Speaker 1: I am delighted to be joined by the Barclays chief
Speaker 1: executive officers.
Speaker 2: Then, Kat, thank you for joining us.
Speaker 1: First of all, congratulations a pretty strong set of results.
Speaker 1: A lot of it has to do with fake What
Speaker 1: do you see in terms of main drivers going forward?
Speaker 3: Yeah, thank you frand Scene. Great to be here with you.
Speaker 3: And yes, it was a very nice set of results
Speaker 3: this morning that we were privileged to publish. What I
Speaker 3: liked about the results friand Scene is not just the numbers,
Speaker 3: but the composition of it. And Fink was an important part,
Speaker 3: but not the only part. So if you look at
Speaker 3: the numbers, top line, uh, you know, two point six
Speaker 3: billion of profit before tax and sterling, it's about up
Speaker 3: sixteen percent, Revenues up around eleven percent, seven point two
Speaker 3: billion pounds, an excellent rote of fifteen percent across the
Speaker 3: group capital ending where we would like it to be.
Speaker 3: One of the you know, a record quota of performance
Speaker 3: for the bank and the second biggest for the corporate
Speaker 3: and investment bank. So all very good. Now what drives it?
Speaker 3: And that's the important part, and for us, it's actually
Speaker 3: been the workings of many, many quarters of building this.
Speaker 3: And there are two parts I'd like to highlight.
Speaker 4: The first is.
Speaker 3: The investments which we've made in our business, whether it's
Speaker 3: in our credit card portfolios in the US where we
Speaker 3: acquired a gap portfolio of ten million customers, and whether
Speaker 3: it is in our market's business where not just investment
Speaker 3: in technology and people in fixed income, but also in
Speaker 3: our trading systems, but also in financing, both in fixed
Speaker 3: income and in equities prime, which continue to help us
Speaker 3: in this environment.
Speaker 1: So if you look at FIG Trading, are you expecting
Speaker 1: this momentum to go into the second quarter?
Speaker 3: So we hope to keep the market share that we
Speaker 3: have gained with our clients over a number of years.
Speaker 3: To persist, we've broadened and deepened relationships. The actual dollar
Speaker 3: amount of revenues, of course, goes up and down with
Speaker 3: volatility in the markets, and that's much much harder to predict.
Speaker 3: But what we try to do is to have that capability.
Speaker 1: So is this a kind of diversification for the rest
Speaker 1: when you look at your main drivers going forward.
Speaker 3: Well, what we hope is that we have a lot
Speaker 3: of drivers and that at the right times in the market,
Speaker 3: that they all are there and they click. So, you know,
Speaker 3: the first quarter of this year was a lot about
Speaker 3: the bond markets. Interest rates went up and down with
Speaker 3: the stuff in banking that happened in the US, and
Speaker 3: I'm sure we'll talk about that. The first quarter a
Speaker 3: year ago was about equity ball single stocks, and then
Speaker 3: our equity business was ready to capture that. So that's
Speaker 3: how we try to do it. I have a full
Speaker 3: fledged capability.
Speaker 2: So when you look at marked was pretty incredible.
Speaker 1: When you look at the banks starting with the SVB
Speaker 1: and then CREDI, sweez. Does that mean that you had
Speaker 1: deposits that people come to you because they were afraid
Speaker 1: of other banks.
Speaker 3: So the UK has been more insulated from that deposit
Speaker 3: flight across banks then certainly the US has been between
Speaker 3: the regionals and the big.
Speaker 4: Money center banks.
Speaker 3: Having said that, our deposit franchise grew by about ten
Speaker 3: billion pounds during the quarter, and a lot of that
Speaker 3: was actually people corporates putting deposits with us. On the
Speaker 3: consumer side, it dropped a little, but that seasonality we
Speaker 3: expect as people pay their income tax bills and draw
Speaker 3: money from their accounts to do that. So the deposit
Speaker 3: franchise has behaved extremely well and predictably.
Speaker 4: But it's also for US.
Speaker 3: It's a deposit franchise that we've built over decades, right,
Speaker 3: with a very nice mixture of individuals of corporates, small businesses.
Speaker 1: But do you expect the worst of the banking turmoil
Speaker 1: to be over?
Speaker 2: It's unclear.
Speaker 1: So some people think that there was a banking turmoil
Speaker 1: in March. Others say, look, it's two specific cases for
Speaker 1: two specific reasons.
Speaker 2: How do you see it going forward?
