WEBVTT - Barclays CEO CS Venkatakrishnan Talks Buyback Boosting Guidance 0:00:00.040 --> 0:00:02.840 Barclay's unvearning a share buyback plan worth more than nine 0:00:02.880 --> 0:00:05.160 hundred and sixty million US dollars This coming is the 0:00:05.200 --> 0:00:08.600 British lender reported better than expected second quarter investment banking 0:00:08.640 --> 0:00:12.119 revenue and boosted its guidance for the full year. Joining 0:00:12.160 --> 0:00:15.680 us now is the Barclay CEO CS ven Karatea Krishna 0:00:15.840 --> 0:00:16.239 ven Katta. 0:00:16.200 --> 0:00:17.600 It's great to catch up with you, sir. 0:00:17.920 --> 0:00:20.720 Once again, I will go through the numbers so you 0:00:20.760 --> 0:00:24.200 could be modest and you don't have to Equity underwriting booming. 0:00:24.520 --> 0:00:26.119 Equity's trading up nicely. 0:00:26.200 --> 0:00:29.840 The stock is up by something like fifty percent year today, Venkat. 0:00:29.920 --> 0:00:31.640 There was some weakness in thick trading that I want 0:00:31.640 --> 0:00:33.120 to get to in just a moment. But let's start 0:00:33.159 --> 0:00:36.040 with the position of strength you're in Equity's trading. Where 0:00:36.040 --> 0:00:38.480 did that strength come from, Venkat? And do you expect 0:00:38.520 --> 0:00:40.000 it to continue through the year. 0:00:42.760 --> 0:00:45.640 Well, thank you for asking me to join the program. 0:00:45.720 --> 0:00:48.280 I'm very grateful to be here. And as you say, 0:00:48.760 --> 0:00:52.280 we are in the process of delivering on the investor 0:00:52.360 --> 0:00:54.400 plan that we laid out in February of this year, 0:00:54.880 --> 0:00:57.880 which was to have a simpler, bitter, more balanced bank 0:00:58.120 --> 0:01:00.600 a bank that returns twelve percent hour to e and 0:01:00.720 --> 0:01:04.080 above by twenty twenty six, returning about ten billion pounds 0:01:04.120 --> 0:01:07.720 to shareholders by twenty twenty six and more, and then 0:01:07.920 --> 0:01:10.959 rebalancing the bank so that the investment bank goes from 0:01:10.959 --> 0:01:13.199 around sixty percent of the bank to around fifty percent 0:01:13.200 --> 0:01:15.480 of the bank. One part of the investment bank is 0:01:15.480 --> 0:01:18.200 our market's business and the equity business, which you highlight. 0:01:19.080 --> 0:01:19.959 We've always had a. 0:01:19.880 --> 0:01:22.919 Great strength and equity and I think as equity markets 0:01:23.000 --> 0:01:26.080 themselves have gone through the changes that you've seen in 0:01:26.120 --> 0:01:28.959 this since the start of this year, our traders have 0:01:29.000 --> 0:01:32.600 been able to capitalize on client demand, on increasing volatility 0:01:32.959 --> 0:01:36.399 and providing the kind of innovative derivative solutions they seek 0:01:36.680 --> 0:01:40.120 clients seek from Barclays and I do expect as market 0:01:40.200 --> 0:01:44.480 volatility keeps the pace for our performance in equities to continue. 0:01:44.760 --> 0:01:47.480 While we're seeing that same strength in sick trading VENCAT, 0:01:47.600 --> 0:01:50.240 I wonder what you can do to turn things around 0:01:50.280 --> 0:01:52.520 in that particular part of the business. 0:01:54.960 --> 0:01:58.520 So within FEC, we are a very very strong credit 0:01:58.560 --> 0:02:02.280 house and typically in the top three. One of the 0:02:02.320 --> 0:02:04.880 reasons in fig that in the market and for us, 0:02:04.920 --> 0:02:07.360 it affects US. Maybe a little more is that credit 0:02:07.400 --> 0:02:09.920 spreads have been muted and credit volatility has been muted, 0:02:10.000 --> 0:02:13.639 quite the opposite case from equities. In European rates, which 0:02:13.680 --> 0:02:15.760 is an area of growth for US, we've improved from 0:02:15.800 --> 0:02:19.000 the first quarter to the second quarter, and securitized products, 0:02:19.000 --> 0:02:21.800 which is an important part of fixed income, is growing 0:02:21.800 --> 0:02:26.280 from strength