Good morning. Thank you for joining us today. So thank you. We have today the Barclays Full Year 2025 Results, our Progress, and our Target Update. Today we will announce outlined targets for the next three years to deliver an even better run, a more strongly performing, and a higher returning Barclays. This builds on the improvements which we have delivered in the last two years of our plan and which we shared with you in February of 2024. But first, let us take stock of the progress so far, starting with our 2025 results. There will be an opportunity for those in the room to ask questions at the very end of our presentation.
So turning now to slide 4. Barclays achieved all financial targets and guidance in 2025. We generated a return on tangible equity of 11.3%. Our top line grew by 9% year on year to GBP 29.1 billion, and we achieved our NII guidance for the group and for Barclays UK. Our cost-income ratio, once again, improved year on year to 61%. The group loan loss rate of 52 basis points was comfortably within the 50-60 basis points through the cycle guidance. We have also announced today GBP 3.7 billion of shareholder distributions for 2025. This is up from GBP 3 billion in 2024. This includes dividends of GBP 1.2 billion and share buybacks of GBP 2.5 billion, and that includes a GBP 1 billion tranche which we announced today. Importantly, we remain well capitalized, ending the year at the top end of our 13%-14% CET1 range after accounting for today's buyback. You know, we are delivering these improvements as we said we would.
In 2025, we simplified the bank further, achieving GBP 700 million of gross efficiency savings versus the GBP 500 million target which we had had for the year. We divested the remaining non-strategic businesses, and we announced a long-term partnership for payment acceptance. Operational improvements across the group are creating a better Barclays, driving stronger financial performance. All our divisions generated double-digit RoTE in 2025, and this was an improvement on the prior year. In the Investment Bank, greater capital productivity and cost efficiency contributed to a 2.1 percentage point increase in RoTE to 10.6%. The U.S. Consumer Bank RoTE increased 1.9 percentage points to 11%. This reflects additional scale and operational progress to improve the business mix, to improve pricing, and improve efficiency.
Finally, we are continuing to rebalance the group towards the three highest-returning U.K. businesses. We have now delivered GBP 20 billion of the GBP 30 billion RWA growth which we targeted for the end of 2026, and this includes GBP 7 billion in 2025. So we see good momentum with six consecutive quarters of organic loan growth in Barclays UK and five such quarters in the U.K. Corporate Bank. Progress in each of these three areas is delivering structurally higher and more consistent group returns. It has also increased my confidence in and my expectations for the group. Stronger and more consistent returns mean that we are better equipped to serve our clients and that we have more capacity to invest in the business. All of this is providing a solid foundation to create more value for our shareholders in the next phase of our plan through to 2028 and beyond. We will return to this later.
Our progress in the last two years reflects the consistently excellent work of our colleagues, over 90,000 of them. They implement our strategy every day and are core to our success. So I'm therefore pleased to announce today a grant of approximately GBP 500 of shares to the vast majority of our colleagues, essentially all full-time employees outside of managing directors. This is the second year of such a reward, and it is more than just a reward for past effort. We are aligning the actions of our colleagues with the ultimate outcome of their efforts, which is the change in our share price. And I believe this equity ownership is really important for all our colleagues.
With that, over to you, Anna.
Thank you, Venkat, and good morning, everyone. Slide 6 summarizes the financial highlights for the fourth quarter and full year. Before going into the detail, I would remind you that a weaker U.S. dollar reduced our reported income, costs, and impairments. Return on tangible equity increased from 10.5% to 11.3% year-on-year, in line with guidance. Pre-provision profit increased by 13% as income growth, coupled with efficiency actions, supported 3% positive jaws. Profit before tax increased 13% to GBP 9.1 billion, and earnings per share by 22% to GBP 0.438. My focus, as ever, is on operational progress, which strengthened throughout the year. Income increased by 9% year-on-year to GBP 29.1 billion. We grew stable income streams by 9%, supported by 8% growth in retail and corporate businesses, and 17% growth in financing within markets.
The strength and predictability of this growth means we are upgrading our expected group income to circa GBP 31 billion in 2026 versus circa GBP 30 billion previously. Elsewhere in the investment bank, intermediation revenues increased by 13% as we helped clients navigate a volatile environment while our IB fees were stable. Group net interest income increased for the fourth consecutive year and by 13% year-on-year to GBP 12.8 billion, reflecting three factors. First, stable deposits across the group supported further significant growth of structural hedge income, which I will discuss shortly. Second, lending grew across all divisions, and we exited the year with strong momentum. And third, operational progress in the U.S. Consumer Bank drove stronger NII and NIM.
Turning to the structural hedge. As a reminder, the hedge is designed to reduce income volatility and manage interest rate risk. We had assumed that we reinvest 90% of maturing hedges, but we fully reinvested assets throughout 2025. We also reinvested hedges at higher rates than planned. As a result, hedge income increased GBP 1.2 billion to GBP 5.9 billion, contributing 46% of group NII, excluding IB and head office. The increase in the average hedge duration that I called out last quarter, from 3 to 3.5 years, further supports the predictability of hedge income, which I will return to later. Now moving on to costs. We delivered GBP 700 million of gross efficiency savings in 2025 and GBP 1.7 billion cumulatively towards the GBP 2 billion target by 2026. These savings have contributed to 10% positive jaws since 2023. The group cost income ratio decreased again to 61%, in line with guidance despite several cost headwinds in the year.
Total cost increased by GBP 1 billion to GBP 17.7 billion, with nearly half of this coming from the addition of Tesco Bank. We chose to accelerate some discretionary investments, ending the year with structural cost actions around the top of the GBP 200 million -GBP 300 million guided range. The 2025 group cost base also included some items that we do not expect to repeat. First, the GBP 235 million motor finance provision in Q3, without which we would have ended the year at 60%. Second, circa GBP 50 million of one-off costs in Q4, including a VAT expense in Barclays UK. Turning now to impairment. The full-year impairment charge of GBP 2.3 billion equated to a loan loss rate of 52 basis points, in line with a through-the-cycle guidance of 50-60 basis points.
The credit picture remains benign, with low and stable consumer delinquencies and wholesale loan loss rates below the through-the-cycle range. The Q4 loan loss rate of 48 basis points fell versus Q3, reflecting lower single-name charges in the investment bank. Calibration of our impairment models to better capture consumer behavior resulted in lower loan losses in Barclays UK throughout 2025, including in Q4. With these now largely complete, you should expect the Barclays UK loan loss rate to be closer to 30 basis points from Q1. The U.S. Consumer Bank loan loss rate was higher in the quarter, as expected, shown on the next slide. 30- and 90-day delinquencies were seasonally higher versus Q3 and broadly stable year-on-year, and U.S. consumer behavior remains resilient, as we show on slide 95 in the appendix. The Q4 impairment charge increased GBP 52 million quarter-on-quarter, reflecting higher balances.
As a reminder, the Q1 loan loss rate tends to remain elevated following holiday-related spend in Q4. Turning now to U.K. lending. We have now deployed GBP 20 billion of business growth RWAs in the U.K., including GBP 13 billion of organic growth, and we exited 2025 with strong momentum. Mortgage balances have grown for six quarters, and we delivered GBP 3.1 billion of net lending in Q4. Mortgage applications in 2025 were higher than in any prior year, supported by Kensington and increased broker engagement following improvements to the platform in Q3. We also acquired 1.4 million new credit card customers in the year, up from 1.1 million in 2024. As we show in our operational data pack on slide 79, this included 300,000 new Tesco Bank customers. Supported by this, credit card balances grew to the highest level since 2017.
Core business banking lending has grown for four consecutive quarters, and we expect overall balances to grow in H2 as headwinds from the runoff portfolio diminish. U.K. Corporate Bank lending grew 18% year-on-year, and market share increased 100 basis points in this period to 9.6%. In each case, we have further to go, supporting our plan to deploy 30 billion of RWAs by 2026 and onwards from there. Turning to Barclays UK in more detail. You can see financial highlights on slide 15, but I will talk to slide 16. RoTE was 23.8% in the quarter and 20.7% for the year. NII of GBP 2 billion increased 11% year-on-year and 3% quarter-on-quarter. On a full-year basis, NII of GBP 7.7 billion was in line with guidance, and we expect an increase to between GBP 8.1 billion and GBP 8.3 billion in 2026.
The hedge is expected to drive around GBP 550 million of additional NII. As I'll cover in more detail later, this is a smaller allocation of the total hedge income growth versus 2025, with more growth now allocated elsewhere in the group. We expect a circa GBP 100 million product margin impact in our mortgage book driven by maturities of higher margin loans written during the stamp duty holiday in early 2021. This will be weighted to half one. We also expect lending growth to continue throughout the year. As a planning matter, we expect this benefit to be offset by continued but easing deposit margin compression. These effects will lower NII quarter-on-quarter in Q1 with stability and growth from Q2 and Q3, and on a year-on-year basis, we expect growth in each quarter of 2026.
Non-NII of GBP 247 million was broadly stable year-on-year, with a full year just above GBP 1 billion. We expect a similar level in 2026 with some seasonal variation. The one-off items I described earlier accounted for around half of the year-on-year increase in operating costs in Q4. These should not repeat in Q1 2026. Moving on to the Barclays UK balance sheet. Deposit balances increased GBP 3.1 billion versus Q3 and were broadly stable versus last year. Customers continue to seek higher-yielding products and time deposits, which both grew quarter-on-quarter. Lending grew for the sixth consecutive quarter and by 4% year-on-year, driven by mortgages and cards. Moving on to the U.K. Corporate Bank. RoTE was 19.1% in the quarter and 18.9% for the year. Q4 income grew by 18%, while costs grew by 8% as we accelerated discretionary investments.
These investments support delivery of a high 40s cost-income ratio in 2026, following a 4% improvement in 2025 to 51%. Q4 NII growth of 22% reflected stronger volumes across both sides of the balance sheet. Lending grew 18% year on year, reflecting improvements in the lending process. Deposits grew by 7%, resulting in a 34% loan-to-deposit ratio, up three percentage points. Turning now to Private Bank and Wealth Management . RoTE was 26.3% for the year, on track for the greater-than-25% target for 2026. Q4 RoTE was impacted by higher costs from an acceleration of investments and a historic litigation charge. This was small in the context of the group, but reduced this division's Q4 RoTE meaningfully to 12.6%. Client assets and liabilities grew 9% year on year, and assets under management grew 11%.