Speaker 3: So I think I think the Credit SUEEE was a
Speaker 3: very specific case, while I think Silicon Valley Bank was
Speaker 3: a specific case in terms of its circumstances. It has
Speaker 3: highlighted an issue with some of the regional banks in
Speaker 3: the US and that we will see continuing to play out,
Speaker 3: maybe in a small number of names. And we've seen
Speaker 3: First Republic over the last couple of days, so I
Speaker 3: expect that we will see over a small number of names.
Speaker 3: It's not going to be systemic in any way, but
Speaker 3: there will be repercussions.
Speaker 1: And it hasn't changed the way in which Barclay's behaves all.
Speaker 1: As you said, the UK was pretty immune to that.
Speaker 1: Or are you looking, for example, at possibly buying c
Speaker 1: forrety sweet assets?
Speaker 3: So the UK has been immune from the deposit franchise. Obviously,
Speaker 3: what's happened in the US and with Credit Suite affected
Speaker 3: market volatility, especially in interest rates, and that our trading
Speaker 3: businesses engage in the coming back to assets. Look, we
Speaker 3: have built up our business over quarters and years. We
Speaker 3: have you know, we when Credit Suee got out of
Speaker 3: the prime business, we hired a few of their people
Speaker 3: and some of their clients chose to work with us,
Speaker 3: so we were about that. I think a lot of
Speaker 3: the assets shifting happened before this period.
Speaker 1: When you look forward into what the banking you know,
Speaker 1: the banking world looks like, are you expecting more regulation
Speaker 1: or are you expecting also consumer behavior as would possibly
Speaker 1: go into a downturn.
Speaker 3: So on the banking world, I think regulation will with
Speaker 3: some delay and with some benefit of perspective. Look at
Speaker 3: what happened in March, and whether it's thinking about liquidity,
Speaker 3: whether it's thinking about you know, the digital nature of liquidity,
Speaker 3: how fast people can withdraw. I'm sure they're going to
Speaker 3: look at it. They're also probably going to look at
Speaker 3: how they supervise big banks versus smaller banks. So I imagine
Speaker 3: there's there's going to be some of that and I
Speaker 3: think we'll see the first installment in the US when
Speaker 3: the FED is giving its own report, I think on
Speaker 3: the first of May.
Speaker 2: But do you see distress in the market.
Speaker 1: It's pretty incredible to me to look at interest rates
Speaker 1: going from one to five percent without you know, that
Speaker 1: much breaking.
Speaker 3: Yeah, so I do think that you're seeing an impact
Speaker 3: on consumers. That impact has been really really cushioned by
Speaker 3: the starting conditions because people had more wealth, and by
Speaker 3: employment continuing to hold so people have jobs. So, for instance,
Speaker 3: if you look at the UK, two things we expect
Speaker 3: for the median too, family household with a median house
Speaker 3: that compared to spending about twenty percent of their income
Speaker 3: on mortgages on mortgage payments in the decade twenty ten
Speaker 3: to nineteen, by the time this year ends, it will
Speaker 3: be about twenty eight percent.
Speaker 4: So that's a reasonably big number.
Speaker 3: We've also seen that when in March, when we look
Speaker 3: at the spending data of our customers debit card and
Speaker 3: credit card customers, what we've seen is that while inflation
Speaker 3: year over year was called it nine percent, their expenses
Speaker 3: went up about four or five percent. So they're economizing.
Speaker 3: They're either buying items that cost less or they're spending
Speaker 3: less normally, and I think so people are managing their
Speaker 3: balance sheet. What we have not seen is signs of
Speaker 3: distress among customers, which is a good thing, which is
Speaker 3: a great thing. Which is a great thing, which I think.
Speaker 3: People are economizing. They have jobs, which is great. That's
Speaker 3: why it's important to have economic growth.
Speaker 1: So we heard it from the chief Economists of the
Speaker 1: Bank of England saying, look, people should accept in the
Speaker 1: UK that they will be poor.
Speaker 2: Is that what you're seeing?
Speaker 1: I mean, is that kind of the pattern that you
Speaker 1: could see in terms of consumer spending.
Speaker 3: So yeah, I saw the choice of words and I'm
Speaker 3: not going to dispute the Bank of England here.
Speaker 4: Here's what I would say.
Speaker 3: People are shifting their consumers spending I think from more
Speaker 3: expensive to less expensive, and they're choosing what they spend
Speaker 3: on sometimes that might just be better, right, But it's
Speaker 3: obviously happening because of inflation pressures.