to strength. So our fit performance is improved 0:02:26.280 --> 0:02:28.120 from the first quarter to the second and I could 0:02:28.160 --> 0:02:31.000 expect to continue to see more of that improvement as 0:02:31.000 --> 0:02:31.760 the year goes on. 0:02:32.040 --> 0:02:34.360 Venkatte, We've been having a debate for several months now. 0:02:34.480 --> 0:02:37.240 Are rate cuts good or bad for banks? Or rate 0:02:37.320 --> 0:02:41.480 hikes good or bad for banks? Are rate cuts broadly 0:02:41.760 --> 0:02:45.000 good or bad for your profitability at a time when 0:02:45.040 --> 0:02:46.760 a lot of people are expecting them globally? 0:02:47.960 --> 0:02:48.760 Thank you and Mark. 0:02:50.080 --> 0:02:52.720 So what I would say is very special about this 0:02:52.840 --> 0:02:56.840 rate cycle is that the what we're expecting is not 0:02:56.960 --> 0:03:00.120 a spate of cuts, but fine tuning adjustments. So the 0:03:00.200 --> 0:03:02.280 answer to your question is, I don't think they'll make 0:03:02.320 --> 0:03:03.960 that much of a difference to. 0:03:03.880 --> 0:03:05.720 A bank like ours or to the large banks. 0:03:06.280 --> 0:03:06.480 You know. 0:03:06.560 --> 0:03:07.440 My colleague A. J. 0:03:07.639 --> 0:03:10.160 Raja at Thyaksha, who runs in macro research for US 0:03:10.560 --> 0:03:14.320 often says a rate cycle is when you go up 0:03:14.360 --> 0:03:17.200 in an escalator meaning slow cuts, and come down in 0:03:17.240 --> 0:03:20.240 an elevator slow rises and then fast cuts coming down 0:03:20.280 --> 0:03:23.520 in an elevator. What we've seen this time is we 0:03:23.560 --> 0:03:26.800 went up in an elevator, meaning very fast rate hikes, 0:03:27.200 --> 0:03:29.520 and we may be coming down by the stairs. So 0:03:29.560 --> 0:03:31.600 you saw a fine tuning adjustment by the Bank of 0:03:31.639 --> 0:03:36.120 England this morning. You saw the FED pause, but they're 0:03:36.280 --> 0:03:39.120 indicating they may go later this year. All of these 0:03:39.160 --> 0:03:42.200 things are just trying to adjust interest rates by a 0:03:42.240 --> 0:03:45.600 small amount because real rates have crept up at a 0:03:45.600 --> 0:03:48.560 constant inflation which is two percent, which is low. But 0:03:48.680 --> 0:03:53.040 it's just trying to overcome the slight impediment of rising 0:03:53.080 --> 0:03:55.440 real rates. So I don't expect this to have much 0:03:55.440 --> 0:03:57.720 of an effect on the banking sector, if any, and 0:03:57.800 --> 0:03:59.800 certainly we are not changing the way we view the 0:03:59.800 --> 0:04:01.960 world world because of this modest rate cut. 0:04:02.160 --> 0:04:04.120 In the meantime, you say that you are on track 0:04:04.200 --> 0:04:07.800 to achieve one billion pounds in cost cuts. There is 0:04:07.840 --> 0:04:11.200 sort of some swirling questions around where those cost cuts 0:04:11.240 --> 0:04:14.200 are coming from. Is it simply just being more efficient 0:04:14.200 --> 0:04:17.120 in certain sectors, is it ongoing job cuts. 0:04:17.400 --> 0:04:19.400 What are you executing? 0:04:21.279 --> 0:04:24.279 So we did a billion pounds worth of structural cost 0:04:24.320 --> 0:04:27.800 actions last year. We're seeing a the benefits of some 0:04:27.880 --> 0:04:30.480 of that. B We're seeing the benefits of a greater 0:04:30.600 --> 0:04:34.200 focus on productivity and efficiency in the way in which 0:04:34.240 --> 0:04:36.600 we run the bank. And what we are also seeing 0:04:37.200 --> 0:04:41.000 is the results of investments which we have made, particularly 0:04:41.000 --> 0:04:44.440 in markets, particularly in trading technology. I'm talking to you 0:04:44.480 --> 0:04:47.960 from our equity trading flow in London and the way 0:04:48.000 --> 0:04:50.880 we have increased our market share and electronic trading here 0:04:50.880 --> 0:04:53.360 in Europe and in the US is all a result 0:04:53.360 --> 0:04:55.800 of past investment. You have to continue to do it, 0:04:56.080 --> 0:04:58.159 but it's probably at a slower pace than we did 0:04:58.240 --> 0:05:02.000 in the last couple of years. Its efficiency and better investment. 