More than half of this AUM growth came from net new assets under management of GBP 3.3 billion, including GBP 0.6 billion in Q4. This contributed to 4% quarter-on-quarter income growth, and we expect continued volume and income growth in 2026. Turning now to the Investment Bank. As a reminder, our objective here is to generate higher structural returns by improving the productivity, mix, and efficiency of the business. Risk-weighted assets have been stable for four years. Income-to-average RWAs has increased by 110 basis points since 2023 to 6.6%. In the top right, more stable income from financing and the International Corporate Bank grew 14% and accounted for 42% of IB income, up from 32% in 2022. Moving to the bottom left, markets income has grown year-on-year for seven consecutive quarters as we deepen client relationships, and investment banking income has grown for five of the past seven quarters.
Together with seventh consecutive quarters of positive operating jaws, this has improved the financial performance of the division. The investment bank delivered a full-year RoTE of 10.6% in 2025, up 210 basis points. Q4 RoTE was seasonally low at 4%, up modestly year-on-year. Income grew 7%, which we show in more detail on slide 25, and costs were flat. In U.S. dollars, markets income was up 17% year-on-year, delivering around two-thirds of the investment bank's income in the quarter. FIC and equities grew 14% and 21% respectively. We saw particular strength in securitised products within FIC and prime and equity derivatives in equities. Financing income grew 20% year-on-year and for the sixth consecutive quarter, with prime balances up 30% year-on-year, including strong growth in Asia. In investment banking, income was broadly stable.
The U.S. government shutdown weighed on ECM activity, with the majority of Q4 IPOs pushed into H1 2026. This was offset by a 7% increase in DCM fees and an 18% increase in advisory fees. The M&A pipeline is strong, and our share of announced fees and volumes due to complete in 2026 has increased year-on-year. International Corporate Bank income was broadly stable, including 5% growth in Transaction Banking income. Turning now to the U.S. Consumer Bank. Operational progress has continued. Net receivables grew 5% quarter-on-quarter and 10% year-on-year, around half of which related to the addition of the General Motors balances at the end of Q3. Our partnership cards business has grown faster than the overall market in 16 of the last 20 quarters.
NIM improved slightly versus Q3 to 11.6%, supported by the repricing that we undertook in 2024 and portfolio mix. Retail deposits grew 5% quarter-on-quarter and 20% year-on-year, which improved the funding mix. We continue to drive greater digital interactions, supporting a 41% cost-income ratio in the quarter. We expect this progress to continue, reflecting sustainable improvements in returns. Q4 RoTE of 15.8% was supported by a one-off benefit, which I'll come to shortly, adjusting for which RoTE was 12.5%, and the full-year RoTE increased 190 basis points to 11%. In U.S. dollars, Q4 income grew by 28% year-on-year, while costs were up 4%. NII increased 19%, reflecting stronger volumes and margins. Following a review of customer behaviour, we have updated our assumptions to reflect more transacting versus revolving balances and longer-duration customer relationships.
This has allowed us to more precisely allocate partner rewards, which has two accounting effects. First, a one-off benefit largely in non-NII of circa GBP 45 million in Q4. Second, an ongoing change in income mix, reducing non-NII by circa GBP 50 million from Q1, offset by a broadly equivalent increase in NII. Q1 NIM will be around 12.5%, with total income of circa GBP 950 million. There are considerable inorganic changes in the business in 2026, so to help with modeling, we have included some details in slide 96 in the appendix. Following the sale of the AA portfolio in Q2, we expect NIM to rise to nearly 14% in half two, supporting a circa 12% ROTE in 2026 before the AA gain on sale. We ended the quarter with a CET1 ratio of 14.3%. This included 33 basis points of capital generation from profits.
Given this strong capital position, we have announced a GBP 1 billion share buyback and a GBP 0.8 billion final dividend equivalent to GBP 0.056 per share. Looking ahead, we continue to expect between GBP 19 billion and GBP 26 billion of regulatory RWA inflation. Within this, the circa GBP 16 billion effect of IRB migration in the U.S. Consumer Bank remains our best estimate. Around GBP 5 billion of that will now happen with the implementation of Basel 3.1 on 1 January 2027, with the remainder anticipated that year. We expect a reduction in the Group Pillar 2A requirement following each of these changes. We have been operating around the top of our 13%-14% CET1 range, with the returns and distributions in the plan announced today based on that level. Post-implementation, we will consider where we operate across the range.
More broadly, in the U.K., we welcome the constructive tone in the recent FPC review of capital requirements and will continue to engage closely with the Bank of England. Turning now to the RWA walk. Investment bank RWAs decreased due to seasonality and accounted for 55% of group RWAs at the end of the year. The reduction in Barclays UK reflected a securitization in Q4 to manage risk on the balance sheet. As usual, a word on our overall liquidity and funding. We have a strong and diverse funding base, including a 73% LDR and an NSFR of 135%, and we are highly liquid across currencies with an LCR of 170%. These measures reflect purposeful and prudent management of our balance sheet, delivering resilience and thus ensuring we have the capacity to support customers in a range of economic environments.
TNAV per share increased GBP 0.17 in the quarter and GBP 0.52 year on year to GBP 4.09 , attributable profit added GBP 0.09 and GBP 0.43 per share, respectively. Movements in the cash flow hedge reserve added GBP 0.05 per share in the quarter, and we expect this to largely unwind by the end of 2026, adding around GBP 0.09 to TNAV. To summarize, we are pleased with the group's performance in the second year of our three-year plan, having achieved all our targets and guidance. We now expect group income of GBP 31 billion in 2026, GBP 1 billion more than originally expected. And continued operational progress means we are more confident in delivering target RoTE greater than 12% in 2026. Venkat will now outline the next three years of the plan before I take you through the 28 financial targets in more detail.
Venkat, over to you. Great.
Thank you again, Anna, and welcome back. Barclays is now on a journey to sustainably higher financial returns. I think of this journey as taking place in four stages. First, from 2021 to 2023, we stabilized the bank's financial profile, exercising capital discipline in the investment bank while starting to build out our areas of strength. Second, since the launch of our Simpler, Better, More Balanced strategy in February 2024, we've positioned the bank for income growth and for higher returns. We have simplified our processes to drive efficiency, and we exited non-strategic businesses. We've invested in digital capabilities to create a better customer experience, and we've grown our highest-returning U.K. businesses to create a more balanced Barclays with more stable returns. Today, we set out the third stage of this plan on the way to the fourth.
In this third stage, we will build on the foundations we have created so far to increase returns for the bank and to make them resilient across a range of environments. Year by year, we are improving the profit signature of the bank. Stronger financial results create the capacity to invest to secure sustainably higher returns. This is the fourth stage, and it extends beyond 2028. Two years ago, we presented a vision anchored in measured ambition and disciplined delivery. I said then that we were building a potent set of businesses which were strong in themselves and mutually reinforcing. Our vision was harnessed to our home U.K. market, where we aimed to deepen our presence even as we engaged with the world from London. Our vision today is one of accelerating ambition, still anchored in disciplined delivery.
We will forge segment-leading, operationally efficient businesses that are primed to support growth, and we will drive structurally deeper client relationships by connecting these businesses. We have more capacity to invest. We build upon a strong track record of delivery. Our drive is greater, and our commitment is unwavering. We will increase investments twofold to drive deep technological transformation and modernization of the bank. This includes embedding AI at scale across the group to deliver better products and services. And importantly, we will pursue our ambition while generating higher returns in each of the next three years. In 2028, we are targeting a return on tangible equity of greater than 14%, up from greater than 12% for 2026. Stronger capital generation will enable greater than GBP 15 billion of distributions across the period of 2026 to 2028.
This provides capacity for additional investment and growth beyond the level set out in the plan today. As we have done, we will exert considerable discipline over any investment, given the importance which we place on shareholder distributions. In 2026, we expect the Investment Bank to represent a mid-50s of group RWAs. This is above the initial target, and it reflects the postponement of previously anticipated regulatory changes. We expect this proportion to fall to about 50% by 2028, as we continue to maintain broadly stable RWAs in the Investment Bank and deploy more capital in our consumer and corporate businesses. We will continue to be guided by three goals, and these are to make Barclays simpler, to run it in a better way, and to make it more balanced. Our journey began by creating a simpler business structure, organized and operating in a simpler way.
It continued with the simplification of our processes and customer journeys to improve the quality of our service and to drive efficiency. In the next three years, we will be deploying digital capabilities and AI to further this progress. To harness these technologies successfully, we must standardize our data, we must modernize our approaches, and we must harmonize systems and processes. Delivering in this manner will not only enable greater productivity, it will improve our operational resilience, our reliability, and security. And importantly, and I'll come back to this, it will create a fulfilling working environment for our colleagues. For some time now, technology has revolved around our businesses. Now, our businesses are revolving around technology. Customer interactions in the U.S. Consumer Bank are almost entirely digital today. Elsewhere in the group, we've made significant progress to build easy-to-use customer-facing platforms, and we'll continue on that journey.
By 2028, we will deliver a simpler but more sophisticated suite of products and AI-enabled services. So how are we doing this? Our transformation is built on three pillars: cloud computing, data platforms, and AI adoption. To date, we've made the most progress in employing cloud computing built on scalable and robust infrastructure. We are one of the leading adopters in the sector, with 89% of applications on the cloud versus 75% two years ago. And this platform provides greater stability and faster product deployment. We're also migrating core data onto a standardized platform. This helps us to provide personalized services for our customers and to implement models more rapidly. And by building on these modular foundations, we can accelerate the development, testing, and deployment of code and models. So with cloud infrastructure and data platforms in place, we are now able to deploy AI at scale.
Across the group, we have more than 250 AI tools and models in use. By 2028, we expect more than half of our customer journeys in the U.S. Consumer Bank to be digitally personalized. Technology is creating a more stimulating working environment for our colleagues who are at the heart of these developments. Let me share some examples. In the past two years, we've held a number of AI hackathons where employees prototype quick solutions to existing business problems. Every time I visit a hackathon, including one just two weeks ago, I'm overwhelmed by the seemingly limitless ambition and inventiveness of our colleagues. Their winning ideas translate into actual projects and actual products. This includes an AI chatbot that we recently launched for FX trading. We call it BARXBot. This tool delivers FX quotes 75% faster than the previous approach.
