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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: I'm really happy to say that joining me right now

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Speaker 2: is Barklay's CEO cs Van Katza Krishnan.

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Speaker 3: I'm used to calling you, Venka. It's really good to

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Speaker 3: have you with us over here in Saudi Venkat.

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Speaker 2: Let me just start off by asking you, quite simply,

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Speaker 2: how is Barkley's affirming it's footprints in the Kingdom?

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Speaker 1: Thank you, Johanna, Thank you for having me. We're very

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Speaker 1: excited to be here. We've been in the Middle East

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Speaker 1: for about one hundred and thirty years, through the region

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Speaker 1: and in the Kingdom. Right now we are establishing our

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Speaker 1: regional headquarters. We are in the process of getting all

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Speaker 1: the appropriate investment, banking and other licenses, and we're very

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Speaker 1: hopeful that it will happen quickly. The Saudi government has

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Speaker 1: been extremely welcoming, extremely helpful to us in both telling

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Speaker 1: us what to do and navigating us through it. We

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Speaker 1: think it's a great place to be, so we're also

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Speaker 1: opening our new headquarters here, which we hope to have

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Speaker 1: set up sometime in the new year.

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Speaker 2: Okay, do you have any plans for headcounts for the

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Speaker 2: new office? Can you give us any more details about

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Speaker 2: where it's going to be headcount numbers.

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Speaker 1: Yeah, the office will be in the king of the

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Speaker 1: La Financial District, and we're getting enough to sort of

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Speaker 1: have a good sized office. You know, we'll build it

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Speaker 1: up as we get the licenses and as we move.

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Speaker 3: Yeah.

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Speaker 2: And for me, I mean when I look back at

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Speaker 2: sort of the evolution of Barclays in the region, it

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Speaker 2: was back in twenty fourteen where I believe the investment

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Speaker 2: banking license was canceled, and we fast forward almost a

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Speaker 2: decade later, you're coming back into the Kingdom. At the time,

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Speaker 2: we reported that there was a lot of competition coming

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Speaker 2: through from some of the local banks.

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Speaker 3: Why is this time going to be different.

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Speaker 1: Well, Barclays is different, Saudi is progressing, and the UK

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Speaker 1: Saudi relationship is extremely strong. We represent all parts of that.

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Speaker 1: We have a great global investment bank and we think

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Speaker 1: it's important to lead with that. We are not here

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Speaker 1: to compete in retail. The Saudi and the local banks

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Speaker 1: have an important role to play in this economy.

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Speaker 4: We're there to help. We're there to.

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Speaker 1: Provide the connection with the rest of the world, help

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Speaker 1: bring in direct investment, help actually bring in liquidity.

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Speaker 4: You know, if there are reports.

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Speaker 1: You would have seen it that Saudi banks themselves have

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Speaker 1: so much lending to do that actually this economy could

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Speaker 1: use some foreign lending.

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Speaker 4: We hope to be part of that.

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Speaker 1: And the connection with London, between Saudi Arabia and London

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Speaker 1: is very old.

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Speaker 4: And very deep.

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Speaker 2: Yeah, last week around earnings, you did say that you're

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Speaker 2: happy with how the Investment Bank is doing in terms

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Speaker 2: of this is a called positive jaws improving profitability, but

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Speaker 2: their scope to get more done in terms of boosting IPOs,

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Speaker 2: equity lengths, business and m and a. Where does the

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Speaker 2: Middle East fit into that.

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Speaker 4: It's a very very important part of it.

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Speaker 1: I mean, you know, there was a lot of activity

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Speaker 1: lost here in Saudi Arabia and actually in the region.

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Speaker 1: You know, the regional exchanges have seen a lot of

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Speaker 1: activity in addition their investment flows. And the important thing

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Speaker 1: about investment flows is it used to be out of

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Speaker 1: the region into the Europe, into the United States, where

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Speaker 1: of course we have a very strong presence. Now there's

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Speaker 1: a lot coming back into the region. It's two way,

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Speaker 1: and I think that's the part where we can help.

