Earnings Call: Q4 2019

Feb 13, 2020

Good morning. 2019 was another year of progress for Martin. We continue to see positive momentum across our businesses and this allowed us to increase returns to shareholders. We have delivered a 9% return on tangible equity and we will pay a dividend of 0.09 per share, 3 times the dividend level in 2017. Our common equity Tier 1 ratio stands at 13.8%, above our target of around 13.5%. Income was up 2% on the year. We've maintained our cost discipline, reducing operating expenses to below £13,600,000,000 This combination meant we improved our cost income ratio for the 3rd consecutive year to 63% with positive jaws across all operating businesses. Profit before tax excluding litigation and conduct was £6,200,000,000 for the year with a profit of £1,300,000,000 in the 4th quarter. Earnings per share was 24.4p This sustainable performance is grounded in our diversified model. Our income is generated across a mix of customers and clients, products, geographies and currencies. As a result of the countercyclical benefits of our consumer and wholesale mix, our business is resilient through an economic cycle. 45% of our income comes from outside the United Kingdom and 47% of our income comes from our consumer banking and payments businesses. We have delivered on our target ROTE for 2019 and are focused on continuing to improve returns to the group. Barclays UK and our consumer car containment businesses are consistently high returning at 17.5% and 15.9%, respectively, for the year. We continue to make good progress with our digital strategy in Barclays U. K. More people than ever are now using our top ranked banking app with over a 1000000 more customers active on mobile than we had last year. We also fully integrated Barclaycard accounts into our banking app during the year, so that our customers can now access even more of our products in one place. Investment in our capabilities is enabling us to improve the client experience and increase efficiency across our cards and payments business, strengthening existing relationships and helping us to build new ones. We just partnered with Emirates Airlines, the world's largest international carrier to provide a new co branded credit card to U. S. Consumers this spring. This is a great growth opportunity for Vartan and adds to the strong and profitable partnerships we have with top brands in the U. S. Like American Airlines and Uber. We've also recently signed a new European agreement with Visa, which will help us expand into new markets and invest in developing faster and smoother payments for merchants and consumers, while maintaining the protection and security that our customers and clients expect. In the UK, we've joined up with British Airways in an exclusive deal to reward our premier banking customers with obvious points earned as they do more business to Barclays. We believe there are good opportunities to unlock further growth across the consumer banking and payments landscape, building and deepening relationships in the UK, growing our partnerships and new propositions in the U. S. And strategically expanding in Europe. Looking at our Corporate and Investment Bank, we are pleased with our progress. Despite a 6% decline in the industry wallet across markets and banking since 2017, we have grown revenues in those businesses by 9% over the same period. That has underpinned a 230 basis points improvement in returns across the Corporate and Investment Bank as a whole. Our top tier markets business has gained 90 basis points a share since 2017, over 9 times that of our closest European peer and comparable to the highest gaining U. S. Banks. And our banking franchise saw 10 basis points of share gain just last year with many of our European peers seeing their share decline giving us a ranking of 6th globally for the first time and more importantly we are 5th in the U. S. We added some significant marquee deals in 2019. Barclays is acting as exclusive financial advisor and lead financer for Danaher in its $21,400,000,000 acquisition of the biopharma division of GE Life Science, the largest ever acquisition in the life science tools market. We're also acting as corporate broker, financial advisor and sponsor to the London Stock Exchange and its $27,000,000 pending acquisition Refinitiv. And as part of that deal, we were the underwriter, bookrunner, facility agent on various facilities totaling $13,500,000,000 In Corporate Banking, we have been driving returns through a careful focus on the returns profile of each client, balancing the capital committed in lending with the amount of transactional banking business a client does with us. As a result, we have seen 90 basis points increase in 2016 and return on risk weighted assets. We continue to manage our capital holistically across the Corporate and Investment Bank dynamically adopting our capital allocation to match our opportunities. The 8% return for 2019 does not care where we believe it should be, but represents real progress. The profitability and cost efficiency of our model means that we are also sustainably creating the capacity to grow. We are focused on growing fee based technology led annuity businesses with lower capital intensity. There are 3 areas where we have a significant customer base and believe we can differentiate Barclays over the next 3 to 5 years. Firstly, in payments, we are in the unique position of Vienna Bank with merchant acquiring, card issuing and supplier payment capabilities. That means that we issue debt and credit cards to consumers, provide businesses with the ability to accept payments in store and online, and we help clients make payments to suppliers as they order goods and services. This ability to see the payments landscape from all sides, alongside the significant investment in technology we have already made, creates opportunities to deliver real value to our corporate clients to consumers. We helped 1 of the large U. K. Insurance clients realize 1,000,000 of pounds worth of additional online customer transactions simply as a result of the improvements we made to their payment routes. Those improvements were powered by the insights we get from machine learning against the large data set that comes from seeing every stage of the payment process. We're also connecting to the procurement system of our clients taking out time and costs by eliminating paper and manual processing, while giving access to working capital. We see good growth opportunities to build our leading payment position in the UK. Only around 25% of our 1,000,000 UK small business customers use our payment services today. So there's a significant opportunity to grow here. One of the ways we're doing this is by moving to digital application and onboarding, which will reduce friction for small businesses and make signing up much more efficient. And we're embedding our payment acceptance capabilities in the software of 3rd party partners, which is helping us to scale much faster. We're also looking to further expand our European payments business. We recently signed a major client through our new European wide payment acceptance proposition supporting their entire UK and Europe business with thousands of new payment terminals. Secondly, we're growing our transaction banking proposition in corporate banking, everyday fee based banking services. We're continuing to expand the proposition across Europe with our single platform now live across 7 of our 9 target European countries. We added 360 new European clients in 2019 without the expense of bricks and mortars, which has helped us to grow to over €10,000,000,000 in our European deposit base. Improved client coverage and increased integration with our payments business and FX team is also helping to grow and diversify our income, as well as deepening the relationships we have with our corporate customers across more products. We now have over $500,000,000 of fee and commission income from Transaction 90 and are targeting 5% to 10% annual growth rate in that number over the next few years. 