It is driving better execution for our traders and swifter service for our clients. In the U.S. Consumer Bank, we are launching a conversational AI tool in our app. This accelerates customer query responses by 95% and enables more personalized service. We've also built the infrastructure and provided colleagues with tools to drive greater efficiency and productivity. In doing so, we enable them to perform in the economy of the future. The rollout of GitLab to 19,000 developers means we are now able to implement code 15% faster. And we are one of the largest users of Microsoft Copilot in the financial services industry, with around 90% of our colleagues on the system. In 2025 alone, this saved our teams more than 1 million hours of work. So far, I've spoken about improvements in the way we engage with clients and how they engage with us.
I want Barclays to be renowned for operational performance, excellent operational performance. To me, operational performance and financial success are two sides of the same coin. With three quarters of our colleagues engaged in operating the bank, simpler operations can improve efficiency materially. Let me just highlight two examples to bring this to life. In finance, Anna's area, we are simplifying our accounting platforms, moving from 11 to three subledgers within the trading book. This will lead to fewer manual reconciliations, faster reporting, and more efficient data analysis. On the risk side, close to my own heart, our wholesale credit risk systems remain overly manual. We are rebuilding the architecture and using AI to aggregate and analyze data and generate reports. This supports fast and accurate credit decisions.
To summarize, the simpler Barclays is both well organized and well run for colleagues and customers alike. At the beating heart of this is a standardized infrastructure supporting harmonized processes and enabling modern approaches to product development and delivery. It's powered and curated by our talented and inventive colleagues. Moving to better. Having a simpler business means we can focus on delivering better service for our customers. This results in improved returns for our shareholders. In this next stage, we are building a better bank by forging segment-leading businesses and deepening client relationships. Just one second.
To me, segment leadership is built on two pillars: best-in-class offerings and deep client relationships. We begin from a strong position. We are the largest non-U.S. investment bank with deep expertise in fixed income and financing markets. We are a leading U.K. retail bank with an established and growing Private Bank and Wealth Management business. Our U.S. Consumer Bank is a highly sought-after partner for customers and corporate clients alike. The second pillar of segment leadership is combining the strengths of our products in each business and our capabilities across businesses. In doing so, we create deeper client relationships. There is significant potential to increase connections between Barclays UK and the Private Bank and Wealth Management through our premier proposition.
The acquisition of Best Egg in the U.S. allows us to bring market-leading digital lending capabilities to our credit card partners. As the only U.K. investment bank, we bring a unique global reach and sophisticated capabilities to our U.K. corporate clients. By investing to strengthen these connections, we make each business individually stronger. By forging connections across the group, we will unlock new sources of fee growth beyond 2028. Let me share how I think about this. I'll start with the investment bank.
As I said, Barclays is the leading non-U.S. investment bank. We are U.K. domiciled, but we actually look more American than European, with 50%-60% of our revenues coming in the U.S. The investment bank has built a diverse and stable income mix. Two years ago, when I stood in front of you, I said that improving the investment bank was the hardest part of our plan. So what have we done, and how have we done it? At that time, we had asked our business to do four things. First, to leverage further the traditional areas of strength. For a long time, fixed income has been the calling card of Barclays. This is true in trading, financing, Debt Capital Markets .
In markets, we identified three focus businesses where we plan to grow income by gaining share: European rates, equity derivatives, and securitized products. We've made good progress, gaining share by about 150 basis points between 2023 and the first half of 2025. We have also leveraged our historical strength in fixed income financing to grow in prime. My second ask was to drive greater capital productivity. The business has consistently increased return on RWAs. Now we will build on those successes. The third request was to increase fee share. The bankers who we hired in 2023 and 2024 have become more productive. Early results are good, but there is more to do. And so we will continue to invest and realize the full benefits of this investment over time. The final ask was to deepen relationships in the International Corporate Bank .
Here, we've made strong progress rolling out what we call our Treasury Coverage Model beyond the 1,500 top clients of the bank. In the next three years, we will leverage strong Transaction Banking capabilities from the U.K. Corporate Bank and build on existing debt capital market strengths. We will be providing a more complete service to global corporates. In doing so, we expect the International Corporate Bank to become a larger part of the investment bank by 2028. This will remain an important source of fee growth beyond 2028. I will discuss this later. Turning to Barclays UK., Barclays aims to be the Premier bank for all U.K. customers. We have a strong customer base, including around 1.1 million what we call mass affluent customers in Barclays UK. Our Premier proposition provides exclusive rewards and priority service for this cohort.
But only 50% of eligible customers have a Premier account. This provides a material opportunity to increase engagement. Investment to improve our service has raised NPS scores among Premier customers. We plan to enhance our offering further by expanding the product range and rewards. We can also support this segment's investment needs more fully. We will achieve this by strengthening connections between Barclays UK and Private Bank and Wealth Management . Within Barclays UK., we have identified 400,000 customers who could benefit from financial advice. In 2025 alone, we onboarded 65,000 customers to Barclays Direct Investing, which is the new name for our digital self-investment platform. In 2026, we will launch Premier Wealth Management to provide planning and advice to Premier customers. This will be human-led but digitally enabled, fairly priced, transparently constructed, and clearly disclosed.
Turning now to the U.S. Consumer Bank, our leading digital U.S. Consumer Bank is delivering strong growth and customer engagement. Our focused partnership business was among the top four fastest-growing credit card businesses in 16 of the last 20 quarters. Since 2023, we have achieved a 12% organic growth in receivables. By driving growth and customer engagement in this way, we are retaining existing card partners and attracting new ones. Last year, we renewed partnerships with Upromise, Carnival, and Wyndham Hotels. We successfully integrated General Motors. Operational progress in the U.S. Consumer Bank is also driving higher returns for Barclays. We will continue to use our digital deposit capabilities. In fact, the launch of a tiered savings product in 2024 has enabled 34% retail deposit growth, with the cost of this funding being about 50 basis points below the funding it replaced.
In doing so, we support the broader banking needs of our card customers. The acquisition of Best Egg in the second quarter of 2026 will further expand the breadth of our digital capabilities. Around 90% of Best Egg's consumer loan originations come through digital channels, including online aggregators. Best Egg's strong capabilities enable flexible product design to suit a range of customer needs. We will leverage these capabilities to accelerate growth, including through closer integration with our card partners. So as you can see, the U.S. Consumer Bank is more than just a cards business. I strongly believe that happy and satisfied customers are the sine qua non of any enterprise. We aim to improve customer service by investing in it deeply, making it a point of ambition and pride. As I said earlier, operational excellence and financial success are two sides of the same coin.
I see them as the same. In Barclays UK last year, we launched a new platform to improve materially the speed of more applications for more than 26,000 mortgage brokers. Digital adoption in the U.S. Consumer Bank is already higher than in any of our divisions. And as I said, we are deploying AI tools to improve personalization further and ease of use. We are also making it easier for customers to come to Barclays, including in the Private Bank and Wealth Management division. Our digital platforms are a critical part of providing a superb experience to deepen customer engagement. This year, we will relaunch the Barclays App to deliver more personalized support through digital channels. Even as we emphasize digital engagement, we recognize that customers sometimes value the quality and depth of engaging with us in person, especially with complex issues and in important life moments.
So we will look to enhance and expand our branch footprint. This will enable us to tailor our services to meet the changing preferences of our customers. And in the U.S. Consumer Bank, we are leveraging our capabilities across cards, deposits, and loans to drive even greater customer engagement. The secret sauce in our investment bank is in our synergies, which we use to deepen client relationships. We are big enough to offer multiple sophisticated products to our clients. And we have the nimbleness and the cultural drive to customize delivery and create tailored solutions. We now rank top five with 62 of our top 100 markets clients. This is up from 30 in 2021, 49 in 2023. And we are on track of our target of 70 in 2026. Our leading fixed income and prime equity financing products are integrated on a single platform.
Operating in this way provides a single view of risk both for the client and for Barclays. Of our top 100 markets clients, 97 are also financing clients. By continuing to leverage our integrated financing platform, we do two things. First, we build a stronger foundation of stable income, which supports returns in a range of environments. And second, we deepen relationships and drive greater engagement across the Investment Bank, including in intermediation. Over the next three years, we will bring together our investment banking and Transaction Banking strengths to accelerate growth in the International Corporate Bank . We are the top sterling clearing bank. We have a comprehensive suite of products and differentiated payment strength. By replicating some of these capabilities in the U.S., we have already driven a circa 140% growth in dollar deposits since 2023.
We plan to leverage this strength in other products through simple but complete digital channels. In Europe, we will also extend the reach of our existing product suite from nine to 15 countries to provide a more complete client coverage. We are also creating a better client experience to support this growth. By the end of the first quarter of this year, all U.K. corporate clients will be enabled on an enhanced platform that we call iPortal. This combines five previously separate platforms for Corporate Banking into one. And in doing so, we make it easier for clients to access a broader range of products. Across the banking system, technology is not just affecting how we do business. It's also affecting what business we do. Nowhere is this likely to be greater than in new asset types and new payment methods.
We are deeply engaged in understanding the role that digital assets will play in meeting the future needs of our clients. We are developing our own tokenized deposits to increase the speed and simplicity of transactions. We are testing retail and wholesale use cases, including for corporate bond issuance and investment. We have been structurally improving the profit signature of Barclays. We are doing it in two ways. First, by changing the mix of the group by growing our highest-returning U.K. businesses. I'm pleased with our progress, having grown these businesses from 30% of group RWAs to 34% in the last two years. We also now expect higher returns in Barclays UK. We will continue this progress, increasing lending by more than 5% annually while generating an RoTE greater than 20% across the three U.K. businesses. Second, we said we would strengthen returns in the lower-returning divisions.
The U.S. Consumer Bank RoTE has increased from 4% in 2023 to 11% in 2025 in all the ways I described to you. We expect this to build to mid-teens while absorbing regulatory RWA headwinds. When I stood in front of you two years ago, I said we would increase returns in the investment bank by improving productivity on a stable RWA base. I'm very pleased with the progress to date. IB RoTE is up from 7% to 11% in two years. But we have more work to do. With greater visibility one year out, to the end of 2026, we expect the investment bank to generate circa 12% RoTE this year. By 2028, we expect this to rise to more than 13%. Let me be very clear. We remain ambitious for this business and for the return it should be generating.
Importantly, this should be done on a sustainable basis. More broadly, the ongoing change in the mix of RWAs across the group means that we are relying less on the IB to drive improvements in group RoTE. This is exactly as it should be. In summary, the better Barclays will continue to show higher returns. It will also be built on segment-leading businesses which offer the best-in-client service and experience. Our third goal is to create a more balanced Barclays. We will continue to maintain capital discipline in the investment bank while growing parts of the retail and corporate businesses. But being more balanced also means growing new sources of fee income beyond 2028. Two years ago, I said that every global bank had to be strong at home. We've been a U.K.-centered bank for more than three centuries.