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Speaker 2: Yeah, and I saw also that you acted as one

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Speaker 2: of the book runners on the pis W Eurogreen bonds,

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Speaker 2: and what we are seeing is an increased amounts of

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Speaker 2: borrowing and issuance coming through from the kingdom.

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Speaker 3: Surely that also presents an opportunity.

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Speaker 1: It presents a great opportunity the Saudi sovereign. The kingdom

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Speaker 1: itself is issuing a lot more sovereign debt institutions like

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Speaker 1: the PIF the one you mentioned have and it was

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Speaker 1: great for us to be part of that bond, representing

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Speaker 1: as it does both sustainability and Saudi Okay, so we've.

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Speaker 2: Spoken about investment banking, how are you doing the growth

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Speaker 2: of the wealth business in this part of the world

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Speaker 2: as well.

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Speaker 1: So wealth is growing in hously, both the development of

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Speaker 1: regional wealth and then actually the movement of people into Dubai,

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Speaker 1: which is becoming a fairly big offshore center for wealth.

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Speaker 1: We've got a presence there and I think it is

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Speaker 1: to help people save and grow for the next generation

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Speaker 1: in the generation after that. That's what the country of

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Speaker 1: Saudi Arabia is doing through its institutions. That's what we

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Speaker 1: want to help the people to do.

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Speaker 2: Yeah, we were reporting on how HSBC's Middle East wealth

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Speaker 2: business was under scrutiny by the regulators and it's impacted

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Speaker 2: their ability to transact with a number of clients in

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Speaker 2: the region. Do you sense this as potentially an opportunity

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Speaker 2: to pick up market share and wealth?

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Speaker 1: No, Look, I think there's enough room in the region

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Speaker 1: for all the great banks, and what we will do

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Speaker 1: is do it in our own way, in our own style,

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Speaker 1: and you know, hope to serve the region.

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Speaker 2: Okay, so you mentioned the number of people moving to Dubai,

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Speaker 2: but we also hear and we report on it's on

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Speaker 2: Bloomberg all the time, the number of asset man hedge

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Speaker 2: funds moving to Divine Aubadew as well. Do you see

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Speaker 2: that as opening up an opportunity and sense of maybe

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Speaker 2: you can expand your prime brokerage services to cater for

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Speaker 2: all of these asset managers that are moving to the

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Speaker 2: region as well.

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Speaker 4: That's already happening.

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Speaker 1: We've catered many of them through London and we will

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Speaker 1: look to follow our clients to where they are. And

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Speaker 1: I think as the critical mass builds, you should expect

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Speaker 1: us to see us do more and more in the region.

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Speaker 3: Yeah.

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Speaker 2: Okay, so bright spots, bright growth spots around the world.

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Speaker 2: Let's talk about the rest of the world. We have

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Speaker 2: a FED meeting coming up this week. They are likely

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Speaker 2: to cut interest rates. But you know, you look at

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Speaker 2: US GDP numbers and we're still printing north of three percent.

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Speaker 3: I mean, how do you see the US economy here?

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Speaker 1: We continue to see signs of strength. Of course, right

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Speaker 1: now in the month of October, because of the government shutdown,

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Speaker 1: we don't have as much real time data as we

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Speaker 1: would normally have, and so for those of us outside,

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Speaker 1: it is difficult to handicap exactly what's going on with employment,

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Speaker 1: which is the most important part of this. But we

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Speaker 1: do think that the economy continues to perform reasonably well,

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Speaker 1: that credit conditions continue to be strong. Employment we think

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Speaker 1: continues to hold. But there is the effect of tariffs

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Speaker 1: which is a little bit uncertain, so we have to see,

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Speaker 1: but I think the expectation is that the fat cuts

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Speaker 1: a bit.

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Speaker 2: Lots of academic circles have been talking about this case

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Speaker 2: shaped economy and the fact that upper income earners are

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Speaker 2: thriving but lower income are struggling. You know, real wages

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Speaker 2: are declining, starting to keep up with inflation. Are you

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Speaker 2: seeing any signs of that? In your consumer business?