3rd, we see a significant long term opportunity to grow our U. K. Wealth advice and investments platform. We want to bring an integrated digital first experience across banking, financial planning and investments to over 1,000,000 of our existing premier banking customers. We're just beginning a multi year program to transform our smart investors and wealth management businesses, building fee based income with low capital intensity. We already have some £24,000,000,000 of assets under management with good growth potential as we deliver this integrated platform. These are all areas that can increase our profitability without significantly increasing capital deployment, enabling us to further diversify Barclays without limiting our commitment to the businesses we're already in or our capacity to return more capital to shareholders. In summary, we are pleased with our continued delivery in 2019, which again demonstrated the strength of our strategy to be the British Universal Bank. We know that our success over the long term is tied not just sustainable financial results, but to the progress of our communities and the preservation of our environment. We are committed to playing a leading role in the transition to a low carbon economy and are actively engaged in conversations with all of our stakeholders to ensure we make the greatest difference. In 2019, we achieved our 9% returns target and increased returns to shareholders whilst remaining in line with our target CET1 level. We have a good control of our costs, both in absolute terms and are still improving cost to income ratio. We continue to believe that it's appropriate to target a return of greater than 10% and we are managing our business to achieve just that. Given the low interest rate environment, however, it has become more challenging to achieve a 10% return this year. Nonetheless, we are confident that Barclays is well positioned and will further improve returns meaningfully in 2020. We expect future earnings to drive increased returns to shareholders as we anticipate a significant reduction in charges related to litigation and conduct from this year onwards. We intend to pay a progressive ordinary dividend supplemented with additional cash returns to shareholders, including share buybacks as and when appropriate. Through continued cost discipline, we will also increase the capacity to invest selectively across our business, including the opportunities I've just outlined. Barclays is in a strong position, well placed to face the challenges and opportunities ahead, and we look forward to delivering for all of our stakeholders in 2020 beyond. Now I'll hand you over to Tushar, who will take you through the numbers in more detail. Thanks, Jeff. I'll begin with a quick summary of the results for the full year and then focus my comments on Q4 performance, our cost trajectory and our capital position. We reported approximately 4 times of $6,200,000,000 generating 24.4p of earnings per share excluding litigation and conduct, up from 21.9p in 2018. This delivered an RoTE of 9%, the 3rd consecutive year of underlying RoTE progression and in line with our target for the year. As Jeff mentioned, we still believe that above 10% is an appropriate target for Barclays over time, but achieving this in 2020 has become more difficult. We are nevertheless confident of reporting meaningful year on year progression in RoTE for 2020. I exclude litigation and conduct charges in my commentary as usual, but following the PCI provision of €1,400,000,000 in Q3, we hope that in future there will be less need to discuss the GAAP statutory profitability. In 2019, this GAAP was largely due to the PPI provision, which resulted in a statutory EPS of 14.3p. The residual PPI provision is £1,200,000,000 and we are well advanced with progressing the large volume of license received in Q3 in the run off to the deadline. We grew income 2% year on year with growth in CIB and CCP and income held up well in Barclays UK despite the challenging rate and margin environment. Costs were down 2% delivering positive jaws both at the group level and in each of our operating businesses. Adjusted E13,600,000,000 costs are in line with our guidance for the year. Cost control will remain a major focus as we flex our cost base to suit the income environment and to see our existing target delivering a plus 60% costincome ratio over time. The reduction in the year from 66% to 63% represents good progress towards this. Impairment was $1,900,000,000 upon last year's charge, which benefited from improved macroeconomic variables, but periodic metrics remain broadly stable across both secured and unsecured portfolios. We ended the year with a capital ratio of 13.8%, which was up 60 basis points year on year reflecting the change in treatment of operational risk at Q3. Our underlying capital generation more than offset the litigation and combat headwind close to 60 basis points allowing us to pay a significantly increased dividend of 0.09p We are comfortable with our capital target of around 13.5%. Although our capital ratio will go backwards in Q1, we are confident of generating capital in 2020 to fund increased returns to shareholders. Looking now at the 4th quarter. Income increased 4%, reflecting improvements across all the operating businesses. The cost rate of $3,500,000 was down 9% and reflects substantial cost efficiency measures across the group, including a lower bank levy charge. This resulted in positive jaws of 13%. Intellence was $523,000,000 down $120,000,000 reflecting non recurrence of £150,000,000 for economic uncertainty in the UK, which we took in Q4 last year and remains in place. Credit metrics remain reassuring with improvements in arrears in UK cards and flat arrears in U. S. Cards. The improved Q4 performance contributed to our delivery for full year RoTE of 9%. Looking now to businesses in more detail, starting with BUK. BUK reported an RoTE of 18 0.7% for Q4 with income up 5% despite the challenging income environment, while costs decreased 8%, delivering strong positive jaws for both Q4 and for the full year. As in recent quarters, we had lower interest earning lending in UK cards continuing to reflect reduced risk appetite and high customer repayments. This was more than offset by the benefits of treasury operations and debt sales. As I mentioned at Q3, our debt sales this year were concentrated in Q4, but would more normally be spread across the year. With Personal Banking, we saw continued growth in mortgage balances, up a further GBP 1,900,000,000 in the quarter as outflow again exceeded our stock share. Although mortgage pricing remains competitive, we saw some margin improvement in the quarter. In Barclays Heart, balances were down GBP 200,000,000 as in Q3 to $14,700,000,000 reflecting both our risk appetite and balance pay down. As I indicated in Q3, NIM was just above 300 basis points at 303, resulting in a full year NIM of €309,000,000 This reflected our growth in secured lending, and I would expect that to continue in 2020, resulting in a NIM below €300,000,000 The combination of these factors and the low rate environment would suggest a 2020 income run rate below the Q4 level. The cost decrease reflects efficiency savings, which more than offset continued investment, particularly in improved digital capabilities to serve our customers. Cost management will remain a priority in 2020 given the income environment, but we won't that spend to be skewed towards the first half. Payment for the quarter was down year on year because of the one off in Q4 last year that I mentioned, but up on the low Q3 print at £190,000,000 UK card billings were down slightly and other credit metrics are benign. As we look forward, the GBP 200,000,000 run rate we referenced in the past is looking too high, absent significant deterioration in the economic conditions. Turning now to Barclays International. The BI businesses delivered an ROV of 6% for the quarter compared to breakeven last year with improvement in both CIB and CCP. I'll go into more detail on the businesses on the next two slides. Although Q4 is seasonally the weakest quarter for the CIB, RoTE was 3.9% compared to a small loss last year, contributing to a full year RoTE of 8%, up from around 7% in 2018. Income was up 8% at £2,300,000,000 while costs were down 9% at £1,800,000,000 delivering strong positive jaws. Markets income included a gain of £55,000,000 on Tradeweb and a £37,000,000 negative from CBA hedging net of treasury activities. SIC had a good quarter, up 27%, reflecting strong performance particularly in rates. Ex fees increased 9% despite a lower contribution from derivatives as cash equities and ex key financing reported year on year growth. Overall, market income was up 20% year on year. Banking was down 7% against our record Q4 last year. As I've stressed before, the timing of deal completion can make the banking line quite lumpy from quarter to quarter, but we're happy with the way the franchise is developing. Corporate mark to market moves on loan hedges. We reduced CIB cost by 9% as cost efficiencies outweighed continued investments in the business. And going forward, we will clearly be aiming for positive jaws, adapting the cost base to the income environment. RWA decreased by over €13,000,000,000 in the quarter to CHF 172,000,000,000 or was similar to the 2018 year end level. Some of the Q4 reduction reflected a weakening of the dollar. As usual, we would expect an increase through Q1, which will include the new securitization rules introduced on the 1st January as well as seasonality. Turning now to consumer cards and payments. We continue to generate attractive returns in CCP with a Q4 RoTE of 16.3%, up from 5.4% for Q4 last year. Income increased year on year by 6%, reflecting improved treasury contribution. You'll recall that we disclosed a €60,000,000 negative last Q4. The costs were down 10% resulting in strong positive jaws. New as cards, we continue