It remains a great place in which to do business and from which to do business. The economy is resilient. The legal and regulatory environment is both strong and trusted. We remain committed to investing and growing in this, our home market. Our investment will focus on diversifying sources of NII beyond deposit income. We will increase U.K. lending in two main ways. First, we will leverage strong multi-brand offerings to reach new customers. For instance, the acquisition of Kensington in 2023 enabled us to provide mortgages to more complex borrowers. And the acquisition of Tesco Bank added significant scale in unsecured and open market capabilities in personal loans. Second, investment into the business is supporting growth by simplifying and improving customer journeys, as I discussed earlier.
We are encouraged by progress in the U.K. Corporate Bank and expect momentum in core business banking lending to build in 2026. Importantly, we expect to grow U.K. lending by more than 5% annually in the next three years, above the growth in nominal GDP. We will do this by continuing to grow in segments where we were underrepresented and by leveraging our expanded product range and capabilities. We will invest to support growth. In the next three years, we plan to more than double investment to support growth and efficiency compared to the previous three years. We will accelerate the adoption of digital technologies and AI across the group. Investments in the next three years will be substantially more weighted towards new sources of fee income growth beyond 2028. Through these investments, we will continue to develop best-in-class offerings, which is the first pillar of segment leadership.
As I've said, we will also build connections across our business. This is the second pillar of segment leadership. In the U.K., new capabilities will support customers across the wealth continuum. We will leverage U.K. Transaction Banking strength in the International Corporate Bank . Best Egg will enable us to originate assets directly for investors in our leading U.S. asset-backed securities business in the investment bank. As we move beyond 2028, we expect more of our growth to come from fee income versus net interest income. By building more diverse sources of revenue this way, we support more resilient returns. We position ourselves better to navigate a range of environments. Changes in the operating environment globally present both risk and opportunities for large global banks like Barclays. We look to manage this in three ways.
First, by building strong customer businesses diversified by geography, customer, product, and income type. Second, by deepening client relationships across products and, where appropriate, across business segments. And third, through diligent management of economic, financial, operational, and technological risks. AI, for example, is a transformative opportunity which contains risks that need to be managed. And so to harness the technology successfully, we are standardizing our data, modernizing our infrastructure, and harmonizing our business processes. By approaching risk and opportunities in this way, we aim to deliver consistently for our customers with strong operational performance. And this, in turn, will generate resilient financial performance in a range of environments for our shareholders. So to bring this all together, progress in the past two years provides a solid foundation for the next phase of our journey. And we are confident in the path to 2028. We're moving from a period of measured ambition to one of accelerating ambition.
Now I'm going to pass it over to Anna to take you through the financial details of the plan. Anna?
Our confidence in the plan that Venkat has outlined reflects three factors. First, we plan on realistic assumptions that put delivery in our control. Second, the plan includes a significant increase in discretionary investment to support our future growth. And in doing so, we are intentionally prioritizing sustainably higher, longer-term returns over stronger, shorter-term RoTE. And third, that delivery is grounded in existing momentum. For example, target income CAGR of more than 5% compares to 7% delivered since 2023, as you can see on the top row. Planned UK lending of more than 5% is in line with the momentum we've seen in 2025. And we expect investment banking income to RWAs to increase by more than 40 basis points to greater than 7%, having increased 110 basis points in the last two years.
Our planning assumption is for a low single-digit IB income CAGR 2025-2028 versus 9% achieved so far. I'll come back to this in more detail. The low 50s target cost-income ratio in 2028 represents more of a step change. We are confident in delivering this, underpinned by circa GBP 2 billion of gross cost efficiency savings over the next three years. This compares to GBP 1.7 billion achieved in the last two. I will also come back to this topic in more detail later. Stable income streams in the retail and corporate businesses will materially drive income growth in RoTE in the next three years. We expect modest cost growth supported by planned efficiency savings and normalization of the elevated cost base in 2025. This combination will deliver positive jaws in every year of the plan, yielding a low 50s group cost-income ratio by 2028.
So what drives income from here? As I said, in the past two years, the group has delivered a 7% income CAGR. This mainly reflected management actions. But the environment has also been favorable, reflected in upgraded 2026 income guidance of circa GBP 31 billion. As a planning matter to 2028, we do not assume similar tailwinds in rates or in investment banking wallet growth. So we expect income CAGR to moderate to more than 5% in the next three years. Most growth comes from group NII, excluding the IB in head office, which has grown 8% annually since 2023. This reflects the U.K. lending CAGR target of greater than 5% and the stability of our deposit franchises, which underpins the structural hedge. But it also reflects progress outside of the U.K. in USCB, where balanced growth and NIM expansion supported 11% year-on-year NII growth in 2025.
In 2026, we expect group NII to increase to at least GBP 13.5 billion, up from GBP 12.8 billion in 2025, and for Barclays UK NII to increase to between GBP 8.1 billion and GBP 8.3 billion. Relative to our previous plan, the investment bank contributes relatively less against a flat wallet assumption. Over time, we do expect the mix of our income growth to pivot more towards asset-based NII and fees versus deposit income. That's why we remain very focused on diversifying sources of NII beyond deposit income by continuing to grow lending. But for the next three years, the structural hedge alone will deliver 50% of planned income growth. We have already locked in GBP 6.4 billion of gross structural hedge income in 2026 and GBP 17 billion over the next three years.
We plan to fully reinvest maturing hedges as we did throughout 2025 and to assume a reinvestment rate of around 3.5%. This is below the current seven-year swap rate of 3.9%, which has become the most relevant proxy given the hedge duration. The average yield of maturing hedges remains below this level in 2026, 2027, and 2028 at circa 1.5%, 2.1%, and 2.7%, respectively. This will result in continued structural hedge income growth, including circa GBP 1 billion in 2026. The increase in the average hedge duration to 3.5 years during 2025 will reduce the quantum of maturing hedges to circa GBP 35 billion per year from around GBP 50 billion in recent years. This slows the pace of structural hedge income growth, but therefore prolongs the expected positive effect until at least 2029.
Also note, the higher proportion of equity hedge and longer duration of product hedges outside of UK means it will attract circa 55% of growth in 2026 versus 75% in 2025. This change in mix is equivalent to circa GBP 200 million less income in Barclays UK in 2026, which instead will occur in other businesses, including the investment bank. Two years ago, we set out a plan to increase the investment bank returns by improving RWA productivity and modestly growing costs. Since then, income to average RWAs has increased by 110 basis points to 6.6%, driven by 9% income CAGR against flat RWAs. In Global Markets , we increased RWA productivity by 60 basis points and grew RWAs to take advantage of the environment. And in investment banking, we increased productivity by 150 basis points and released RWAs.
Further capital productivity remains central to the Investment Bank's journey to higher returns, with a target of greater than 7% RWA productivity by 2028 having absorbed the impact of Basel 3.1. In part, this will come from a continued review of the loan book, which is around 60% complete. Of the GBP 2.1 billion increase in income since 2023, 2/3 came from Global Markets where we have built capacity. Financing income grew by GBP 0.6 billion in a strong industry wallet, and we achieved the 2026 target one year early. This is particularly important given our focus on stable sources of revenue within the Investment Bank. In our three focus businesses and markets, we grew share by 150 basis points between 2023 and halfway into 2025, and income grew by GBP 0.4 billion. In investment banking, we have meaningfully improved RWA productivity, which was our main objective.
Progress towards our secondary objective to add scale through fee share has been slower, although banking fees grew in a market 30% larger than we had planned. Our objective now is to consolidate these gains. We will further deepen our relationships with our top 100 clients and markets and our three focus businesses and financing. We will continue to build banker productivity, including an ECM and M&A, which are capital light. In financial terms, given a flat wallet assumption, our plan does not therefore include material benefits from wallet growth to 2028. We expect proportionately more growth from the ICB as we leverage the Treasury Coverage Model and the Transaction Banking investments outlined by Venkat. This builds on the circa 140% growth in deposits achieved in two years.
As a result, we expect the International Corporate Bank to be a larger part of the IB, leading to more stable income overall. Moving on to costs on slide 66. We delivered positive cost jaws in each of the past three years and expect positive jaws in each of the next three years. This is a result of the income growth we've just discussed and modest cost growth to 2028. So what underpins this cost pathway? First, we don't expect around GBP 0.3 billion of one-off costs in 2025 to repeat, being motor finance and around GBP 50 million of unrelated one-offs in Q4. Second, we expect circa GBP 2 billion of gross efficiency savings by 2028 split roughly evenly across the years. This includes around GBP 0.2 billion of reduced Tesco Bank costs. We will deliver this by modernizing processes and platforms to increase efficiency, as Venkat outlined.
These savings will more than offset the effects of inflation and business growth over the next three years. We expect annual investment costs to increase by around GBP 0.8 billion by 2028, including circa GBP 0.6 billion from the acquisition of Best Egg in Q2 2026. This will result in modest overall cost growth and a high 50s cost-income ratio in 2026, with broadly stable costs thereafter to 2028, supporting a low 50s cost-income ratio. The Barclays UK cost profile is an important part of this overall shape. So let me briefly cover the dynamics here. Barclays UK has been on a transformational journey for several years, reducing the cost-income ratio from high 60s in 2021. Dual running of Tesco Bank added circa GBP 400 million to costs in 2025, including GBP 100 million integration costs. Other costs increased by circa GBP 200 million net of efficiency savings.
This was due to increased investment as well as the GBP 50 million one-off items I mentioned earlier. In 2026, we expect a modest reduction in costs versus 2025 and a low 50s cost-income ratio as we continue to integrate Tesco Bank and invest in the business. By 2028, we expect larger growth and net efficiency savings in line with the group and for Tesco Bank costs to fall by circa GBP 200 million. As a result, we expect Barclays UK costs to fall in each of the next three years, contributing to a mid-40s cost-income ratio in 2028. Our investments to date, organic and inorganic, are delivering revenue growth across the group. Investment in the financing platform from 2023 to 2025 has, for example, supported 60% growth in prime balances. Our investment in the mortgage broker platform has supported more than GBP 14 billion of mortgage applications since its launch.