0:05:02.120 --> 0:05:04.080 Can I ask you about the advisory business with that 0:05:04.160 --> 0:05:06.440 in mind, how is that going? How's the turnaround going 0:05:06.480 --> 0:05:07.039 in that unit? 0:05:09.880 --> 0:05:13.599 So, investment banking we've done, as you've seen the results 0:05:13.600 --> 0:05:17.520 in the banking side quite strongly. Equity capital markets did 0:05:17.640 --> 0:05:21.240 very well, advisories improving. We still have a little way 0:05:21.279 --> 0:05:25.440 to go. We are seeing deal volume pickup, we're seeing 0:05:25.440 --> 0:05:28.760 our backlog increasing and I think over time, as some 0:05:28.800 --> 0:05:32.120 of these ideas fructify, you will see an improvement in 0:05:32.120 --> 0:05:33.080 the advisory numbers. 0:05:33.560 --> 0:05:35.400 I'd love your view, Ven Kaunt on how business is 0:05:35.440 --> 0:05:38.279 going more generally as you look across Corporate America and 0:05:38.320 --> 0:05:40.719 corporations across Europe. I can share with you some of 0:05:40.760 --> 0:05:42.960 the comments we've heard from Corporate America over the last 0:05:43.000 --> 0:05:46.040 couple of weeks from P ANDNG. They're seeing slower price increases. 0:05:46.440 --> 0:05:49.400 Kimberly Clark also saying the same thing. McDonald's are talking 0:05:49.440 --> 0:05:52.719 about the first sales slide since twenty twenty. Pepsi saying 0:05:52.760 --> 0:05:55.760 the consumer is becoming more challenged. You've got a massive 0:05:55.760 --> 0:05:58.840 consumer business as well with the barcleaycart business. When you 0:05:58.880 --> 0:06:01.520 look at corporations and the consumer, are you seeing the 0:06:01.560 --> 0:06:04.920 same kind of slow down? VENCA from your vantage point. 0:06:07.400 --> 0:06:09.440 So, what we are seeing and which is good for 0:06:09.480 --> 0:06:12.280 the credit performance of banks, is we are seeing both 0:06:12.320 --> 0:06:17.520 consumers and corporates focusing on efficiency and managing their budgets 0:06:17.560 --> 0:06:20.320 more carefully. So if you are in the consumer business, 0:06:20.360 --> 0:06:23.400 and if you're a consumer oriented company, what you will 0:06:23.480 --> 0:06:27.520 see is therefore a lack of pricing power and then 0:06:27.560 --> 0:06:32.040 people economizing. We see that in our own customers. What 0:06:32.080 --> 0:06:35.360 that means though, is that even though employment is still 0:06:35.440 --> 0:06:38.320 very strong both in the UK and the US, people 0:06:38.320 --> 0:06:41.120 are managing their budgets more carefully, which is one of 0:06:41.160 --> 0:06:44.680 the reasons why buy and large credit impairment costs for 0:06:44.720 --> 0:06:48.479 banks have been relatively well controlled. So it's good for 0:06:48.560 --> 0:06:50.720 the consumer to do this and manage their budgets. 0:06:51.040 --> 0:06:52.840 It's good for their lenders. 0:06:52.680 --> 0:06:57.240 Because they're seeing less signs of consumer distress. It's good however, 0:06:57.720 --> 0:07:00.560 it's for their economy. However, their are winners and losers, 0:07:00.960 --> 0:07:03.080 and that's what you're seeing from some of the people 0:07:03.080 --> 0:07:03.640 you're quoting. 0:07:03.960 --> 0:07:06.600 Are you seeing a big difference in terms of consumer 0:07:06.680 --> 0:07:10.000 strength globally depending on the region. We've been talking a 0:07:10.000 --> 0:07:13.520 lot about how the consumer shows a lot of I 0:07:13.560 --> 0:07:16.280 guess restraint when it comes to spending, but more so 0:07:16.760 --> 0:07:20.800 in some of the sector is more leverage to Chinese consumers. 