to increase the focus on the co brand portfolio while scaling back own brands. This resulted in overall growth in net receivables just 1%, but within that, the co brand balances increased 3% year on year. A good stage in the U. S. Economic cycle, think growth in the co brand balances is likely to be in mid to high single digits per annum, but overall balance growth will be lower. We also saw some income growth in Germany and in private banking and payments. As Jeff mentioned, we are particularly encouraged by the outlook for payments growth following the major investment in systems we have made over the last few years. The reduction in costs also reflects the refocusing in the U. S. Consumer business as we scale back our own brand offering while continuing to invest in other areas. Payments was slightly down year on year at £299,000,000 and down on Q3, which you will recall included a £30,000,000 increase from macroeconomic updates. Credit metrics also remain well controlled with not much movement in the 30 90 day arrears. Turning now to head office. The head office loss before tax of £167,000,000 was a little higher than the Q3 loss of £116,000,000 £116,000,000 The delta is largely attributable to the Absa dividend, which we received in Q1 and Q3 each year. Costs continue to run-in the £60,000,000 to £60,000,000 range, while the negative income reflects the main elements I referenced before, circa €30,000,000 of residual legacy funding costs, tech accounting expenses and the residual negative treasury items. There were also some negative income in Q4 from the sale of close to €1,000,000,000 of our Italian mortgage portfolio. Now I want to focus a little on costs. We delivered on our cost guidance in 2019. And although we are offsetting fixed cost guidance 2020, we are very focused on delivering positive jaws in order to drive the group's cost income ratio to sub-sixty percent over time. Through cost efficiencies, we have delivered an absolute reduction of €1,400,000,000 over the last 3 years, while continuing to invest in key business initiatives. Together with income growth, we generated a 9 percentage point reduction in the costincome ratio. Looking in a bit more detail at these cost efficiency actions. I've shown here some examples of the productivity gains that our Cervco, DS, have been driving over the last 2 years on the 4 main categories. For example, in procurement, the Exos delivered an 11% reduction in supply since the end of 2018. On the real estate front, we've cut over 1,000,000 square feet of floor space, while creating new campuses in New Jersey, Pune and Glasgow. Overall, these savings totaled around $550,000,000 in 2019 and many of the actions are ongoing through 2020. So we expect to drive further significant cost capacity creation. The result of this is that we are spending less on run the bank cost and more on change the bank. For example, between 2018 2020, we expect to reduce costs allocated to mandatory regulatory control by 3rd. THAP decreased in the quarter by 0.12p to 2.62p pulled flat on 2018 despite the currency headwinds. Q4 included a negative currency impact of $0.07 and other reserve headwinds of $0.06 reflecting rate moves and credit spread timing. These more than offset $0.04 of EPS. As you know, sterling dollar rates have been volatile over the last couple of quarters with a significant benefit in Q3 followed by the Q4 headwinds and there will also be material revenues with increases in the quarter or reductions since year end. The capital progression by contrast was a positive story. On capital, CET1 ratio increased in the quarter by 40 basis points to 13.8%. Although Q4 is our seasonally weakest quarter for underlying profitability, we still generated 28 basis points, more than offsetting the 18 basis points applied to dividends and 81 coupons. The other contributor to the increase was a significant reduction in RWAs. This is mainly due to depreciation of the dollar, capital efficient action and the seasonality at year end in the CIB. I would remind you that the RWA reduction from the weakening of the dollar is broadly hedged by the move in the dollar PT1 capital. Looking on the next slide at our capital requirement. Our year end CET1 ratio of 13.8% is comfortable against our target level of around 13.5%. As you know, Q1 tends to be our weakest quarter for ratio build and I will expect a lower capital ratio at 31st March, reflecting both the seasonal build in RWAs and the increase in securitization RWAs that came in on the 1st January. Nevertheless, we remain confident about capital generation from our businesses to support increased returns to shareholders through 2020. This capital build will be held in the next few years by the lower pension deficit contributions agreed with the trustees following the recent triennial valuation, It showed a significant reduction in the funding deficit to GBP 2,300,000,000 These are detailed in an appendix slide. As you know, our capital returns policy is to combine an aggressive dividend with share buyback as and when appropriate, but we won't be saying anything about the precise timing and cost of buybacks until we are ready to announce 1. As shown on this slide, our current capital requirement and also an illustration of how this might change to reflect the expected countercyclical buffer increase indicated by the Bank of England. There is expected to be some reduction in the Pillar 2A requirement, but overall, it would increase our NDA hurdle, all other things being equal. So at any time, we look at capital through a number of lenses, and our target level isn't only based on the buffer over NDA. We wouldn't see this change increasing our target capital level for around 13.5% and we don't see materially affecting our capital distribution plans. Our UK leverage ratio at the end of the year was 5.1% on a spot basis and 4.5% for Q4 on a daily average basis. These are prudent levels for us to hold above our UK leverage requirement, which is currently just below 4%. With the material portion of our exposures being short term or liquid in nature, we've proven our ability to manage our leverage exposure dynamically. Our spot and average measures will generally be wider apart than most UK peers, which reflects flexibility and more static leverage position. I'd also note that we expect the implementation of CRR2 to provide a meaningful benefit to our leverage position given our level of settlement balances and the effects on derivative exposures. Our funding and liquidity position remains strong. We issued GBP 8,600,000,000 equivalent of MREL debt in the year, broadly in line with our plan to issue around €8,000,000,000 and we plan roughly €7,000,000,000 to €8,000,000,000 in the current year. Our MREL is currently at 31.2 percent in line with our expected end requirement. We're also pleased with the recent rating upgrade for Moody's, which has moved our Tier 2 debt up to investment grade. Our liquidity coverage ratio was 160% at the end of the quarter, and our loan to deposit ratio was 82%, reflecting our strong deposit base across both the corporate and consumer businesses. Before I conclude, a few words on ESG, which is rightly becoming an increased focus for both our investors and for other stakeholders. Our key principles on ESG are guided by our core objective of delivering sustainable returns for the long term. This slide shows a number of key 2019 highlights in this area. For the publication of our annual ESG report in March, we will be providing information on how we're taking a leading position on climate change and the transition to a low carbon economy as well as enhanced climate related disclosures supplement our already extensive environmental, social and governance reporting. So to recap, reporting an ROE of 9% excluding litigation and conduct for the year with positive jaws of 4%. We still believe that above 10% is an appropriate target for past due over time, but we acknowledge that achievement of this in 2020 has become more difficult. We are nevertheless confident in reporting meaningful year on year progression in RoTE for 2020. This progression remains a key priority for the group, while also delivering attractive capital returns to shareholders and investing in key business growth opportunities. We paid a dividend of 0.09 percent for the year, up from 6.5%. With our PEQ1 ratio at 13.8% against our target of around 13.5%, we are well placed to generate capital to fund increased distribution to shareholders. Thank you. I'll now take your questions. And as usual, I'd ask if you limit yourself to 2 per person, so we get a chance to get around to everyone. Our first question today comes from Alvaro Serrano of Morgan Stanley. Please go ahead. Good morning. Thanks for taking my questions. You're clearly quite confident as you said to deliver a meaningful improvement to RoTE this year. I've got 2 questions right now. First of all, in the IP, what kind of revenue environment are you factoring in? Or do you expect can you give