Speaker 1: But it's readjusting your You're not seeing something worrisome and loans.
Speaker 1: I know there was an impairment actually in your numbers,
Speaker 1: you know, what are the details on that. There's nothing
Speaker 1: something impending that can actually really be worry.
Speaker 3: Some we're not seeing except in the very fine margins
Speaker 3: of very low rates, some increase in stress. We're not
Speaker 3: seeing that at all. The impairment you're seeing. Our impairment
Speaker 3: number was around five hundred million pounds compared to about
Speaker 3: one hundred and fifty a year ago. Most of that
Speaker 3: is the build up of the balances in our us
Speaker 3: Cord's portfolio, where it's sort of automatic. We build up balances,
Speaker 3: we create impairment.
Speaker 1: When you look at the world, what worries you in
Speaker 1: terms of regions, term of spending and how does that
Speaker 1: impact your strategy. I know India, for example, is increasing
Speaker 1: its wealth quite significantly. Do you have a strategy specifically
Speaker 1: for India?
Speaker 3: Yeah, I mean India is a very good question. We
Speaker 3: have long had a very strong investment banking presence in
Speaker 3: India and it has contributed well to US and in
Speaker 3: fact we participant in many transactions last year. So I
Speaker 3: think we will continue to invest in people in our
Speaker 3: capability in India. You know other parts of the world,
Speaker 3: I mean, we have generally outside we've concentrated on Europe,
Speaker 3: the UK, and the US. We've got a footprint in Asia,
Speaker 3: which is India, Singapore, Hong Kong and Tokyo, and we
Speaker 3: expect to keep that footprint.
Speaker 1: Did the Imbani saga change anything in how people invest
Speaker 1: in India?
Speaker 4: I don't think so. I don't think so.
Speaker 3: It seemed particular to that company, and that company seems
Speaker 3: to have taken quite a lot of steps to improve
Speaker 3: its own financial position, So that's good.
Speaker 1: Is there anything in liquidity that you worry when you
Speaker 1: look at the functioning of the markets.
Speaker 3: It's much better now than it was six months ago,
Speaker 3: particularly in gelts. So let's begin here at home in London.
Speaker 3: The guilt market, as you remember from September October was
Speaker 3: quite something, was quite something. That market has the strains
Speaker 3: in that market have considerably improved, and you can see
Speaker 3: it in the improved quality of Sterling. I mean Sterling
Speaker 3: is eking its way back up, So that market has improved.
Speaker 3: I think in the US markets there have been spots
Speaker 3: of illiquidity in treasuries and even in corporates. And you know,
Speaker 3: we have the debt ceiling issue ahead of us, so
Speaker 3: we have to watch what does the debt I mean worst.
Speaker 1: Case scenario for the dead ceiling. And I don't know
Speaker 1: whether you actually model this worst and best case scenario.
Speaker 1: So best case scenario, nothing really happens. Worst case scenario,
Speaker 1: could we actually see a US default?
Speaker 4: I very much doubt it. I very much doubt it.
Speaker 3: I think we've gone through this before and solutions always prevail.
Speaker 3: And people in Washington are beginning to talk, and there
Speaker 3: are proposals on both sides of the island Washington. So
Speaker 3: I think it's all of us have to prepare for
Speaker 3: these eventualities. But I doubt this eventuality will come.
Speaker 2: We're here in Canary Wharf.
Speaker 1: You are the most beautiful actually if you I think
Speaker 1: of all of London. Are you committed to Canary Wharf
Speaker 1: and London?
Speaker 3: Yeah, well, we've just built four new wonderful trading flows
Speaker 3: in this building, and so we have invested in this building.
Speaker 3: We've invested in Canary Wharf and in London, you know,
Speaker 3: and across the UK. You know, we've built wonderful campus
Speaker 3: in Glasgow, so we do like to have a presence
Speaker 3: across the UK.
Speaker 1: You've also come back after you know, a tough year. Yes,
Speaker 1: what's it been like coming back?
Speaker 4: Thank you? It's actually been wonderful to come back.
Speaker 3: You know, I was sick and I worked for a
Speaker 3: few months through my treatment, but I worked at home
Speaker 3: and sort of to reflect on that and reflect on
Speaker 3: the hybrid situation. What I can say is personally, I
Speaker 3: have experienced the joy of being back in the office,
Speaker 3: of being able to interact more casually with colleagues, and
Speaker 3: I think it's improved my productivity and it's improved my
Speaker 3: frame of mind.