0:07:20.840 --> 0:07:23.239 How much you see in Europe in a weaker spot 0:07:23.280 --> 0:07:24.800 than say the US. 0:07:28.280 --> 0:07:31.880 Well, I think I think the slowdown which we've seen 0:07:31.960 --> 0:07:35.480 in China is palpable, and what Chinese demand has done 0:07:36.000 --> 0:07:38.840 is affected sectors which were particularly exposed to them. You 0:07:38.880 --> 0:07:41.960 saw some of it in the fashion goods industry and 0:07:42.080 --> 0:07:47.000 tech of course, is a different situation because you know 0:07:47.040 --> 0:07:50.000 the trade with China is being limited in tech for 0:07:50.040 --> 0:07:52.760 other reasons. But I do think that what you will 0:07:52.800 --> 0:07:56.280 see as people with that exposure to China being more affected. 0:07:56.320 --> 0:07:58.240 You've already seen it in the numbers and that I 0:07:58.280 --> 0:08:00.000 expect that you'll see that for some time to come. 0:08:01.000 --> 0:08:02.960 How much does it affect where you're expanding or where 0:08:02.960 --> 0:08:03.760 you're not expanding. 0:08:06.280 --> 0:08:10.560 Well, Barclay's is a first and foremost a consumer bank 0:08:10.640 --> 0:08:16.200 in the UK, a global investment bank, and so got 0:08:16.200 --> 0:08:19.280 a very strong corporate presence and a wealth presence. But 0:08:19.440 --> 0:08:24.640 all of that is very highly connected to London, from Europe, 0:08:24.800 --> 0:08:28.400 from the United States, and then from India, Singapore, Hong Kong. 0:08:29.200 --> 0:08:32.240 We are not a major presence in mainland China, and 0:08:32.280 --> 0:08:34.760 so what we think is that the impact of what's 0:08:34.760 --> 0:08:39.000 happening in China is relatively more muted for US compared 0:08:39.000 --> 0:08:40.640 to other banks with larger exposures. 0:08:41.120 --> 0:08:42.800 It has raise a question though about some of the 0:08:43.200 --> 0:08:46.800 tensions that have been coming to the fore politically internationally, 0:08:46.840 --> 0:08:52.040 in terms of potential tariffs, potential restrictions, changing policies, the elections. 0:08:52.160 --> 0:08:53.760 How are you trying to get ahead of that at 0:08:53.800 --> 0:08:55.760 a time where there's a lot of policy uncertainty, and 0:08:55.840 --> 0:08:59.800 arguably that's one reason why advisory and mergers and acquisitions 0:08:59.840 --> 0:09:03.080 have been as robust as some people had expected it 0:09:03.120 --> 0:09:03.280 to be. 0:09:06.760 --> 0:09:08.440 It's a very very good point, and I think the 0:09:08.480 --> 0:09:11.760 big area where all that comes into play is cross 0:09:11.760 --> 0:09:15.240 border m and A and cross border transactions. You've even 0:09:15.280 --> 0:09:18.160 seen a slowdown of that within Europe itself, you know. 0:09:18.280 --> 0:09:21.200 For us, it highlights one of the things which we've done, 0:09:21.200 --> 0:09:23.360 which is we decided very early this year when we 0:09:23.360 --> 0:09:26.000 did our investorday and made the decision towards the end 0:09:26.000 --> 0:09:28.600 of last year to invest thirty billion pounds of risk 0:09:28.600 --> 0:09:31.840 created assets in the UK. The UK has had its election, 0:09:32.320 --> 0:09:35.320 We've elected a business friendly government. The transition has been 0:09:35.360 --> 0:09:39.160 smooth and it points to the importance for banks like 0:09:39.320 --> 0:09:43.720 us to be in places with very clear economic policy, 0:09:43.800 --> 0:09:47.240 the good rule of law, growth and stable governments and 0:09:47.240 --> 0:09:48.560 stable economic policies. 0:09:49.000 --> 0:09:51.160 Venkat the year is going well. Hopefully next time you're 0:09:51.200 --> 0:09:52.600 in New York we can catch up again here in 0:09:52.600 --> 0:09:55.120 the studio. I appreciate your time this morning, sir. Thank you. 0:09:55.240 --> 0:09:59.480 The Barclay CEO CS ven Kara Krishna, the Barclay stock 0:09:59.520 --> 0:10:00.600 is up more fifty percent. 0:10:00.640 --> 0:10:02.480 It's quite a year so far for Barclays. 0:10:02.520 --> 0:10:06.680 They've also pledged seven hundred and fifty million pounds being 0:10:06.720 --> 0:10:10.200 returned to shareholders, so quite big in terms of dividend payments.