us a handhold us a bit there? Because obviously FICC was very strong last year. You had GIL gains in there. You had Tradeweb gains. So it seems like you might have some revenue headwinds. So what kind of revenue environment would you expect given the start of the year? And second, I had a question a bit more color on costs related to the flexibility you've quoted. I'm not sure if you can give us the comp ratio that you gave us last year in the IB, but if not, a bit of color around what are the non comp trends last year and what should we expect for 2020 And where you retain that flexibility? Thanks, Alvaro. It's Tushar here. Why don't I kick off on both of them, and Jess will add a couple of points at the end. I think the backdrop of your question, generally speaking, is where do you see our returns improve from here? What are the drivers? And I know you sort of focused in on the Investment Bank, but it may be helpful if I just sort of give you a backdrop of some of the momentum that we've got across all of our businesses And the puts and takes here, and you'll model it, obviously, as you see fit. But we're pleased with some of the momentum in our U. K. Business, pleased with the mortgage growth, pleased with deposit growth. We have seen a little bit of stabilization of interest margin in the mortgage business, and we hope to continue to grow balances there. I think the other thing that we're seeing is probably some softening continued softening, I guess, of our unsecured balances, but against the backdrop of a relatively benign credit environment. You may have picked up from my comments my scripted comments that our impairment guidance is probably a bit higher than we'll expect to see. Within the CIB, we are pretty pleased with the performance that we've had this year. And actually, I don't think it's just talking about 1 year. It's really over 3 years where you've shown a slide that had our revenue performance improve against the backdrop of a consistently downward industry revenue backdrop. None of us have the crystal ball on which direction revenues are going to go in this year or beyond. But what I would say is that even in a down market, you've shown us able to improve the returns and the profitability in the CID over 3 years. And just away from sort of pure investment banking revenues where you've seen our market share improve, and we've published some stats around that. You've seen the risk weighted assets, return on risk weighted assets in the Corporate Bank improve. You've seen us talk about some of the momentum that we have in Transaction Banking, particularly in Europe and some of the growth we expect to see there. And likewise, in the cards business, I think you'll expect us to see, and I'm talking about U. S. Cards here, continued growth in balances and therefore profitability. On the cost side, again, the broader backdrop is disciplined cost management. We've had our costs reduced over a number of years now consecutively in pound sterling with everything included in there. In terms of the comp pull around the Investment Bank, we haven't published that ratio. But what I would say is that we did talk about having comp flexibility to ensure that we could flex our cost base to the income environment. And of course, you've seen that the investment banking industry share is down year on year, and you'd expect us to sort of factor that into the compensation awards that we would have. Trends around non comp, we put a slide out there on a whole bunch of activities that we show that we had about over £500,000,000 of gross we show that we had about over £500,000,000 of gross productivity. We continue to see momentum on those initiatives and new ones going into 2020 beyond. And again, that would give us flexibility to manage our cost base accordingly depending on the environment that we're in. The final comment I have before Jes may want to add some things is positive operating leverage is important for us. I'm pleased that we have got positive operating leverage across all of our businesses this year, both in the quarter and for the full year. And we'd like to continue to drive our cost income ratio down, so that's something that's quite important to us. Yes, Raul, maybe what I'd add is for a longer term view, my own point of view, the share size of the capital markets continues to grow and the capital markets continues to replace bank balance sheets in terms of funding economic growth. Concurrent with that, you have seen capacity leave the intermediary space as banks have pulled back. Those two factors at some point, I think, should start to have an impact on the overall revenue characteristics of the intermediaries in the capital markets. Thank you. Thanks, Elvira. I appreciate your question. We have the next question please, operator. The next question comes from Jonathan Pierce of Numis. Please go ahead. Hi there. Can you hear me? Yes. Yes. Good morning, Jonathan. Perfect. Two questions, please. First one on your equity Tier 1 trajectory in the Q1. Last year, about a 20 basis point drop in the Q1 IFRS 16 was obviously impacting there a little bit, the neutralization of share awards so on and so forth. Is that what you're expecting maybe a touch more because I guess the securitization add on is a bit more than IFRS 16. But is it that order of magnitude in Q1, sort of 20, maybe 30 basis points max drop in the equity Tier 1 this quarter? Yes. Have you got 2 questions, Jonathan? If you have, I'll take them. I'll do them in one shot. Or if you've got any color? Yes. The other one was connected actually risk weighted asset growth more broadly over the year. How you see the trade off this year between organic growth and securitizations, mortgage add ons. Can you give us a bit more color on that? So I also note that it's probably connected to the improved impairment performance as well that the asset quality movements appear to be negative now. So I'm just wondering, in the balance this year, procyclicality growth, regulatory add ons, how do you see RWAs moving over the full year as a whole, please? Yes. No, thanks, Jonathan. So on the, if you like, near term move on CET1, you're right. We will have, obviously, we called out securitization inflation, just the change in the regulatory rules there. That will flow through as well as the regular seasonality that you would expect Q1 being typically quite often the most profitable quarter. It doesn't even always the case. You sort of said 20 basis points last year, is that a sort of similar thing to think about this year? I'm sort of reluctant to quote a number, but it's not unusual to see that kind of move in Q1. So look, I'll let you sort of model that as you see with Fit. But I don't think you'll be that far off the mark there. In terms of RWA sort of evolution over the year, in terms of regulatory inflation, the other one in the past you called out, which was mortgage risk weights, and we sort of guided to that, no change in guidance previously, again, low sort of single digit type impact. Beyond that, I don't think we'll be utilizing a lot of RWA inflation to fuel sort of the business activity. It's pretty modest in both the consumer businesses. And in the CIB, it will sort of bounce around over the course of the year, but I don't expect much significant growth. So I think if you sort of in a roundabout way thinking about how much profitability gets absorbed by reinvesting onto our balance sheet, I don't think it will be significant compared to previous years outside of the regulatory inflation that we talked about. Okay. That's great. Thank you. Thanks, Jonathan. Can we have the next question please, operator? The next question on the line comes from Claire Keane of Credit Suisse. Please go ahead. Good morning. Hi Claire. I have another question. Hey, you're a little bit hard to hear. I don't know if you're far away from your speaker or Yes. Sorry, I'll speak up a bit. That's better. Thank you. So Barclays UK, on the income, obviously, Q4 was a bit higher than maybe the other quarters. And you mentioned the treasury gains and the debt sales. But if we look year on year, non interest income was up €110,000,000 So how much of that do you assume is sustainable? Do you think the full year 2019 print is sustainable for 2020? That's my first question. The second question then on costs for Barclays U. K. You mentioned the investment spend. Can you give us some indication of how the investment spend for 2020 is compared to 2019? And if we should expect absolute costs to be higher in the first half twenty twenty than the second half? Yes. Thanks, Claire. Yes. And in the U. K, we did call out debt sales. Don't sort of confuse these with sort of debt sales from our liquidity pool. These are just selling low rated receivables essentially that we do as a regular part of business. I'd encourage you guys not to sort of think of that as a nonrecurring item. It is a recurring thing we do every year. Just so happened in 2019, the bulk of it was actually in Q4. So it sort of