We have also realized GBP 100 million of funding synergies on Tesco and significant margin benefits through Kensington, as both acquisitions support UK lending growth. We plan to double annual organic investment by 2027, focused on technology change and fee growth. In addition, we expect operational costs of Best Egg of circa GBP 0.3 billion in 2026 and GBP 0.4 billion in 2028. This highlights the increased intensity of investment at this stage to support stronger fee growth and returns beyond 2028. Cost discipline remains a key focus of our plan and is the lever that we have most control of. During 2026, we expect a high 50s group cost-income ratio improving again from 61% in 2025. This reflects strong progress in the UK businesses in particular. Looking ahead, we expect further improvements to deliver a low 50s% group cost-income ratio by 2028.
Turning now to impairment. The group has operated around the through-the-cycle target loan loss range of 50-60 basis points for the past decade, and this guidance remains appropriate. It reflects two offsetting factors. First, in Barclays UK, lower arrears and high credit card repayment rates have contributed to a loan loss rate consistently below the through-the-cycle expectations. Strong mortgage affordability criteria and credit card quality support structurally lower impairment in the UK market. As a result, we now expect a lower through-the-cycle loan loss rate in Barclays UK of circa 30 basis points versus 35 basis points previously. Second, we expect a circa 500 basis points through-the-cycle loan loss rate in USCB. This is up from circa 400 basis points previously due to the changing portfolio mix.
It will be higher in 2026 at circa 550 basis points, reflecting post-acquisition stage migration of the General Motors portfolio and retention of some non-performing American Airlines balances. Both effects will diminish in 2027 and will be more than offset by higher NIM. During the past two years, we have structurally improved Barclays profit signature. The investment bank and USCB now deliver double-digit returns, and we plan to drive these higher whilst continuing to allocate additional capital to our highest-returning UK businesses. By 2028, we expect capital generation to exceed 230 basis points, an improvement of more than 30% over the next three years. We continue to exercise disciplined capital allocation, first by holding a prudent level of regulatory capital. As you have seen, we've been operating around the top of the 13%-14% target range ahead of the expected regulatory developments that I discussed earlier.
Second, we will distribute greater than GBP 15 billion to shareholders by 2028, subject to regulatory and board approval. Third, we will maintain capacity for selective investments to support structurally higher returns beyond 2028. Given the strength of capital generation, this capacity does exceed the level of investment set out in the plan today. As we have done, we will exert considerable discipline over any investment, given the importance we place on shareholder distributions. We expect a progressive increase in our total payout in 2026. We are also evolving the mix of distribution to reflect the growing consistency of capital generation and to recognize feedback from shareholders. In addition to the move to quarterly buybacks announced in Q3, we plan to increase the dividend to GBP 2 billion in 2026 from GBP 1.2 billion in recent years.
While we continue to prefer share buybacks, we will review the mix of distributions periodically to reflect the level of our returns and the preferences of our shareholders. Bringing this together on the next slide. Operational progress during the past two years means we are confident in achieving our 2026 targets and guidance. But momentum across the group also underpins our confidence in delivering the 2028 targets outlined today. We are focused as ever on driving greater efficiency and operating leverage, protecting returns in a range of environments. And we will drive structurally higher and more sustainable returns beyond 2028 by investing to support more diverse sources of income and fee growth.
Over to Venkat for final remarks.
All right. Thank you, Anna. So two years on since our Investor Update in February 2024, as we've discussed, we remain on track to deliver our goals. We are moving from a period of measured ambition to one of accelerating ambition. We aim for sustainably stronger returns, greater shareholder distributions, and operational excellence. The targets which we have shared today are underpinned by structural improvements to the profit signature of the bank, which we have made in the last two years, and our drive to become a simpler, better, and more balanced bank. We plan to continue this progress in the coming three years. Of course, our journey does not end in 2028. Our ultimate aim is to secure structurally higher and more resilient returns beyond 2028.
Now I'll pause for 15 minutes for a break before Anna and I open for Q&A. What shall I say, 10:40 U.K.?
Yeah.
Please be back in the room. There's refreshments outside, restrooms outside, and we'll be back. Thank you.
Right. Thank you. Welcome back. So we'll go to questions in the room. Please limit yourself to two per person so that we can get around as much as possible. And also, please introduce yourself as you ask your questions. The mics on your table work, and you don't have to do anything. They will just work. So I'll begin with the person who raised his hand first and who taught me a lot of what I know about analyzing banks. Kian?
You're too kind.
Just for that, he gets preference.
You're too kind, Venkat. Two questions. The first question is on the capital return of over GBP 15 billion. If you could just put this in context of capacity to support investment and growth, how should we think about this capacity that you're outlining? It looks like there's quite a bit of buffer. So we would like to understand that. And then secondly, you're one of the few CEOs who actually discusses ledgers and middle office integration, which is not a hot topic. It's a hot topic, but a lot of CEOs talk about it.
I began as a programmer, so that probably helps explain it.
That's probably why. Yes. Probably because you came from the same organization that I'm from, which is a big focus. But trying to understand a little bit the investment phase, which has stepped up in 2026 significantly. And you're going from $1.1 billion-$2.3 billion of investments. Just what the focus is and how should we think about post-2028, basically, in that respect.
All right. Anna, do you want to start on the capital, and then we can come back to the other one?
Yeah, sure. Thanks, Kian. So one of the hallmarks of this plan is the level of capital generation. We've talked about that. And really, when we talk about an improving profit signature, that's really what we mean. It's this chart here that they've just brought up showing that sort of change to 230 basis points. And in the plan, what we've done is we've meaningfully increased the distribution to greater than 15, but we've also meaningfully, in fact, doubled the level of investment. But such is the level of capital generation within the plan, the level of generation actually surpasses both of those two increases. So what we've done here is we've deliberately created some capacity for us to be able to invest further if and only if we determine that is the right thing for us to do.
I'll just remind you of our very clear capital hierarchy here, specifically the importance of shareholder returns. So we're going to set a very, very high bar for any additional level of investment. Quite frankly, if we are unable to find such an investment, then the capital hierarchy will kick in, and we will distribute more than we have here in the plan. Or alternatively, we will be investing more than we have here in the plan, and we would expect the momentum of the business in the outer years to be higher than we're presenting here. We have no inclination, no objective here to hold on to higher than required levels of capital. But what we're trying to do is create some capacity to underpin some of the meaningful opportunities for growth that we have whilst meaningfully stepping up that level of distribution. Venkat?
Yeah. And I would say, I think if you look at our track record of investment, Anna spoke about the investment which we had made in our prime and financing business and both the quantum of investment and the payback. You saw the quantum of investment in even the mortgage broker application and the payback. We look to make investments where you would get the revenue realization fairly quickly. And you see that even of Kensington Mortgages and Tesco and, God willing, Best Egg. So we're looking to do that. And we need to keep that capacity for that reason because opportunities will be there and needs will be there. I would say, Kian, on the second question about subledgers and the sort of the guts of the organization, it comes from both a philosophical place and from the actual reality of the business.
The philosophical place is, as I said, for a long time in this industry, the businesses, technology has revolved around the businesses. Now, as you see, not just in U.S., but across the industry, the depth and extent of technology-based services, products, and delivery, the businesses are revolving around technology. What that means, especially if you're going to take advantage of the promise of new technologies like AI and cloud computing, is that you've really got to, as I use the word, harmonize your processes and standardize your approaches. Especially when it comes to data platforms and to the way in which you construct and store your data, the way in which you do computing, the way in which you build models, and the way in which you deliver. If these things are not standard, you add huge complexity. So we've got to unravel that complexity.
In large, complex G-SIBs, that's a big task. That's what we're trying to do. All right. Alvaro.
Kind of one of them is actually sorry, Alvaro Serrano from Morgan Stanley. One of them is kind of a follow-up to the second question, maybe for you, Venkat. In one of the slides, you pointed out that 75% of the employees are in support functions. I think, yes, support functions. And obviously, one of the least, for me, the surprise of the plan is the cost element, as you were referring to. During the plan, how is that number going to come down during the plan in 2028? And beyond that, how low do you think it can go? Because it's obviously one of the core pillars.
And second, maybe a more financial one on, again, maintaining the RWAs flat in the investment bank. And one of the things coming out is ongoing RWA efficiencies. Is there anything maybe this one's for Anna, but is there anything you can point us to that is pretty mechanical around the way the business is done in investment banking, maybe less legacy LBO business, more sort of private credit capital-like businesses that we can gain conviction that mechanically the RWAs are going to be flat? I don't know, pointing out to a proportion of contribution today versus three years out, something that will give us confidence that we can keep it flat. Thank you.
Thanks. We're going to tag team on both these questions, Alvaro. So first of all, on the cost, just a definitional point. When we call support functions, there's a bit of a legal entity aspect of Barclays. This is what we call Barclays Execution Services. And this includes technology and operations, but it also includes compliance, risk, finance, HR, and legal. And so it includes basically the non-revenue-generating parts or direct revenue-generating parts of the business. So that's the first thing. The second thing, as I've said, and I'll have Anna chime in, we don't have an explicit target in terms of number of employees. What I've said is there will be productivity benefits from all these investments. We hope to harness this productivity benefit in improving the quality and delivery of services, whether that is to clients or whether that's internally.
There will be obviously a gross efficiency cost savings that we've outlined and investment in the group. But we are not outlining a particular people target. I think we are approaching this from something that creates enable efficiency in order to provide enablement. Then we'll see where we go.
Yeah, sure. If I can just add to that, our real focus from here on in is really on that technology efficiency. So the majority of cost out, if you like, the efficiency is going to be driven by change delivery, by platform modernization, and the kinds of things that Venkat was talking about, about enabling products to market, if you like, much, much faster than we have done before. So that's where we see the sort of meaningful change, if you like, in the cost base. Shall I start on RWAs?
Yeah, you do. But just one thing. It's no accident that the most digitally enabled part of the bank, which is the U.S. Consumer Bank, also has our lowest cost-income ratio. It's no accident. Go ahead.
Yeah, sure. So on RWAs, I mean, this is not a new thing for the IB. They've been flat for four years. They were flat for two years before we started the last plan. Whilst we've made considerable progress, 110 basis points, we do think that there's more to go here. I just call out so let me talk about a couple of what's. The first would be, if you remember when we did our investment banking deep dive, we talked about that review of the loan book being really good stewards of capital. We are 2/3 of the way through that review with a third to go. It might be helpful, actually, if we can bring up the slide that's got the relative revenues over RWAs, and you'll really see what's happening in investment banking.