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Speaker 1: We see continued consumer strength and that consumer strength, which

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Speaker 1: we see both in the UK and the US, comes

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Speaker 1: from people improving their balance sheet. They're being very conservative,

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Speaker 1: so perhaps they're acting as if there's a ca shaped

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Speaker 1: economy because they are saving for the future and savings

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Speaker 1: rates are going up. So but I think this is

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Speaker 1: a phenomenon that's been happening over a long period of time.

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Speaker 1: Lots of academic writers have written about it, which is

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Speaker 1: that there's a lot of wealth growth at the high

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Speaker 1: end of the economy, driven in part by the equity markets,

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Speaker 1: especially in the US. I think that's part of the

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Speaker 1: reason why it's important for everybody to participate in the

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Speaker 1: equity markets to the degree they can and appropriate to

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Speaker 1: their own risk level, because it is a source of

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Speaker 1: wealth and it is less represented in portfolios, especially in

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Speaker 1: Western Europe and the UK.

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Speaker 3: Yeah. Yeah, that's a very good point.

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Speaker 2: And obviously there's a big budget coming up in the

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Speaker 2: UK later this month next month. But let me just

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Speaker 2: come back to what I was saying and the reason

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Speaker 2: I'm asking you about the health of the US consumer.

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Speaker 3: As all of a.

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Speaker 2: Sudden, people have started getting a bit worried about credit

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Speaker 2: conditions in the US, and you know, my colleagues in

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Speaker 2: Ploomberg last week asked you about, you know, certain exposure

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Speaker 2: that you had as a bank, but do you see signs.

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Speaker 3: Of perhaps credit deterioration.

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Speaker 2: Are you becoming perhaps a lot more vigilant about the

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Speaker 2: type of lending that you're doing based on the Tricolor

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Speaker 2: and First Brands experience.

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Speaker 4: Well, we didn't have First Brands, we had tri Color.

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Speaker 1: But we are absolutely becoming more vigilant because I think

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Speaker 1: whenever you have fraud, you've got to understand what you

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Speaker 1: can learn from it, what early warning science they might be,

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Speaker 1: and you have to look across the portfolio. You know,

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Speaker 1: credit is something you do throughout the cycle, but every

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Speaker 1: time there is an unexpected loss in credit, you have

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Speaker 1: to learn and I think it's important to be vigilant.

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Speaker 4: You know. We've also said, I've said it.

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Speaker 1: Many times through this year, that we are at the

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Speaker 1: end of a fifteen year long credit cycle, and so

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Speaker 1: you've got to be cautious. As credit cycles grow longer

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Speaker 1: and longer and longer, then you have incidents like this

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Speaker 1: which cause you to be more vigilant. And then we

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Speaker 1: have the economy, which, as we said just now, seems

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Speaker 1: to be at some sort of an inflection point. So

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Speaker 1: all of that tells you you've got to be a

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Speaker 1: little more vigilant.

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Speaker 2: Yeah, when you look at valuations and credits and equity,

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Speaker 2: do you feel that there's a risk that this is

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Speaker 2: going to fuel more and more speculative behavior and that

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Speaker 2: credit standards are going to begin to get water down

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Speaker 2: simply because people are chasing returns.

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Speaker 1: There's always the risk late in the credit cycle that

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Speaker 1: people are chasing returns. As you say, I think on

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Speaker 1: the equity market, obviously, there is a part of that

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Speaker 1: market AI related which is doing extremely, extremely well. There's

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Speaker 1: tremendous amount of allocation into it. Whenever you have these

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Speaker 1: vast amounts of allocation, there's always a risk of misallocation.

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Speaker 1: By the way, that doesn't mean that shouldn't happen, because people,

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Speaker 1: I think account for that in their returns forecast. But

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Speaker 1: for those who are lending, you know, we've got to

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Speaker 1: be careful because the bank is the lending.

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Speaker 3: Okay.

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Speaker 2: So putting that all together, how do you see the

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Speaker 2: momentum going into the last quarter of the year in

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Speaker 2: terms of just fmaking. Obviously there's a shutdown now, so

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Speaker 2: that's hampering some the IPO activity. But are the signals

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Speaker 2: positive as we head into the last quarter of the year.

