On the U.K. credit card facilities, are they being used substantially? Should we be quite optimistic that all these facilities in the corporate side and the credit card books are being used that much? I thought they'd be used a lot more. Is it too early to be particularly optimistic on this because of the level of government support we have right now? Thank you.
Just on the cost number, what I'd say is what I was speaking to was flattish more towards 2019, make sure you take the FX adjustment to it.
What is the FX adjustment, out of interest? Sorry.
Well, I can hold you.
Oh, yeah.
Just sort of retranslate on a constant currency basis, but broadly.
Oh
this was the last year. We'll update guidance as we go along. It's still early on. We'll see how this plays out. We'll keep you posted. On the impairment. Yeah, look, it's so hard to forecast, but I think if you add on GBP 2 billion plus what I guided to, you're getting into that sort of GBP 5 billion zip code. We'll keep you posted, but that arithmetic sort of works. In U.K. cards, it's the same thing. We have seen a meaningful drop-off in spend. That's no real big secret there. You've seen it in payment data, our own payment data, but also in sort of GDP type revisions. What's more interesting is we have seen a drop-off in card balances that is ebbing sort of down and down.
Bad for income, good for impairment, and that's sort of somewhat in the income guidance that I gave earlier. Obviously better for impairment. Does that rebound? In some ways, we sort of hope it does rebound, but we hope it does rebound as the economy recovers because then it sort of gets back to more of a normal environment. I think it's very early to forecast that. We haven't even come out of this particular lockdown and how consumers behave and how everybody gets back to work I think is very unclear at the moment.
Yeah. Fair enough. It's kind of a good quality rebound, a bad quality rebound, so to speak. That makes sense.
Yeah. We'll know more, I think. We'll know a lot more in Q2, obviously. Okay.
Thank you very much. Cheers.
Thanks for everybody for joining us. Appreciate it. I know there's a lot going on. Although we won't be able to get to meet in person over the next few days and weeks, hopefully we'll get a chance to speak again. I'll close the call now. Thanks again.