Barclays Reports Q2 2026 Results: Full Earnings Call Transcript

Barclays (NYSE:BCS) held its second-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.

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Summary

Barclays PLC reported a significant increase in shareholder returns with a £1 billion share buyback and an £800 million interim dividend, bringing first half distributions to £2.3 billion, up 61% from the previous year.

The company achieved a RoTE of 16.1% in Q2 and 14.8% for the first half, with all three UK businesses delivering RoTEs above 20%.

Barclays announced strategic acquisitions, including Best Egg and GoHenry, to enhance loan capabilities and attract new customer segments.

Investment in technology and operational improvements are expected to drive future cost flexibility, with plans to achieve a RoTE greater than 14% by 2028.

The U.S. Consumer Bank showed strong digital growth with over 25 million customers, and a new partnership with Samsung Wallet was announced.

For 2026, Barclays expects income to be around £31.5 billion, reflecting broad-based growth and productivity improvements in the investment bank.

Operational efficiencies have resulted in £350 million of gross savings year-to-date, with an improved cost-to-income ratio of 54% from 59% a year earlier.

The company remains optimistic about the UK economy, citing corporate lending growth and increased investment confidence among UK corporates.

Barclays plans to continue its focus on achieving a low 50s cost-income ratio by 2028, driven by ongoing investments in technology and process improvements.

Full Transcript

OPERATOR

Welcome to Barclays Half Year 2026 Results Analyst and Investor Conference call. This call will be recorded for replay and transcription purposes. These will be published on Barclays' investor relations website in line with Barclays' privacy policy. During the call, Barclays representatives may make forward-looking statements within the meaning of U.S. securities laws. These statements can be identified by the fact they relate to future events and circumstances and sometimes use words such as may, seek, continue, aim, anticipate, target, project, expect, estimate, intend, plan, goal, believe, achieve, or other similar words.

Forward-looking statements are based on the current beliefs and expectations of Barclays' directors, officers, and employees and are subject to significant risks and uncertainties. No forward-looking statement is a guarantee of future performance, and the Barclays Group's actual results, financial condition, or performance could differ materially from those contained in such statements. Subject to applicable laws and regulations, Barclays undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

For more information on forward-looking statements and other important information, please refer to the disclaimer notice in the presentation slides which accompany this call. At the end of the presentation there will be a question and answer session. If you would like to ask a question, please press star followed by one on the telephone keypad at the start of the question and answer session. If you change your mind and wish to remove your question, please press star followed by two.

Please stand by and you'll be placed through to the call shortly.

CS Venkatakrishnan, Chief Executive Officer

Here, having achieved 16.1% in the second quarter and 14.8% for the first half, we are balancing progressive returns and distributions with investment to secure sustainably higher RoTE. We are increasing shareholder returns, announcing a £1 billion share buyback and an £800 million interim dividend. This brings the first half distributions to £2.3 billion, up 61% versus the first half of 2025. In our investor update in February this year, I spoke of an accelerating ambition for Barclays forging segment-leading, operationally efficient businesses primed to support growth.

We said we would build the foundations for an all-weather RoTE from 2026 to 2028 with the aim of sustainably higher returns beyond 2028. As we discussed, our businesses are now revolving around technology, and our aim is to build standardized foundations, modernized approaches, and harmonized systems and processes. All of this is powered by our talented and inventive colleagues, and we are using additional capacity from our strong first half profitability to structurally improve Barclays' returns.

This program is showing encouraging results. Therefore, after our increase in distributions, we will use some of the capacity from our stronger first half profitability to take further cost actions later in 2026. We anticipate that this will create greater cost flexibility from 2027 onwards. These plans increase our confidence in delivering a 2028 RoTE greater than 14%, accelerating our progress towards an all-weather RoTE. Anna will expand on this shortly.

All three UK businesses delivered RoTE above 20% this quarter with consistent volume and revenue growth. Investments which we have made have allowed us again to monetize strong markets and banking volumes in the investment bank, where RoTE increased nearly 4% versus last year to 16% in this quarter, while the U.S. consumer bank delivered 10.5% RoTE excluding the American Airlines gain on sale. Operational improvements across the group are delivering stronger structural returns and a better customer experience.