squashed up together a bit. But if you go in previous years, it's normally more evenly across the quarter, and it's just a regular thing we do every single year. So I'll let you sort of model the line with everything else that's going on there, but I wouldn't be stripping out too much in terms of one off impact there, if any. In terms of Sustainable for 20 Yes. I mean we think look, I think the headwinds that we have in BUK is mostly the rate environment. So obviously, with a lower flatter curve, some of the hedges that we have on place are just mostly going to be less meaningful than we had in the previous year, and I sort of called that out in earlier calls. I think on fees and commissions, things like debt sales, other things with I wouldn't sort of think of them as the nonrecurring. The only other thing, I guess, that if you really wanted to get into the micro REITs of modeling, just be a little bit careful about is overdrafts, sort of switched around a bit from fees into interest income again. So I mean it's sort of broadly offsetting the geography may be different. I'd just maybe play it at 2 things on the cost issue. One is, as we move from spending all of our money to run the bank to having a balance of run the bank and change the bank. What that does give us and I think we did some of it in 2019 is more control over our cost line. And obviously, we want to invest for the future and for growth and we will. But discretionary spending, you've got greater control to manage that during the course of the year. And I think the only thing we showed during this year is variable compensation is variable. And so we're going to match our cost and our compensation management through the course of 2020 much like we did in 2019 with very much of a focus on the profitability of the bank. Yes. And just to round off that point, you asked about the shape of the U. K. Costs. We'll be front loaded. I sort of called that out in my scripted comments. So I do expect a higher cost trajectory in the first half relative to the second half. And that's really because of the continued sort of investment spend that we have around managing our real estate footprint as well as some of the digitization activities going on. So if that's of any help in your modeling. The next question comes from Joseph Dixon of Jefferies. Please go ahead. Hi, thanks for taking my questions. I guess a couple of things. So first of all, what are the milestones you need to see to gain more comfort around, for lack of a better word, certainty on the U. K. To release the overlays you've taken because it's hard to see in the macro backdrop anything getting worse, if anything, surveys point to the contrary. So what are the milestones you need to see in the timing associated with releasing some of the overlays you've taken on result as a result of the uncertainty. And I suppose in a somewhat related manner, if I look at the top two lines of your assets on the balance sheet, the cash and cash equivalents have been moving up quite a bit and they're now 20% of tangible assets and that's also seems the timing of the increase in those seems to have also corresponded to the postal referendum world in the UK. So you've hit yourself both ways, both in terms of having cash in this excess liquidity and then the impairment overlay. On the balance sheet angle, do you see this number coming down over time also as some of the certainty comes back into the picture? I mean, what is it we need to see and look at as a milestone for those things to unwind? Thank you. Yes. Why don't I cover those 2 and I may hand over to Jes to maybe talk about just the how he sees the U. K. Environment generally. So I think it's sort of crux of your second question. On the impairment overlay, I mean, just for those that may not be as familiar, we did take a charge in the Q4 of 2018 of £150,000,000 related to sort of uncertainty around the future sort of economic forecast around that period given all the political uncertainty and the sort of very sort of path dependency of where the UK economy may have gone. And we've kept that provision in place right through to 2019. I think, Joe, I'm not sure there's a sort of a numeric quantitative trigger point to your answer that I'll call out. What I would say is that as we each quarter assess whether we think we have a better tighter set of external data to project our forecast on, there'll be less and less need to have that uncertainty overlay, and that's just an assessment we'd make every quarter. On the liquidity on our balance sheet, I mean, you're right. It's driven by customer behavior, a lot of cash being left on our balance sheet rather than demand for credit. You see particularly in sort of small business and sort of corporate type activity. It's worth saying that it is worth saying that sentiment, I would say, has qualitatively feels better. I don't think you could say that's transmitted into actual change in demand for credit or a drawing down of those cash balances into credit assets. But that's the sentiment continues to improve. We look forward to seeing that. But I can't say we're seeing that yet. Anything you want to say on the Tangerine just or? No, I think obviously having the political uncertainty of Brexit behind us, I think you've already seen it as a positive thing. You've already seen it in business confidence and in discussions with both international businesses in the UK and domestic. We see, I think, relief in terms of that political issue being put behind. We obviously have trade negotiations both with the European Union and what's possible now with the U. S. The other thing we also have to be mindful of is clearly the current government is comfortable provided it's not for operating costs to increase the fiscal deficit as percentage of GDP and to the extent that is invested in infrastructure and whatnot that generates capital churn, that's also very positive for the economy. So I think one's got a more positive outlook today than one would have had a few months ago. Thanks, Joe. Could we have the next question please, operator? Sure. The next question comes from Andrew Coombs of Citi. Please go ahead. Good morning. If I could ask a couple of questions, please. First on CIB revenues and second on costs and the ambition for 2020. On CIB revenues, you made the point your marketing and banking fees are up 9% in 2017. That has been part offset by a decline in the Corporate and Transaction Bank and both are down year on year again in the Q4, which I think you draw out due to mark to market on loan hedges. I'm interested in your thoughts on those business, particularly corporate lending, but also the transaction bank going forward. You talked about a number of initiatives. You talked about 5% to 10% growth per annum in Transaction Banking and Unity revenues. But to what extent do you think you can offset the low rate environment? Are you confident that, that business can grow versus what we've seen in the past? And then on costs, if I look at Slide 23, the EUR 550,000,000 of savings, you've not quantified anything for 2020. More broadly, you're now talking about positive jaws rather than an absolute cost focus. So is it better to say the priority is not for an absolute cost reduction anymore? It's much more about you think about the cost in relationship to the revenues that will ultimately depend on the top line going forward? Yes. Thanks, Andy. On your first question, on the sort of transactional banking and corporate lending. The corporate lending line, it can be a little bit noisy because the hedge is going through that line. I think it's the sort of gist of your question is, is that sort of if you look through the loan hedges, taking maybe a trading average or something like that, so you see through that noise, is that stabilized out? I'd say it probably has obviously somewhat driven by the rate environment, but I think it's a reasonable sort of jumping off point. Obviously, the returns on that lending book has increased. So the productivity of the capital we have against that book has improved. You can see a slide on that. On transaction banking, this is an area we are quite excited about. We've talked about our European transaction banking offerings to our clients. We've talked on the slides about adding about 300 or so clients, attracting about £10,000,000,000 or so of euro deposits, expecting that to grow and expecting the annuity revenues to be growing at sort of high sort of 5% to 10% high single digit type territory and we feel very good about that. Maybe just before it shows the cost. We talked about improving the return on risk weighted assets by 90 basis points. Let me give the actual number of return on risk weighted assets, but that's a meaningful increase over the last years in terms of transactional revenue versus our revenues from the extension of credit. And then I think also we shouldn't underplay. So we've completely reengineered the front office of our corporate banking offering across Europe. So before it