At the same time, so it's that bottom right-hand chart that I'm calling out there. So absolute levels of RWAs have been coming down in banking as we have reviewed that loan book. That's allowed us to be much more nimble in how we deploy RWAs across the Investment Bank and really deploying them at the moment, as you've seen, in markets, just because the market opportunity has been there. The other thing I would call out is much of our growth that we're really leaning on from here on in, some of the things we talked about before, so M&A and ECM, but the International Corporate Bank is a really big part of this part of the plan. It's made tremendous progress in the last two years. And that, again, comes from the Treasury Coverage Model that we talked about in our deep dive.
We've increased our deposits by 140% here. Now we have the opportunity to really leverage that by deploying the technology that Venkat's talking about and really driving fee products from here. We're confident in that trajectory. Venkat?
Yeah. I mean, I'll just add to what Anna said. I mean, structurally, it is the International Corporate Bank and Transaction Banking . It is the continued growth in our prime businesses, which revenue per unit RWA, because of just the way the lending is structured, is generally better. It is, over a very long period of time, the way lending in banking has been changing from direct lending on individual credits to portfolio lending. But that's over a very long period of time. But it's the thing Anna said. It's Corporate Banking . It is an emphasis on fee businesses and also at the right points of the cycle intermediation. So yeah, go ahead, please.
Thank you. So Guy Stebbings from BNP Paribas. The first question was on capital in terms of targets. You've got the 13%-40% target, but I think you've talked sort of running at the top end of that range throughout this plan. And given this is a plan now to 2028, post Pillar 2A changes, given the constructive tone from the regulator, I'm just wondering, what do we need to see to sort of potentially move lower down in that range as sort of a formal way you're running from the business? Is it just getting that Pillar 2A change from the regulator? And presumably, you've got pretty good visibility as to what you're expecting there. So if things do land as you expect, maybe you could help sort of frame that, and we can think about what that means for capital return and rotate targets.
Then the second question was on the mortgage book in the U.K. You referred to the headwind in the first half of this year. Can I just check in terms of the definition of that headwind? Is that sort of a gross headwind? Because I'm mindful that with Kensington and the sort of flow of the book, you might be able to offset some of that as you have some higher LTV, higher margin business coming through. So can you kind of frame the definition of that headwind? Thank you.
Yeah, sure, Guy. I'll take both of those. So on the first one, if you go back to the beginning of 2025, what we said was that because we were carrying more Pillar 2 in advance of IRB implementation, you should expect us to operate at the top of the range or towards the top of the range. That's still what we're saying. It's no different to that. And I do expect there to be some Pillar 2 offset when we get through Basel 3.1 and IRB. I just don't know what they are right now. And what we are trying to do in every single part of this plan is put it in our control. We want our distribution plan to be underpinned by the things that we're doing and that it can't be put off course by the timing of regulatory change or the certainty of that change.
So that's all we're saying here. For us, in the short term, our planning assumption, or actually throughout this plan, our planning assumption is that we will be at the top end of the range. And obviously, you should reflect that in the way you think about our distributions. You should reflect that in the way that you calculate our RoTE. But once we get beyond that implementation and we have that clarity, we will, of course, review where we think we should be within that range. I mean, we still think that the 13%-14% range is the right range for Barclays. But at this point in time, we just don't have the regulatory clarity. And we want this plan in our control. So that's the reason for it.
On mortgages, I'm specifically talking about a gross impact. It relates to the mortgages that were written at the very end of 2020 and beginning of 2021. So as you remember, as we were all coming out of COVID, there was that stamp duty holiday, and the mortgage market was very substantial. Those mortgages were written at very widespread, like 160 basis points. That's quite meaningfully different from where we are now. So just as they refinance, you're going to see some relatively short-term pressure across the market as a whole. We think it'll be gone by the end of half one. And then beyond that, you're going to see the kind of progress that you've seen in our NIR to date. But it is a gross impact. We're obviously enjoying very good levels of net lending driven very much by Kensington and that broker platform. So it's a short-term hiatus, I would describe it as.
And if I may just underline one thing, whether it's capital or looking at our RoTE, there are potential tailwinds. We are planning prudently, but what Anna is referring to, whether it's the new capital rules and what relief we get, there are potential tailwinds. We are not banking them. Sorry, go ahead. And I'll come back to the back in a minute. Yeah.
While you've been talking so long, let me see if I can take my questions. First one's on private banking wealth management. What product? Are you currently missing from your primary banking proposition? How easy is it for you to build those yourself? Secondly, to continue on the U.K. loan book, U.K. retail banks continue to surprise to the upside on loan book growth relative to GDP. I think your guidance is for 5% loan growth CAGR out to 2028. What's driving the growth in excess of GDP? What's your outlook for volumes in the mortgage market for the next couple of years? Thank you.
Let me start on both. We've got a pretty big and complete product suite. There are a couple of gaps in the product suite that are missing. SIPs, Junior ISAs that are coming online. But if you put yourself at a higher level looking at it, starting at the self-directed end of the spectrum, what we've got is Direct Investing, what we used to call Smart Investor, which is basically your do-it-yourself investment, buying stocks, bonds. Then you come to the next piece, which is planning and advice. And that is where we are doing some work, as I said, to create products, which we will talk to you about soon, which are clearly constructed, fairly priced, transparently built, and cheaply distributed and, sorry, efficiently distributed. And there, we are looking to grow in scale. And we've got the basic product set.
Then we've got our private bank, both domestically and internationally, which is complete. So I would view it more as a scaling journey than as a completion of product capability. That is our goal. Look, I think more broadly, the U.K. is a nation of savers. I think it needs to be more of a nation of investors. I think we're going to have a broader tailwind and support for this. I think it's an important role for banks to play. You'll see us emphasize it. Then if I come to loan growth above GDP, let me begin, and then Anna should fill in. We've said 5%, as you say, loan growth versus nominal GDP of 2%.
Basically, there are parts of the business in Corporate Banking , in business banking, and even in parts of personal loans where we were underrepresented in the last number of years. Tesco has given us the capability in personal loans, and you can see the increase. You're seeing the increase, 18% growth in lending in the U.K. Corporate Bank. If you look at the UK corporate bank broadly, still, loan to deposits is like 35%-34%. So we have a lot to grow versus what you might normally expect from somebody, Anna?
Yeah, I mean, simply put, Ben, I think it's a combination of capability, increased capability. So we've talked a lot about the mortgage platform. Actually, we're doing very similar things within the Corporate Banking environment, making it easier for that customer or client to engage with us and making that journey efficient, quick, giving them certainty, etc. That's making a really big difference. I think also the sort of broader product architecture that Venkat talked about, we see it in cards across multiple products. We obviously see it in our mortgage business. So we're just going to market with a much, much broader range and certainly more of a step change than we've had sort of two or three years ago. What it isn't is price. And what it isn't is risk. So you can imagine a CFO: I've got a very keen eye on those things.
If you think about our corporate lending, it's up by 18% year-on-year. We've got more than 1,000 new clients in two years. About half of those are driving some of that lending. As I look at the risk profile, it's not changed since the beginning of the plan. As I look at the portfolio margin, it's not changed since the beginning of the plan. It's really technology, intention to lend, and I would say breadth of product.
Okay. Go ahead, please. Yeah.
Sure. Tim Piechowski with ACR. I think today in guidance, it's the first time you've pointed us to the seven-year swap rate from the five-year swap rate on the hedge book. Could you talk about, is there a change in kind of the duration targeting there and what gives you the confidence to make that change looking at deposit betas, etc.?
Yeah, sure. Thank you, Tim, for the question. So we actually extended the length of the hedge last year, taking it from roughly 3 years to 3.5. And that's why the seven-year swap rate becomes the most relevant rate. That really follows the observation of customer and client behavior. Because what we do is every single month, we are looking at how the deposit books perform across retail and corporate at a very, very granular level. And what we were observing was really that the customer and client lives were lengthening out, and we were getting more confidence around that. So it's purely a reflection of that change.
Thanks. Andy?
I'm just one on the investment bank and one on U.S. consumer, please. Sorry, that's Andrew Coombs from Citibank. Apologies. Thank you very much. Andrew Coombs from Citi.
Always happy to help.
On the Investment Bank, if I look at your 2026 targets, previously, you had a greater than 12% return target. It's now circa 12%, a high 50s cost-income. It's now circa 60%. I'm assuming the change is primarily due to FX, but perhaps you could firstly confirm that. Secondly, when I go back two years and think of the original plan, a lot of the revenue growth was assumed to come from market share gains, and you actually assumed a fairly flat wallet. Actually, what's materialized is a much better wallet than you expected, but flat market share. So perhaps you could also just talk to competitive dynamics and how that's played out versus what you thought two years ago and how that then fed through to your 2028 assumptions as well.
Then on the U.S. consumer bank, I just wanted to understand some of the moving parts. Because you talk about greater than 13% NIM for 2026 full year. But I think in your earlier commentary, you said 12.5% for Q1, 14% for the second half post the AA sale. So presuming it's the 14% you would argue we should be thinking about into the outer years. But then similarly, on the loan loss ratio charge, you're actually assuming that's coming down even as the exit NIM is higher. So perhaps you could just square the circle there. Thank you.
Yeah, sure. Shall I start, and then I'll hand to you on market shares, and then I'll take it back on you?
Yeah.
Okay, thank you. So Andy, you are correct. The material moving part between the last plan and this plan is we previously planned on $1.27. We're now planning on $1.35 rate. Now, that has no impact on group capital, no impact on our ability to distribute. But in particular pockets of the bank, you see some concentrated effects. And the IB is one of those. You're going to see it in USCB as well. So that movement in FX is worth about 50 basis points. So all we're doing is we're just truing up our expectations. We're pleased with the progress that it's made so far. I'm not going to mark that plan to market every single passing quarter. It's just that as we're resetting targets, we felt like it was the appropriate thing to do. Venkat?
Yeah, and I think on the other side, what I would point to is, look, on the investment banking side, banking per se, as I said to you, we would like to see greater fee share. What you've seen so far is progress from the hires and the investments we've made. And you've seen greater revenues, obviously, and excellent capital discipline. And as we make these investments, we hope to see the fee share. On markets, I would point you to the fact that in the three focus businesses, we've done what we said we would do, and we've done it a year early. And as well as the number of our top five clients among the top 100 clients for whom we are top five, that has gone from 30 to 50 to 60. So there is structural progress being made in these elements.