Speaker 4: So I'm very happy to be back.
Speaker 1: Has it changed the way you see actually the working
Speaker 1: model at all for your employees.
Speaker 3: It's made something that was in my mind intellectual more tangible,
Speaker 3: which is I always knew that there was a benefit
Speaker 3: of being in person and being around the office, and
Speaker 3: now I've experienced it. Because it's one thing when you're
Speaker 3: in COVID and everybody is away. It's another thing when
Speaker 3: you're sick and you're alone, but everybody's in the office,
Speaker 3: not all the time.
Speaker 4: Now, there are.
Speaker 3: Many benefits that have come from hybrid working which we
Speaker 3: should all use and we should we should capitalize on
Speaker 3: the flexibility and the acceptance of flexibility, which is I
Speaker 3: think the most important thing, and so we want to
Speaker 3: keep that. We don't want to dispel it. I'm very
Speaker 3: happy to say we were very satisfied, you know, Barclay's UK.
Speaker 3: In the UK, we've been named for the third year
Speaker 3: in a row as the LinkedIn Employer of the Year,
Speaker 3: so we hope that we are trying to get that
Speaker 3: mixed correct.
Speaker 1: How do you view AI, that's the big question. Yeah,
Speaker 1: we don't have an hour unfortunately to talk about it.
Speaker 3: So the most important thing for me in that is
Speaker 3: to try to educate myself on it. From everything I
Speaker 3: understand and what I have seen, it is and can
Speaker 3: represent a remarkable improvement in productivity and find ways to
Speaker 3: do certain tasks better by being able to map relationships
Speaker 3: as opposed to just a listing of facts. So I
Speaker 3: think the potential is enormous and I think it behooves
Speaker 3: all of us and organizations to try to understand what
Speaker 3: it is. I'm sure it will always be more than
Speaker 3: what we thought and less than what people, you know,
Speaker 3: the people who are the greatest enthusiasts believe.
Speaker 1: So what does that look like at Barclay So you're
Speaker 1: deploying and I don't know whether this goes back to costs.
Speaker 1: Maybe costs we're a little bit disappointing, but you also
Speaker 1: have to grow and invest it. Is there a parallel
Speaker 1: to what you could achieve with a or new technology.
Speaker 3: So it's a very good question. I think there is.
Speaker 3: I think in the end, efficiency will come.
Speaker 4: From technology and digitization.
Speaker 3: And the question for us, for instance, in AI is
Speaker 3: when you're looking at patterns and you're looking at relationships.
Speaker 3: You know, one of the areas where we see a
Speaker 3: lot of it is in financial crime aml kyic relationships
Speaker 3: between transactions. Is there a way to do this better
Speaker 3: that brings efficiency and brings actually better performance, you know,
Speaker 3: our own costs this quarter? Coming back to that question,
Speaker 3: we have invested in our businesses. We continue to invest
Speaker 3: and those investments have been profitable, and we take it
Speaker 3: very carefully and deliberately and over many quarters. And what
Speaker 3: you've seen in this first quarter is what I think
Speaker 3: would be the peak of our investment for this year.
Speaker 1: Anything that worries you actually in the next two to
Speaker 1: three years, I mean today was a strong day. Yeah,
Speaker 1: I think we're also looking at you know, fake and
Speaker 1: the only bank that did as well as you was
Speaker 1: probably Bank of America. How hard are the next twelve months.
Speaker 2: Going to be?
Speaker 3: So I think there's a part of there are three
Speaker 3: parts to that. One part of hard is how's the
Speaker 3: environment going to be and I think that's a little
Speaker 3: hard to predict. I mean, we've been very cautious for
Speaker 3: the last number of quarters. But if you told me
Speaker 3: on the first of January of this year that in
Speaker 3: the first quarter the sector that would be in crisis
Speaker 3: as banks, I.
Speaker 4: Wouldn't have believed you. So the thing is we don't know.
Speaker 3: So I think that volatility alone, while it brings opportunities
Speaker 3: in certain businesses, for us, is something that gives us caution.
Speaker 3: Right the investment banking landscape, now we did well in
Speaker 3: investment banking.
Speaker 4: We actually had very.
