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Let's focus now on numbers out of Berkleys. The first quarter investment banking revenue coming in at three point three to three billion pounds. That is broadly similar to the estimate of three point three to five billion. The net interest income entirely in line with the estimates. Let's dive into a bit more detail though. I'm very pleased to say that joining us now, Cspncate Krishnan, the CEO of Barkleys Vencat, a real pleasure to have you with us today.
Thank you so much for joining us. We want to talk about net interest margin, want to talk about the investment banking part of the business. I'll go to the net interest margin story first. If I could entirely inlign with estimates that number. This morning, yesterday we saw Lloyd's reporting something a little different. Under a bit of pressure as consumers shop around for higher rates of interest on savings products. How should we look at net interest margin
with all the volatility around rate expectations? What's your sensitivity to the rate environment that.
Well, Anna, thank you very much for having me and as you say, these results are entirely in line with our expectations and with what we put out on our investor Day about ten weeks ago. At that point we said that we had a target for twenty twenty six returns of twelve percent, ten percent and twenty four Our first quarter rot is twelve point three percent, which is
entirely in line. Our income numbers are in line, our costs are in line, and our capitalization is in the middle of our range at thirteen point five percent on CET one. As far as net interest income goes, you know, the rates markets have been volatile. There's been a round trip approximately of ninety bases points down ninety bases points back up in the tenure guilt in the UK, and roughly the same numbers in the US, and so it is very early. Our numbers are in line with what
we said. We've seen deposit growth, we've seen lending growth in mortgages and in credit, and so we're pleased with that. But it's one quarter in a longer journey of three years.
Yes, it is. I mean some of the talk at the margin has been a little bit more on the hawkish side, the higher for longer arguments producing that ninety basis points round trip to the upside, most recently Vancanta, as you mentioned, So where does that leave us then, as we go through the rest of the year and we look at what happens to rates, what does that do to net interest margin? Give us a sense of the sensitivity.
Well, I think net interest margin obviously when you have higher rates, you have a better lending difference. You pay more in deposits, but you get more in lending. And there's a firmness in the market. But you know, rates are very very volatile, so I would shy away from predicting a number in just the first quarter of the year.
Ven Kat, good morning, it's guy. As you say, the rates market is very volatile. Yet Q one thick revenue looks a little light. Why is that and why are we seeing big differences beginning to emerge between banks in terms of the way there before in that space? Great?
Yeah, So I think first of all, within the Barclays investment banking revenue complex, as in any quarter, you'll have some ups and downs. When we look at our own thick business, one part of it, which is one of our strategic areas, securitized products, has done very well on the right side. In Europe, here a little weaker. And then on equities, and we're talking from our equities flow
here at Barclays we've done extremely well. So on FIK, I think it's a bit of the complexion of the business and it's a bit about where the movement has been. But I think it's hard to read into any one bank in any one quarter. You've got to see the trend over a longer time.
Okay, do you think the US thick environment is more conducive to profitability than the European thick environment. It's interesting. We're going to be talking to BNP Parabar in just a moment, and I'm kind of interested in the compare and contrast between the way that European banks are performing in that space and US bank to performing in that space. Yeah.
I think, you know, for instance, Barclays we have a fairly big US presence, as you know. I think what you've seen in the US market is more active positioning. The market is of course broader across the full range of credit and the full and include securitized products. So I think there's a greater and richer opportunity in the product set in the US, which lends itself to greater performance by those with bigger US exposures.
It's pretty in London that you again for joining us this morning to offset though some of that kind of depression that.
You're seeing in the thick area.
Talk to us a little bit how you're viewing kind of the capital markets the deal flow as well. Is there enough momentum there or early signs of momentum there to offset some of the pain perhaps in the bond business.
Yeah, So I think deal flow and the equity markets themselves have been starting to show some buoyancy. As I said, we are on our equity floor here and then our own numbers and equities have shown an uptake for this quarter versus the same quarter last year. I think deal flow is increasing, you know, in our own energy business or our sustainability business and the transition business. We've seen nine deals in the last quarter and a bit, and so I do think that there is a deal flow happening.
I think though it's very early. You've got to give it a quarter or two to cement.
Is Barkleys prepared to capitalize on that when it does ultimately come to fruition, when it does actually see a little bit more momentum is Barkley's positioned to capitalize on that. Given a little bit of an exodus in terms of your bankers as well as lower advisory fees relative to your American peers, how do you tackle that?
Well?