Okay, can we bring up the slide at the back of the deck? I think it's 95 or 96, please, on U.S. Consumer Bank, perhaps just to help this. There, 96. Perfect. Thank you. So Andy, you're right. There's a lot going on in U.S. Consumer Bank in 2026, specifically being driven by the fact in Q2, we expect to exit the American Airlines partnership and will also purchase Best Egg or complete the purchase of Best Egg in the same quarter. So firstly, that has a NIM impact. So I expect the NIM to go to around 12.5% in the first quarter. What's driving that? Well, it's just the accounting that I called out earlier. It's a movement between non-NII and NII.
Then we've always said that because American Airlines were such a high-quality portfolio, the NIM on it is relatively low, but also the loan loss rate on it is relatively low. So taken together, it was a relatively low-returning portfolio because it's superprime. So what happens when that leaves the portfolio is the NIM will go up further. And so you're right, in the second half of next year, I'm expecting, if you like, a clean run rate of NIM, which looks more like 14%. Now, when I come to loan loss rate, that same impact is going to take us from 400 basis points to 500 basis points. But that will be more than offset by NIM.
During 2026, in isolation, what you're going to have is a couple of impairment effects. The first is, if you recall, when we buy something, we bring it all on at Stage 1. So it has to mature through Stage 2. So you get what we call stage migration. You're going to get that in the General Motors portfolio. So that's going to elevate impairments slightly. And then for a period of time, we're going to be holding onto some non-performing loans from the AA portfolio that won't go with them on the sale. So those two things together are going to show a little bit of elevation during 2026. So that's why I'm guiding you to around 550. But ongoing, 14% NIM and 500 loan loss rate.
Nothing to add. Thank you. Oh, Perli Mont?
Oh, sorry, I forgot that this was working. Hello, it's Perli Mont from Bank of America. So thinking about the income guidance at the group level, so it's greater than 5% CAGR. Within that, obviously, investment bank is probably below, and the consumer bank is above. And with the U.K. part also growing volumes greater than 5%, I'm just trying to think about what does it imply about margins. So in terms of product margin, that is, would you expect more of that growth, income growth, coming from the volume side? Are we basically past the point where deposit margin is growing very substantially because of the hedge? And obviously, 2026 would probably be a bit higher because of more of the hedge is coming through in 2026. So in 2027 and 2028, how should we think about the margin piece? That's number one.
Number two is that, so it sounds like Investment Bank at Barclays is going to stay relatively flat because you still expect that to come down to about 50% of the group by 2028. So roughly speaking, it's not much more to the Investment Bank. And the cost guidance at a group level, only modestly growing from now to 2028, that suggests Investment Bank's not getting very much cost either. So I'm just trying to think about why you've decided to do that in the context that, obviously, the IB probably is one of the businesses that has performed above expectations in the last cycle. And increasingly, there are questions about with the U.S. peers investing more and putting more capital behind the IB, why would you choose not to do so?
I'll let Anna take the first question, and she can start the second, and I might come in.
There we go. There's a plan. Thank you, Perli. There's a lot in your question. Let me try and unpack it a bit. So how do we think about product margin in the U.K., is I think your question. So look, there's a bit more to go here. And you can see that from the, can we go to the structural hedge slide, please? Thank you. Okay. So we are assuming that we are going to be reinvesting the structural hedge at 3.5%. The maturing yield over the next three years is materially below that. So 1.5%, 2.1%, 2.7%. So you're going to have a considerable hedge tailwind across at least this plan, probably beyond. And everything that we've done around the tenor of the hedge and extending it from 3 to 3.5 is only going to increase that momentum for longer.
So that remains there as a, if you like, an underpin for product margins. Then if you think about lending more, and particularly within our credit card business, all of the volume that we've written over the last two years coming to maturity from its promotional balances, that will start to increase the interest-earning lending in the credit card book. So we expect those things to continue. Now, what we're not doing here is planning for any expansion of product margin, really, though. Because what we've said implicitly is that the growth that we're seeing in lending and some of the margin pressure that we're seeing in the U.K. market pretty much broadly offset. That's our planning assumption. Now, it may turn out differently to that, but we're not assuming that product margins either as a totality, if you like, Perli, get either better or worse, if that makes sense.
You just continue with that hedge grinding in the background. Product is broadly a wash. That's how we think about it, or that's how we've planned for it. In terms of the investment bank, look, what we're trying to do here is construct a plan that is carefully constructed. Okay? We're trying to put as much of it within our control as possible. So we're planning on a flat wallet. We're not materially expecting any market share change in markets. We expect some in investment banking. The pressure here in the plan is coming more from Transaction Banking , but that's where we're directing our investment. But don't conflate careful planning and lack of ambition. Because what we will do, of course, if the opportunity presents itself, then we will monetize it as we have done to date. Venkat?
I will emphasize that last point. I must say it's nice to be getting a question about why we shouldn't be bigger in the Investment Bank. But I think we've targeted we've been very clear to you over the last couple of years about where we're roughly targeting the IB as a percentage of the group. I think what you should expect us to do is exactly what Anna said, which is we're making a plan based on an assumption of a wallet. If there is opportunity, we've done it in the last number of years, which is we take advantage of it. Yeah, sorry, let's start, Chris.
Chris Hallam from Goldman Sachs. Just a question on the investment bank to begin with. Are you able to give any color on perhaps how much leverage exposure is tied up in the investment bank? I know we talk about RWAs, but as we shift towards the growth you're seeing in the financing businesses, how relevant that metric is. And when you talk about flat market share in Global Markets , is that a conservative assumption or not, given, I guess, the drag story we're seeing building in the U.S. and also the ambitions one of your European peers has in FIC, specifically in the United States? And then the second question is more broadly on AI. I think, or I assume, behind the scenes, going through all the planning, you've looked at a lot of the opportunity set in that area.
It feels as though, more generally, there's a narrative that the technologies are becoming more impactful, but perhaps the speed at which you can get them into the enterprise is taking longer than people had expected and maybe slightly at a higher slightly higher cost. Is that a fair narrative or one that you would agree with when you think about the work you've done behind the scenes on this topic?
Yeah. Do you want to go with the first one?
Yeah, sure. Thanks, Chris, for the question. I mean, we don't talk about return on leverage balance sheet a lot with this community, but you can imagine we're very focused on it in the background. You're right, there are two big parts of the bank where leverage is deployed probably most extensively. One of them is obviously retail mortgages. The other one is financing within the investment bank. Now, it's a very high-RoTE business because it's essentially secured lending, but it does consume leverage balance sheet. That's why we have the AT1 strategy that we have. We're always thinking about what are those returns on the leverage balance sheet versus the cost of those AT1s? That's how we think about it in the background. We have deployed more leverage in the business over the last few years, but so have our U.S. peers.
Our perception to date, certainly, is that they have not been leverage-constrained in the way that they have addressed that. Despite that, we've grown the balances by 60%. It's a business, of course, we're focused on the returns across many lenders, but we're happy with where it's going.
Yeah, I'd also say one of the things about the bank and the way we're building the bank is that we have lots of options and lots of opportunities. So just as you have two areas which consume leverage, you've also got the U.S. cards business, which helps you offset that because it's capital-dense, relatively speaking. And what we're doing on the personal and unsecured side in the U.K., which is also relatively more capital-dense. So I spoke on one of the slides about balancing product, income type, mix. All these factors are coming in to create the portfolio which we have.
Yeah, sure. I think back to you on AI--
Oh, back to me on AI. Yeah. So you're right that I think what people are finding is that it's not just sort of enabling a particular type of model or a particular capability on everybody's computers and then get to work. So you have human adoption, and then you have, more importantly, the ability to get it to work in the system. To get it to work in the system requires two things or three things. One is the basic infrastructure, then adding the capability, and then the third, the willingness to re-engineer your processes. That is what we are trying to convey in the slides we spoke about on technology. So the basic infrastructure is about both data and computing. Then on top of that, you build the model capability, which exists in some of the computing platforms, but which you might put on your own.
And then the third is the commitment to re-engineer processes, and you've got to really do it end to end. So whether it is that BARXBot, whether it is what we're trying to do in credit risk, whether it is what we are trying to do in U.S. cards, in the U.S. consumer bank, in customer service, you can't leave pieces of this undone. Okay? And that's the deep organizational commitment. So we recognize it. That's what we are finding behind the scenes, as you said. But we're trying to pick the right projects that will have the biggest impact on the bank and see it through from beginning to end. Yes?
Another question on the income planning assumptions.
Yeah, sorry, can you introduce yourself, please?
Oh, sorry. Yeah, Mike Holton from BNY Newton. There are some that you talked about that do seem relatively conservative. Now, whether they will be or not, we'll see over the planning period. But to the extent that they are and revenues are better, income's better than you're planning, should we expect as investors for that to flow to the bottom line, so profits are better, RoTE is better, or over the course of the plan, would you invest that away, maybe make additional accelerated investments in the business such that you still hit or maybe beat your plan by a little bit, but you improve the sustainability, perhaps, of the profitability, pull some investments forward? So beyond 2028, you're set up even better.
Do you want me to start?
Please.
Okay. So Mike, the first thing I would say is that our targets that we've given you have very deliberately got a greater-than sign in front of them. So we're balancing a few things here. The first is that, as I've said a few times, we want to put this within our control, the delivery of the plan. That's really, really important to us, and particularly the delivery of the distributions of the plan. So that's number one. Number two, we are balancing here the longer-term growth of the firm. So Venkat's talked a lot about the additional investments that we have and will continue to make. I mean, between Venkat and I, it would be relatively easy for us to optimize the returns of the firm across a short-term horizon. That is not what this is about.
We are really balancing here, investing more in the business, and that means that the RoTEs in the shorter term are probably a bit lower than they would otherwise be. But we think it's really, really important to create a Barclays for two years' time when we're standing up, maybe, doing the next phase of the plan, the third phase of the trilogy, where we're talking about 2028 and beyond. We want that momentum to continue. So that's why we've not so much on the income forecasts, but when I was talking before about the capital capacity of the plan, that's exactly what I was driving at, our ability to flex our investment pathway if we feel that's the right thing to do.
But every time we are doing that, we are considering what are the returns on that investment relative to either the business as it stands now, so is it going to enhance those returns further, or how does it look like versus the returns of a buyback? So we're thinking about all of those things as we deploy that.