was reliant on the bricks and mortar of our branches in Italy and Spain, that's all gone now. We put a whole new front office system and out of the box in the 1st year, we had a 360 good sized corporate clients across Europe that delivered some £10,000,000,000 of Europe deposits. So that's a whole mother, if you will, geography to feed into that transaction banking. Yes. Very much so. I guess just to round off that point. And the other thing we've seen good progress in is the connectivity between, if you like, that corporate payments business, but also our payments acceptance business. And you've seen the rollout in Europe there as well. And the connectivity and the cross referrals of clients there is something we feel very, very good about. Going on to costs. Yes, look, we've had a fixed cost target for a number of years now, I mean virtually ever since I've been here, I think. And hopefully, you've seen us delivering against those objectives every year with costs going down virtually every year as well. For us, I think as the company sort of completed, if you like, its intensity around restructuring and various other reorganizations that we had to do on the backdrop of changing regulation, ring fencing and CCAR and Brexit and all the kind of good stuff that's gone on there. We're more and more focused on operating jaws and wanting to drive that forward. So I think you'll hear us talk a little bit less about absolute cost targets, but very much trying to drive positive operating jaws. And as you said, I think, Andy, cost sort of tracking income with a bias towards positive jaws. And again, I'd encourage you to look at that on a trend basis. So for example, in the U. K. Bank, we will be front loading some of the investment spend for this year into that. But look, I'd encourage to look at our positive jaws on sort of a trend basis rather than literally every single quarter. Thanks for your questions, Sandy. We have the next question please, operator. The next question comes from Chris Can't of Autonomous. Please go ahead. Good morning. Thank you for taking my question. I wanted to come on back on to capital, if I could, please. You've indicated that MDA headroom is not the only consideration in reiterating your circa 13.5% CET1 target, but you're now in effect saying that 100 bps of headroom over MDA is acceptable. The slide you expect your MDA to go to 12.5. You used to target 150. The only other banks I'm aware of in Europe targeting such a low level of headroom to MDA are Piraeus and Novobanko. Could you explain a little bit more why you're happy to run with a lower headroom than basically all European peers targets? And as a follow-up question, this can be my second question, you still say state circa 13.5%, but that would imply that you would be happy to run a little bit below 13.5%, which would be less than 100 bps of headroom. So could I please confirm that you're happy to run with less headroom to MDA than the likes of Novavango, please? Yes. Thanks for your questions, Chris. I must admit, I don't track all the European banks that you seem to track. I don't have those particular numbers to hand. But what I would say is we do look at capital, bucket level for us against a number of lenses. Distance to MD8 is important, obviously particularly important because of the dividend stuffers and various other restrictions that are invoked then. About 100 basis points is over £3,000,000,000 and we have run a wider distance to MDA in the past. Now in the past, of course, we've been had quite significant conduct litigation type items that have been running through our capital line item as well as extensive restructuring. So what that does is make some of these charges quite episodic and large in nature. And therefore, we felt it's very prudent to be running a wider distance to MDA while that was going on. I think you should expect to see a bit less of that now. So I think that's one thing. I think the other thing, of course, is distance to NDA is important, but so is stress test capacity, so is PRA buffer capacity and various other things that are sort of linked to that. The other thing I'd say is it's a little bit speculative, I guess, but we're all assuming that the countercyclical buffer does come in at the end the course, that's the stated objective of the SPC and the Bank of England. Were it to come in at that time, I think you would expect it to be alongside a very buoyant healthy economy. So there's some you'd expect it to be a very positive operating environment that ought to be beneficial to profits as well. So I think you should look at it in the context of that. And on the flip side, if the economy is going into some form of stress or difficulty, then I think the SPC have said that they would not invoke the countercyclical buffer, in which case to MDA, would sort of automatically recalibrate to where it was. So I think it's just important to look at all of those things in the round rather than on one particular item. And you've also and I think you've asked me this several times in the past. It seems to be something that it's just a theme, I guess, that comes up. What is circa $13,500,000 would be prepared to go below $13,500,000 Look, I think the way I always think about these things is we there are a lot of things that sort of go up and down when you're managing an organization of our complexity. And we don't manage these things to the sort of second decimal point. There'll be puts and takes, but we look at it in the round. And I think somewhere around the 13.5 level is entirely appropriate for us. We're a little bit above that at the moment, and we're fine with that. We may be close to that in subsequent quarters, and I guess we'll be fine with that. I'm not sure that's probably going to answer the question the way you'd like me to, but probably all I'm going to say on it. If I could just push you a bit on your observation on the countercyclical buffer implying a buoyant operating environment. I guess firstly, my interpretation of the Bank of England's change there is they've just changed their view on the normal through the cycle level. It has nothing to do with the buoyancy or otherwise of the U. K. Economy. They just think that's the long term average. And secondly, if it was a buoyant operating environment, in what way does that negate the need to change your capital target when your MDAs just come up by quite a bit? I'm a bit confused as to how the operating environment feeds into the setting of your capital target. Obviously, a buoyant environment would make it easier to increase your capital to a new revised higher target. But I'm a little bit confused as to how philosophically that fits into your process of setting your capital target in terms of how you expect how buoyant you expect the U. K. Economy to be? Thanks. Chris, it just means you're more profitable. Okay. So you could move to a higher capital target then? It just means you're more profitable, so you're generating more capital each quarter. Can we take the next question please, operator? The next question is from Robin Down of HSBC. Please go ahead. Good morning. Can I come back to the very opening question that Alvaro gave you? You're obviously signaling this morning that you expect a meaningful improvement in the RoTE this year, which starting from sort of 9%, I would guess, will probably be pushing up to around sort of 9.5% or so. I'm looking at the consensus today or consensus you published pre results and it's at 8.5% for 2020. Now I can see some of the gap might be down to sort of actual equity levels being slightly lower than perhaps consensus or forecast. But to go from a sort of kind of an 8.5% to sort of, let's say, a mid-9% level does suggest some single €100,000,000 of extra PBT versus consensus. And I'm conscious, obviously, you're making this forecast very early in the year, which kind of feels quite brave in terms of crystal ball gazing. But what is it you're looking at when you look at the consensus versus your own sort of management budgets and thinking, well, they've got that wrong? And I'm guessing one element is the U. K. Bank levy. I assume the new kind of lower level we've seen in 2019 might stick. But where else is consensus going wrong here, if you like, in your view? Is it the impairment charges? Or is the kind of sort of 2% revenue growth versus 1% cost inflation just not positive enough in terms of jaws? Perhaps if you could give us a bit of color would be very helpful. Maybe I'll take the first crack and then Robin and have Dushar come in. I mean, so having done this for 4 years, we have beat consistent in terms of RoTE every year. We delivered 4.4% in 2016. We delivered 6.5% which was quite a bit above consistent to 2017, 8.5% in 2018. Again, people thought it was a stretch and then obviously 9% versus consensus. And during the whole course of the year, consensus was pretty much around 8.8.1. So 1, if we can do in the 5th year what we've done through 1 through 4, hopefully we have a meaningful improvement