It has been and it is a very very important area of focus for us. We want to increase what we do in MNA, we want to do increase what we do in equities. We have hired a lot of very talented bankers. We have focused on the energy transition, We have focused across the important sectors of technology and healthcare, and so we absolutely are positioned to capitalize on it and you should see the results over the coming quarters.
It's not something that's won in days, weeks and months, but over a longer period of time, and we've put the sustained investment and skills behind it and we will continue to do so.
Can I ask you about M and A within the UK market, Vencat, we've got a bit of M and A taking place. Barclay's you yourselves in the process of acquiring Tesco's retail bank offering. We also have consolidation with Nationwide buying Virgin Money. The building society space. We see consolidation there as well. Is this a sector where we'll see more and are you going to play more of a role in that? Well.
I think at any time you have an inflection in the interest rate cycle as we have had, with changing capital models and changing consumer regulation, it stresses business models and it therefore drives some amount of M and A. I think our own acquisition of Tesco Bank is something that's win win for Tesco and for us. We were looking to grow our unsecured lending and I think you
will see other institutions look at that. We have been very very clear our plan for growth is predicated on as an organic one obviously in our areas of focus, which are largely UK centered, our UK Consumer Bank, which has had strong earnings this quarter, our UK Corporate Bank, and our private banking and wealth. If we see some attractive opportunities which are tractable and reasonably integrated, we will look at them. But that's not the focus and thrust of our plan.
And talking about the UK Venkat, what are you seeing in terms of credit impairments in the UK, any areas of concern or any areas that are performing stronger than you would have anticipated.
Well, I think the UK continues to show strength in the economy. You know, there are minor takeups in unemployment and so on, but in the broad scheme of things, growth is strong, employment is strong. Productivity has to grow.
But that's a.
Great focus of both of both sides of the house. In the UK, our credit stats are very very strong. We continue in the UK to outperform estimates quarter after quarter in a row, and so we feel very strong. We feel good about the strength of the UK consumer and UK credit and that's part of our growth strategy in UK.
Blending Venkatz kind of just picking up on that. Then A do you think this is a is a country that needs rate cuts right now? Is that your sense is you sound quite positive if I'm being honest about what you're saying.
In the UK.
Use the word strength a lot. So do we need rate cuts? And the second thing is it is likely we are going to see a change of government. What do you think the change of government implications are for Barclays And do you think you are looking at a higher tax regime going forward post that election?
So, first of all, I think one of the most attractive things about the UK in this year in which there are elections all around the world is that there is relatively little difference in economic policy between labor and Conservative so as far as industry goes, as far as the financial sector goes, indeed, as far as the economy goes, I think that's a great source of strength because political change, I think is unlikely to introduce volatility, certainly nowhere compared
to what it was ten twenty thirty years ago in the UK in differences between the two parties. So I think that's a great strength of the UK, the commitment of both sides to growth, to productivity and to business. And so I do feel strongly about the UK, and I feel strongly about the momentum of the country.
Do you think, okay, we'll come out with the rates questions, just to say, do you think though that there is a greater likelihood that the financial sector in particular, which has had a raised tax burden of late, even under the current administration, we'll see that penalty going higher. And do you think if we do see increased taxation in the UK that that will be compensated for by lower rates potentially on the monetary side. Wondering what the balance looks like so.
Well, it's hard to say what the balance looks like because the rate policy comes from one side, which is the Bank of England, and the fiscal policy comes from Treasury. So I think as far as fiscal policy goes in the UK, growth is the most important thing. That is the way that we can fund the future of the economy. And as far as taxation goes, look I think the governments and the government today and the Labor Party both understand the importance of growth and the importance of balanced taxation.
So I'm again quite hopeful on the country.
Venkatt, let's build on that a little bit. When people talk about how they approach the UK, there seems to be a lot of questions about why the IPO market, specifically in London isn't catching up to some of the strength that at least you're talking about. Is there some sort of rebound in the London IPO market in the near future, and if not, what does it need to get there.
I think that's a very very good question. I think the equity market in the UK and equity risk culture needs a shot in the arm to be frank. I think that it's important for companies to list in the UK, especially for life sciences, technology companies and it needs many things which are slowly coming together. There's a part of it which is regulation. There's a part of it which is equity investment and people buying more stocks, pension funds
buying more stocks. And we think that some of the initiatives, for instance, the public flotation of the governments share of Netwest should be important aspects of that. And then the entire ecosystem of the UK and innovation in the UK coming to fruition in the IPO market is really important and Barclays is trying to play a critical and positive role in that. It will take time. It will take time to undo what has having been happening over twenty to thirty years.
Thank you, thank you very much, thank you for your time. We appreciate you. CSN Categoration now the CEO of Barclays