Yeah, I mean, it's going to be we've presented a plan to you that is based on prudent financial planning in the way Anna has said. But we want to create a deep infrastructure for this bank, make it, as we said, returns in different environments, produce strong returns through different environments, and sustainably higher returns in the long run, which is a combination of investment and shareholder return. Right? Sorry, going to the back, and then I'll come here. Yeah.
It's James Invine from Rothschild & Co Redburn. I've got two, please. Anna, can you talk about your thoughts on kind of deposit volumes and spreads in Barclays UK, please? So we saw a pickup in volumes after a few quarters of kind of flat to slightly down. And I think as well, your U.K. net interest income guidance kind of implicitly assumes quite a bit of deposit pressure. So is that migration? Is it product spread pressure?
And then Venkat, just back on the investment bank, I mean, it sounds like you're very theoretically open to putting more investment in there. But what actually has to happen? So the revenue on risk-weighted assets has gone up. You're talking about a +13% RoTE. How much higher do those numbers have to go before you think you'll give this business another GBP 20 billion of risk-weighted assets or something?
Okay, so on U.K. deposits, you can see that the deposits are up quarter-on-quarter by around, I think, GBP 3 billion if we go to the slide. What we continue to see, though, James, is we do continue to see some competitive pressure in the U.K., and specifically that move towards fixed or time deposits. Now, seasonally, I would expect some concentration of that in Q1, Q2, just because of the ISA season in the U.K. We always see that, and it feels like, as a market, we're well primed to see that. But we are pleased with that deposit progress. What does that underpin? Well, I think just continued improvements in the business. I would say that we've deployed our multi-brands in deposits this year. We don't really talk about that.
We talk about it a lot in assets, but we are going to market with a much more sophisticated product architecture in deposits because we are now deploying the Tesco brand here. So that's really helping us. But we are not assuming from here that there is any real easing in that deposit environment. It may happen. It may not. But as I say, we're trying not to make significant market assumptions, Venkat?
Yeah, so on the Investment Bank, first of all, investment comes in different ways. Investment comes in people. Investment comes in technology, particularly in the markets business. And then investment can come in RWAs. What we've spoken about on the balancing side is basically Investment Bank RWAs as a percentage of the group, where we've set a target of around 50% seems right. We've also indicated flexibility around that number if there's a little opportunity, but 50% seems right. We have been investing heavily on technology and people, and we've spoken about it, whether it's bankers, whether it's trading capability, and of course, electronic trading capability. We spoke a little earlier about the investments we've made in Prime. So there's been and continues to be tremendous investment in technology and capability.
Some of this, or a lot of it, is going towards things that are relatively capital-light and relatively high in fees. So we are prioritizing stable income. We are prioritizing Corporate Banking and, of course, electronic trading, which helps with our intermediation. And on the capital side, as I've said, there's a balancing act, and it's about 50% is where we would aim to target. And to get there right now, IB RWAs have to be relatively flat.
Venkat, on the left-hand side, you've got Chris, Jonathan, and Amit, who are being incredibly patient. So.
All right, in that order, Chris.
It's Chris Cant from Autonomous Research. If I could just ask one point in detail and then on the IB again. So your effective tax rate's been quite difficult to predict over the last couple of planning periods. If you could just fill that gap in our models, I think that would be appreciated by all. And then on the investment banking side of the equation, in terms of stable market shares, I guess one obvious development that's probably coming down the tracks at you in the next 12 months is this regulatory change in the U.S. So are you seeing at the moment any change in the competitive environment? And do you make any allowance in the plan for a potential contraction in product margins as some of your U.S. competitors get more capital capacity, some of which is likely to be deployed into the IB? Thank you.
Tax rate.
Okay, I'll start with the tax rate. So Chris, I'm not going to give you a tax forecast. But I recognize that quarter by quarter, tax can be a bit lumpy because it relates not only to the changing shape of the business, but also things that may have happened in the past. So I would encourage you to look at it over a sort of full-year basis, maybe for the last couple of years, and start from there. And always, if we've got significant tax impacts, we typically call them out for you. So start with that.
Chris, just to clarify, by regulatory change, do you mean capital regulations in the U.S., or do you mean individual banks that might be under regulatory strictures now that might lift?
More the former.
The former, right. Look, U.S. capital regulation is very likely diverging from what's there in the U.K. and what's there in Europe. We have operated this investment bank through multiple capital regimes in different locations, and we adapt. The question is then, how do we adapt? I said earlier in our presentation that the secret source of our investment bank is the synergies, our strength in fixed income and structured financing, and the nimbleness of our approach with our clients and deepening the way in which we engage with clients. So we'll see what comes out. We will see whether we are at a relative advantage or disadvantage in certain things. But the most important thing is to keep investing in the infrastructure, the people, the products, and the client relationships so that we can manage it through different points in the market cycle, through different differences in capital regimes.
This has always been a very competitive business, and we expect it to continue to be so. Jonathan, and then Amit. Yeah.
Hello, good morning. It's Jonathan Pierce from Jefferies. If we can take it up a level, if that's okay, got a couple of questions. I'm really trying to triangulate the capital generation targets on slide 71 with the RoTE and the distribution expectations. I mean, greater than 230 basis points on circa 400 billion of RWA is obviously getting you to an attributable profit number of over GBP 9 billion. So putting to one side, that's quite a bit ahead of consensus, even if we assume 3% RWA growth, which if the investment bank's pretty flat, is quite a lot. That's only going to take us down to about GBP 8 billion of free capital generation, which is obviously huge in the context of the GBP 15 billion+ over the three years. So can I just firstly ask do you recognise those numbers?
Are these distributions going to be really quite back-end loaded such that when you are stood here in two years' time, the next three years of distributions are going to be markedly above the greater than 15% that you've talked about today? Secondly, connected that the RoTE on that +230 basis points, if we use consensus TNAV, would be closer to 15%, maybe a little above 15%. I just wonder if you can talk to TNAV growth over the next few years. It'd be great if you can reference consensus, but maybe some of the things that are harder for us to model, like the own credit unwind, the pension surplus, maybe even the cash flow hedge reserve moves to a positive. How should we be thinking about TNAV two or three years forward, please, particularly versus consensus? Thank you.
Thanks, Jonathan. I guess both of those are for me. So let me just start with capital. So I'm not going to comment on your math, Jonathan. Where I agree with you is that the organisation is generating a lot of capital, and we expect that to continue. And so when we give you a distribution target of greater than 15%, I would concentrate on two things within that slide. One is the greater than sign. And the second is this point that we are making that beyond the investment that we've got in the plan, so beyond the doubling of investment and beyond the level of distributions, there is an element of capital creation here that we are holding for additional investment if we think that is the right thing to do. Now, if we don't, then we will, of course, return that to shareholders.
That's what our capital hierarchy says. It says, "First, be well capitalized, then deliver it to shareholders, then invest it to meaningfully improve the returns of the group." So that capital hierarchy remains. We have no desire to hold onto excess levels of capital. So your thought process is as ours is. But as I say, I will leave the math to you. In terms of the RoTE point, we've given you a RoTE target, which is a greater than. So again, I'm not going to comment on the math that you've given me. Last time I looked at it, TNAV was broadly our expectations of TNAV, and consensus TNAV were broadly similar. I think the difference here is probably in the greater than sign, simplistically put.
Thank you. Amit?
[audio distortion] Yeah, thank you. So maybe one, no, this is quite obvious. Again, just say, for example, looking at B-UK profitability targets, so 2028 greater than 20%, similar to 2026 greater than 20% despite a mid-40s cost income versus the low 50s, further progression in terms of the income from the hedge. I mean, I guess just wondering, why isn't that number, say, greater than 25% or higher? You don't want to show a number like that. So just curious on that as the first question. The second, again, just on the IB, just on IB fees, again, this comes back to the market share point. So I understand the flat wallet assumption going into 2028. But again, when I look at the trajectory, I think last time we were thinking that there'd been investment in 2023 and so forth, which would drive market share gains. We saw gains into 2024.
I think we went from about 3% to 3.3% or so, sorry, into 2025 or 2024. But that's come back down now to around 3% again. So just wondering what's going to create the re-acceleration back to the 3.5% and what gives the conviction on that piece. Thank you.
Do you want to take B-UK, and then I'll come back to the IB?
Yeah, sure.
That's Amit Goel, by the way, from Mediobanca. No, it's okay.
You're doing a good job with that.
I know.
Okay.
I won't say anything.
So a couple of things just to call out, Amit, just to help you. Firstly, again, I'm going to lean on the greater than. The second thing is that although this is not true for the group, for B-UK, it is true, we are expecting some impairment normalisation within that business. So as we said, it's been running relatively low because we've been recalibrating these impairment models that are consistently overpredicting impairment in the U.K. So we've been running pretty low in B-UK. We do expect that to normalise up to around 30 basis points. That's not true of the group. The group is running in totality where I expect it to be. So that's not flattering the group. But I think it is flattering B-UK right now. So if you take that plus just lean on the greater than number, then that should hopefully explain. Venkat?
Yeah, so I'll begin with an answer on fees similar to one I often give on markets. So when we have quarter by quarter or annual results in markets, people will always ask, "Why are you better in this?" or "Why are you worse in that?" Some of it has to do with where we are relatively where our relative strengths and then how do the markets evolve to either play to your relative strengths or not. And you've got to look at it over a long period of time. On investment banking fees, as I said, we made the investment in bankers. And Debt Capital Markets are relatively strong. It's Equity Capital Markets and M&A where we need to do more catching up. And Leveraged Finance are obviously reasonably strong.
So when you then look at that, some of it has to do with the pattern of deals in the last year versus the year before. There were larger, more lumpy deals. Sometimes if you're lucky to be in them, you're good. Otherwise, you're not. So 2024 was a helpful year, 2025 less helpful. But over the long run, we expect to get that market share simply by having the right bankers and the right product. And we look at this over a longer period. So I will give that kind of answer to you. Right. Anybody else? Going once. All right, well, listen, thank you very much. Let me say that over the last couple of years, Anna and I have really appreciated the engagement from all of you and your organizations as we've been on this journey. We appreciate your candid feedback, supportive, and encouraging.
We welcome the opportunity to continue these conversations with you. Some of it will be on the road and one-on-ones. And I want to really thank all my colleagues who've helped put this together, Marina, starting with you and your team and the investor relations team. So please go easy on them. And then thank you. If you have a minute or two, there are refreshments outside, and you can linger, or you can run back to your computers. I leave that to you. Thank you.
Thank you.