in the 9% level and well above the 8.5% that the Street has us in for 20 19. I would point to a couple of things and just on a slide, we've moved some £500,000,000 of costs from that were basically used to run the bank. So we made £500,000,000 of investments, whether it's new trading algorithms in the investment bank or moving from monthly to weekly downloads of the new version of our banking app and the new services that we're putting on that platform to rolling out the new technology front office for the corporate bank in Europe. Those are all investments that we believe are going to generate revenue and perhaps we're more optimistic than the Street is and the impact of those investments. We also have been, I think, demonstrating our ability to capture market share, particularly in the IV and Markets business. When you improve markedly your prime balances, those are prime balances that are very sticky and they stay and it's a very stable income and we saw that during the course of the year and now we'll have the benefit of that through the entire year. Obviously, we can't predict where markets go, but we're fairly encouraged by that. We also have the other side of the equation with our credit spreads are virtually at all time tights versus where they were over the last decade. And we do have a 1,700,000,000,000 balance sheet that we have to fund. And as your test beds come down, your funding expense also goes down. But I don't know, sure you want to add to that? Yes. No, I think that's pretty comprehensive, Jess. I mean, in some ways, Robin, it's just maybe a recap of some of the comments I made to Eldarra's question. I do think we're very pleased with the momentum that the business has, whether it's growth in our secured mortgage portfolio, high quality deposits coming in on both the corporate and consumer side, plans we have around transactional banking, improvement in productivity of corporate lending book, really excited about the payments business and expansion into Europe and being able to offer new products and services there. Wealth business where we've been investing in, that will improve. I think on the impairment side, it does feel we've talked about our U. K. 30 day, 90 day unsecured delinquencies actually trending down a little bit and stable in U. S. Cards. We've added a new airline to our stable of airlines in U. S. Cards Emirates Airlines, which we announced this morning. We think there's about 2,000,000 Americans that fly with that already. So it gives us the opportunity to grow that business. So there's a multitude of things that we are very excited about. As Jeff says, we don't have the crystal ball on the economy. But as we see sit here now, we think with that momentum in the businesses, with the credit environment that we're in and the discipline we have around cost that we should be able to improve returns from where we were this year. Time will tell how well this year pans out. Thanks for your question, Rob. Can we have the next question please, operator? The next question comes from Guy Stebbings of Exane BNP Paribas. Please go ahead. Good morning. Thanks for taking my questions. First, I just want to come back to Barclays UK NIM and sort of what sort of assumptions you're making there? Anything that can help us gauge the sub-three hundred basis points guidance, which clearly could imply sizable downsizer risk. You talked about some of the headwinds in terms of rates and mix, but on the other side, you've referenced the overdraft fee income changes, should help here presumably, albeit unhelpful for OI. Perhaps you could size that for us and whether there's any other offsets for NIM, so that give us a bit of reassurance that below 300 basis points isn't meaningfully below 300 basis points. And also in terms of mix effects coming through there, looking at asset quality performance, it does sort of beg the question whether you might change your strategy here in the future in terms of card growth. That's the first question. And I just wanted to come back on capital, if it's helpful to do that first. Just to sort of check my interpretation here is correct. I mean, presumably one of the reasons for running with a lower MDA is because the increase in accounts cyclical will allow you to draw down more on stress test losses in the future in terms of stress testing. So your implied PRA buffer should be lower all else equal even before considering lower conduct losses, which seems likely given PPI and potentially a favorable revision from the Bank of England on provisions for Stage 2 losses as well. I mean, is that a fair assessment? Or am I missing anything? Thanks. Yes. Thanks, Guy. Let me go in the reverse order. It is a fair assessment. And I sort of when Chris asked the question, I did sort of say we look at capital across a number of lenses, including stress testing, and that's both our internal stress testing as well as the Bank of England as well as PRA buffers. And you've seen on the slide that we put out this morning that the offset that the Bank of England talked about in terms of Pillar 2 offset to the increase in Canaletix or Botoxarts lower our reference rate for passing the stress test. So I think that's a fair interpretation there. But again, we look at these things in the round across the multiple of lenses. Yes, that's a fair point. On the NIM, yes, I think the point I'd want to really emphasize here, this is as much just an expression of the shift in mix in our business as opposed to just net interest income on a like for like basis coming down. Obviously, we have a little bit of a headwind from structural hedges and sort of grinding into slightly lower rates. But put that to one side, we would expect all other things being equal to grow our interest earning balance sheet, mostly driven by mortgages. Now that's just been, as you folks know full well, it's just a lower margin product with a lower impairment outcome, so a lower sort of mathematically constructed net interest margin. So in the answer to your question then, Guy, it really depends on how much we grow that mortgage business relative to our unsecured business. I would say that our business is pretty healthy at the moment. You've probably seen various reports on the healthiness of application volumes. We are growing our share of the mortgage market ahead of our current stock share at the moment, which we're very comfortable with. So I'll let you sort of form your own opinion as to how much that could be. We did about approximately €2,000,000,000 or just a bit less than that €2,000,000,000 in the Q4 and GBP 6,000,000,000 in the year, give you a sense of where it could be. But think of it as a mathematical outcome, but we're still trying to drive up our net interest income, all other things being equal from a higher interest earning balance sheet. Okay. Are you able to give any numbers around the changes in overdraft? Feeling common how that moves into NOI? I don't have them to hand with me here. I'd love to chuck it out on a call. But perhaps when we get together a bit maybe if you put in a call into IR later on, then maybe I'll dig something out from our disclosures rather than me throwing out a public number on a call like this. Okay. Thanks a lot. Thanks, guys. Can we have the next question please, operator? The next question comes from Praful Sinha of JPMorgan. Please go ahead. Hi, good morning. I've got a few follow ups, but mainly one on capital. The pension deficit Revale, which looks like it's about $4,000,000,000 benefit to your capital projection over the next few years. How does that impact the stress test performance, Tushar? And will that sort of help your base stress test plan, base capital plan going into the stress test? And also does that feed into the Pillar 2A eventually, if not the PRA buffer? That's the first one. The second one is on how should we think about the payout ratio now that you are at your capital target, 38% obviously on a clean basis sounds quite low compared to your peer group. Should we get should we think about an update on what is the right payout ratio at the interims? Or would you encourage us to wait until the next stress test is out of the way and we should really think about this as an FY 2020 event? Thanks. Yes. Thanks, Rahul. Yes, on the pensions, look, I think that's right. Obviously, our base trajectory has improved just because of the lower deficit reduction contributions, a total of about 4,000,000,000 pounds over the projected period. Under Pillar 2A, it's a little bit more complicated than that. Pillar 2A is essentially trying to capture the level of volatility that you may have in your sort of pension surplus deficit, more an accounting measure of the surplus deficit rather than the actuarial measure, which is the jumping off point for our triennial. We have been derisking that pension plan, taking advantage of, if you like, the lower funding deficit. I definitely don't want to speculate on how the PRA may look at that as a Pillar 2A matter because they'll look