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Speaker 1: So I think the signals are positive, and I would

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Speaker 1: look at it more fundamentally. We have interest rates which

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Speaker 1: are stable. We've got credit spread which are still relatively low,

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Speaker 1: so borrowing costs are still relatively stable. And then what

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Speaker 1: is happening with AI and the change in technology is

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Speaker 1: causing lots of companies to look at their business models

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Speaker 1: and see where they can become more effective. It's in

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Speaker 1: part what is purring a lot of the M and

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Speaker 1: A activity. So we think those fundamental forces will continue

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Speaker 1: through the rest of this year.

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Speaker 4: We've only got two months left and into next year.

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Speaker 2: Since you bring up AI, how is AI altering how

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Speaker 2: you think about your business?

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Speaker 1: It's altering how we think about it in a fundamental way.

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Speaker 1: We are taking we have some very important projects to

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Speaker 1: try to get the best out of it and to

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Speaker 1: understand how to get the best out of it. So

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Speaker 1: there's a technology at one side, there's making it available

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Speaker 1: to our staff, which we have done, and then there

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Speaker 1: is changing end to end business processes and doing them

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Speaker 1: through the lens of AI. That is the difficult part,

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Speaker 1: and that's the part that requires a lot of discipline

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Speaker 1: and commitment, and that's what we're trying to do.

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Speaker 2: Yeah, ultimately, though, you know, so many banks are spending

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Speaker 2: a lot on AI and AI applications. What is the

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Speaker 2: likelihood that you actually get that return on investments?

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Speaker 1: You know?

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Speaker 2: And I think there's this wideb reference MIT paper saying

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Speaker 2: ninety five percent of these AI applications are not generating

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Speaker 2: a return on investments. Do you have to be patient

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Speaker 2: or do you have to be more realistic in terms

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Speaker 2: of what you can expect?

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Speaker 1: You have to be selective and patient, And yeah, I

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Speaker 1: think you have to be realistic. So I think that

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Speaker 1: comes into the selectivity. You can't just you know, take

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Speaker 1: a quarter of a process and make it AI enabled

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Speaker 1: and the rest of it not. You can't just have

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Speaker 1: lots and lots of experiments to give it in the

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Speaker 1: arms of people so that they understand what the potential

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Speaker 1: is and they can in their own small ways improve

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Speaker 1: their lives, like we've all done with the internet, like

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Speaker 1: we've all done with a personal computer. But then there

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Speaker 1: are giant processes which are true in big banks that

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Speaker 1: you have to fundamentally reshape.

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Speaker 3: Yeah, is AI going to replace junior banker jobs?

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Speaker 4: I hope not.

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Speaker 1: I hope what we do is that we take AI

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Speaker 1: and we make the lives of all of our people

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Speaker 1: more productive, whether they are junior bankers, whether they are

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Speaker 1: junior traders, whether they are people in operations and in

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Speaker 1: customer service. I think if we look at it through

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Speaker 1: the lens of empowerment and enablement, we will get to

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Speaker 1: a better answer for both the company and for society

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Speaker 1: then if we look at it as a bit of

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Speaker 1: a zero some game.

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Speaker 2: I'm going to ask you one question about the UK budget,

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Speaker 2: because I don't think we're getting get an opportunity to

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Speaker 2: speak to you before the budget happens. Do you think

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Speaker 2: that this budget will be friendly towards the UK banking system?

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Speaker 3: Hope that it will be.

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Speaker 1: Well, I certainly hope it is. I have to say

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Speaker 1: the Chancellor is here this week. She's here today leading

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Speaker 1: a delegation and we will be part of that. I

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Speaker 1: think this government has been extremely friendly to the to

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Speaker 1: the private sector, and to the financial services sector and

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Speaker 1: to banking. They recognize our importance to the UK economy

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Speaker 1: and to the UK's rule in global trade. Uh and

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Speaker 1: so we see this as a joint interest between the

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Speaker 1: country and ourselves.

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Speaker 3: Can you tax your way to growth?

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Speaker 4: Maybe that's not for me to ask question for.

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Speaker 2: The answer a real pleasure. Thank you very much for

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Speaker 2: fielding all of our questions and congratulations on the RHQ

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Speaker 2: in Saudi Arabia that was the Berkley CEO cs venkat

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Speaker 2: Krishnan