Speaker 3: Strong results, but we were the least negative, right, So
Speaker 3: that business itself is smaller for across the street because
Speaker 3: fewer deals are getting done, IPOs are scarce. So we
Speaker 3: think those are all things that weigh against it. I
Speaker 3: think on the consumer side, while the consumer is still
Speaker 3: holding up, if the pressure continues for longer and longer
Speaker 3: and longer, we have to worry. So I think it
Speaker 3: behooves us to be cautious.
Speaker 1: When are you expecting all of the you know, the
Speaker 1: pipeline of deals to come back to normalize.
Speaker 3: I think you've got to see the end or the
Speaker 3: science of the end of the interest rate cycle. When
Speaker 3: you and I last spoke in October, I had said
Speaker 3: I thought it would be in the middle of this year.
Speaker 3: I still think, give or take, it could be. It
Speaker 3: could be the third quarter. I think what's happened with
Speaker 3: banks is probably and the worries about, especially in the US,
Speaker 3: how much credit might be extended into the economy from
Speaker 3: the region or might not be because of the issues
Speaker 3: with the regional banks could postpone that point.
Speaker 4: So we have to see.
Speaker 3: But it's probably closer to the end of the year
Speaker 3: in the middle part.
Speaker 2: So this is basically montary policy transmission, right.
Speaker 1: The fact that it could take up to eighteen months
Speaker 1: or I mean everyone or the market is expecting cuts
Speaker 1: from the Fed.
Speaker 2: Yeah, is that your base case?
Speaker 4: No?
Speaker 3: I think first we have to see the stop. We
Speaker 3: have to see interest rate rises stop, and then I
Speaker 3: think there will be a holding period, a.
Speaker 1: Holding period so where we have higher interest rates for
Speaker 1: much longer.
Speaker 2: Is this a new.
Speaker 3: Normal, Well, it could be an old normal. I mean
Speaker 3: thirty years ago, this is what it was. Right when
Speaker 3: I joined this industry, the FED funds rate was around
Speaker 3: five percent. So the question is whether what we've seen
Speaker 3: in the last twenty twenty five years was an abnormal
Speaker 3: period of low interest rates, and what we are going
Speaker 3: back to is actually what it should have been over
Speaker 3: the much longer period of time.
Speaker 1: Is that how you see it, that this is normalizing
Speaker 1: instead of the new normal?
Speaker 3: I think I see it personally as normalizing, but that
Speaker 3: may reflect my age more than anything else.
Speaker 1: But it changes I mean, I guess it also changes
Speaker 1: trade or you know, psychology and market psychology.
Speaker 2: If this is going to.
Speaker 1: Be for the foreseeable future where we are.
Speaker 4: It does it does?
Speaker 3: I mean, first of all, if the risk free rate
Speaker 3: has now become five percent instead of zero, then it
Speaker 3: changes the hurdle for a whole host of investments, which
Speaker 3: is what you're seeing right, what you're seeing in the market.
Speaker 4: The second is the transition from zero to five.
Speaker 3: While it is well telegraphed, not very many people have
Speaker 3: lived through it, and you are seeing that again in
Speaker 3: the way in which certain acid portfolios have reacted to
Speaker 3: rising rates. We have tried to position ourselves carefully for it,
Speaker 3: but nobody gets this perfectly. And then once you stay
Speaker 3: at that higher level of rates, we've got to look
Speaker 3: at what volatility there will be and how business models evolve,
Speaker 3: and you're right, that's going to be new and different.
Speaker 1: You also have a former shareholder activist of Barclays that
Speaker 1: says there should be a probe into you direct ties
Speaker 1: with Jeffrey Epstein, Like, what's your response to that.
Speaker 3: Well, so two things I think. First of all, there
Speaker 3: are new allegations. Our board has spoken about these new allegations.
Speaker 3: They're serious. We are in no position to comment. I'm
Speaker 3: in no position to comment. They are being adjudicated in
Speaker 3: New York and we are not party to that, so
Speaker 3: I have no view on that.
Speaker 4: I know our board well. They're very thoughtful, deliberate people.
Speaker 3: Deliberative people, and while I was not a member of
Speaker 3: the board, I know individually and collectively that they employ
Speaker 3: very careful and.
Speaker 4: Detailed processes to reach their decisions.
Speaker 1: Kat, thank you so much. That was, of course a
Speaker 1: Barclays chief executive officer. And I also dicorrect myself because
Speaker 1: I think I meant a dining instead of umbona, So
Speaker 1: that was my fault.
Speaker 4: That's okay.
Speaker 2: Thank you so much for your time with us today.