at it from multiple, multiple lenses. But on a stand alone basis, if you're derisking the pension plan, that ought to be helpful. But there's many other things that go into that. In terms of payout ratio, it's something that it's something we discussed at the Board quite a lot. And I think we'll talk more about this as the year progresses. I think at the end of the day though, Rahul, dividends are important to us. We would expect them to increase over time. We've talked about progression of increase. Obviously, we have good cover at the moment. And we'll see kind of how much we increase that as the year goes on and we'll supplement that with variable sort of returns, probably buybacks as and when appropriate. We'll talk more about that when the time is right. Thanks for your questions. Can we have the next question please, operator? The next question comes from Ed Firth of KBW. Please go ahead. Good morning, everybody. Can I just bring you back to these debt well, two questions, I guess? The first one is, can I just bring you back to these debt sales in the UK business? Because I'm not sure that I really understand exactly what's driving that and where they come from? And is this a book of debt? Do you have an unrealized gain that you can tell us about? How should we be thinking about this? And in what circumstances? Are they bigger, smaller? Do they come? Do they go? So all those sort of drivers, I guess, would be my first question. And then the second one, yes, could I just invite Jess, just to obviously, the wires are full of the investigation from the PRA, etcetera. Could I just ask you to give your whatever your formal pieces on that as well? Thanks very much. Thanks, Ed. So why don't I cover debt sales? Yes, there's no sort of nothing new here. This is something we I think all banks do as a way of life. Generally speaking, when you have bad debt, there are other businesses that are sort of much more suited to dealing with those bad debts, both as a customer proposition and as an operational matter. So it's just something we do from time to time. Just so it happens, we did it in the Q4 this time around. As a P and L matter, Ed, these are fully charged off. So these are there's no fully impaired, if you like. And to the extent that the recovery value in someone else's hands is different to us because they're operationally geared to do this in a way that we wouldn't be able to do. That's how this thing works. But it's nothing more to it than that. And they happen all throughout the year. There's nothing really magical about them. So it sounds like that in sort of benign environment, you generally would get it's going to be easier to sell nonperforming loans. Is that a fair answer? Yes, yes, yes, I guess so. I mean, the only thing I wanted to stress is 2018 had debt sales, 2017 had debt sales 2016. This is something we've been doing for years. It's nothing new about it. It just happened to be clustered in the Q4. All. And it's normally around the sort of 100, 100 and 50 level. Is that the sort of for a year and you just happen to have it all in the 4th quarter? No, I don't want to give a number out like that. I haven't got that disclosed. But I think what you're looking at is the fees and commissions line being higher in the Q4 compared to previous quarters. A big chunk of that is going to be explained by this, yes. But that's all. I won't say any more than that. Anything you want to say? No, no, no. Ed, yes, happy to. I think it's very well known at my time with JPMorgan beginning in 2000 when I started to run the private bank where he was an existing client. I've had a professional relationship with him in that period. As I left Morgan, the relationship began to taper off quite significantly and the relationship stopped before I joined Barclays. And obviously there's been no contact whatsoever since then. The inquiry by the FDA is very narrowly focused on whether I have been transparent and open with the bank. And I feel very comfortable going back to 2015. I have been transparent and open with the bank. Reading the RNS, the Board has done a review of that issue and they have confirmed that they're also comfortable that I was transparent and open with them with respect to that relationship and now the process will just go on with the FDA. But again, I've had no contact whatsoever with Jefferies while I've been here with Jefferies while I've been here with Barclays. Great. Thanks very much. Thank you, Ed. Why don't we take one more question, and then we'll call it a day. I'm sure we'll get to meet everybody else in there who need to ask a question on the call as we meet you after this. But let's take one more question, please, operator. Our final question today comes from Farhad Kamal of Redburn. Please go ahead. Sorry, I was talking about Barclays UK. You talked about the mix effect on secured and unsecured. But if I look at the structural hedge, the net contribution, it came down by €300,000,000 which is around 15 basis points, which kind of explains the entire reduction in your NIM in Barclays UK. If I look at your if I look at the swap rates right now, 3 months LIBOR was at 75 bps, 5 year, 7 year or like 75 bps as well. So it feels like that's going to 0 at the moment. So that €500,000,000 of net hedge contribution is going to 0 and it's worth about 25 basis points. Am I right in thinking that is just going to mechanically roll off if nothing changes in the yield environment? And can I get an understanding of how that would roll off? Because then it feels like your starting point is a heck of a lot lower than 300 basis points. And then from there, we can think about mix shifts and such like. Is that a fair assumption? And then just to follow-up on the underlying picture, I think you said earlier that there has been some margin improvements in the mortgage market. Do you think that's sustainable? Or do you see competition heating up from here? And then my second question was on payments. You talked about scale of profitability scale of profitability and profits can we expect in the payments business over the next couple of years? Thanks. Yes. Thanks, Fahad. Yes, I think I'm not sure I'm following your logic that much on the NIM sort of the way you're thinking about it. It's probably something we might want to have a chat with you outside this call. But I think if you're saying a jumping off point is 25 basis points lower NIM from where we are today, I think that's way too much of a Just on the hedge income itself, the €500,000,000 on the front book, if you look at the current kind of yield environment, you're I'm assuming your refinance is at 0. So if things don't change, that €500,000,000 will just go to 0. I mean, is that incorrect? Yes. No, I don't think you've got that right, Fahad. Let's we'll give you a call outside of this. But I think you're way off the mark there. The amount of net interest income headwind just from the rate environment staying where it is cycling through. I think you may be overestimating that. So we'll point you to the disclosures to help you sort of get the right one. I think probably some just confusion. And so I'd say on the payment side, it is very profitable for us. So we don't break it out as a segment unto its own. The payments courses through a lot of what the bank does. For sure, our merchant acquiring business is quite profitable. Our merchant to supplier payments business is obviously a very big component of our small business banking and corporate banking. So roughly a third of the GDP of the British economy goes through our payment pipes, both as a bank and also as an acquirer. So they're very profitable and we're investing in payments. And then I've just seen what you see happening in the corporate bank in Europe is also part of that. So payments is a profitable part of the bank. We just don't break out the numbers in a segment basis. Final question you have on mortgages and sustainability. I try not to speculate too much on it. It feels like a good environment at the moment. Application volumes are up. It's usually a sort of approximately 3 month delay from applications into actual lending. So we'll see how much of that sort of transit. But at the moment, it feels like a reasonable environment and margins are are sort of stable. But we'll monitor it closely. So Tushar, can I just ask one question on the hedge? Just sort of back to that point. So in your disclosure on margins, you say the structural hedge contribution went from €800,000,000 in 20.18 to €500,000,000 That €300,000,000 was just a reduction in NII. Am I misunderstanding that? And that would have cost you around 15 basis points of margin. Yes. Let's just give you a call after this. I think you're looking at the gross numbers give you a call outside of this rather than going to turn on this 10 minutes. But we'll give you a buzz and sort it out. Cheers. Okay. Thank you, everybody, for the call. Appreciate your time. And no doubt, we'll see you on the road over the next few weeks. Thank you very much.