We have achieved around £250 million of growth efficiency savings so far this year. As I have mentioned, we want our businesses to be segment-leading, driving growth through new capabilities and deeper client relationships. Our U.S. consumer bank is entirely digital with over 25 million customers and not a single branch. In this quarter we completed the acquisition of Best Egg, adding advanced consumer loan capabilities for our customers and partners.

We have also announced a partnership to provide card products in the Samsung Wallet in the U.S. Our segment-leading offering in the UK is Premier Banking. In this quarter we have commenced a refresh of our banking app and launched Premier Wealth Management to provide planning and advice to Premier customers with no upfront fee. We have also announced the acquisition of GoHenry, which we expect to complete later this year, and this will help attract the next generation of customers to Barclays UK.

Lastly, we are expanding and enhancing our branch network to meet the changing preferences of our customers. Our segment-leading proposition for wealth customers in the UK also extends to providing low-cost, transparently constructed, risk-appropriate products to help them build their financial futures. In addition to Premier Wealth Management, which has no upfront fee, from 31 May 2026 we have removed custody charges for all customers of Barclays Direct Investing, our self-directed investment platform.

This is now the most competitively priced such alternative for those who seek full-service investing with the security of a bank provider. I am highly confident in achieving the group RoTE greater than 12% in 2026, progressing to more than 14% in 2028. We have increased the group RoTE from 9% in 2023 to 12.2% in the past 12 months, and we have driven this improvement through consistent execution of our plan. We are on track to deliver around £31.5 billion of income this year versus the original £30 billion target.

This reflects broad-based franchise growth and progress to drive greater productivity in the investment bank. The benefits of strong performance to our shareholders: we have announced £9 billion of distributions since 2024, well on track for more than £10 billion at the end of this year. And by growing our highest-returning UK businesses, we are building the foundations for sustainably stronger returns in 2028 and beyond. I have told you before that the UK is a great place in which to do business and from which to do business.

Global and domestic events have not changed this. The UK economy has been growing in nominal and real terms and at a faster rate than the Eurozone, and this has supported real wage growth, rising house prices, and stable employment. And as you can see from our results for several quarters, Barclays is helping foster UK growth, not just benefiting from it. Anna will outline how we are doing so shortly. Declining investment since the late 2000s meant that UK corporate debt to GDP had fallen to a multi-decade low.

Corporates have had the capacity to invest, but not the confidence. This seems to be changing. The majority of corporates we surveyed tell us that they are gaining confidence in their prospects. Firms plan to increase investment in the next 12 months, including in technology. This is broad-based across sectors and regions. With overall UK corporate lending up 9% in the past year, Barclays is backing the future of customers and clients across the UK.

We are driving UK growth and prosperity, and all the while bringing stronger and more consistent returns for shareholders. Anna, over to you to take us through the second quarter financials in more detail.

Anna Cross, Group Finance Director

Thank you, Venkat, and good morning everyone. Slide 6 summarizes the financial highlights for the second quarter and first half, but I will begin with slide 7. Q2 RoTE increased 3.8% year on year to 16.1%, including a 1.2% benefit from the AA portfolio sale. Profit before impairment increased by 29%, reflecting income growth and positive operating jaws of 9%. We continue to drive EPS growth, which increased 43% year on year to 16.7p. This is disproportionately driven by operational progress, with attributable profit up 36% year on year.

As you can see in the bottom right, lower share count from £3.2 billion of buybacks executed in the last 12 Months further amplified this. We grew income by 16% to 8.3 billion and expect 2026 to be the ninth consecutive year of income growth, as you can see on slide 8. More stable income streams from financing in markets, retail, and Corporate grew from 4.6 billion two years ago to 5.9 billion in Q2. Given year-to-date momentum, we now expect income to be around 31.5 billion, up half a billion from prior guidance. Group NII excluding IB and head office increased by 10% year on year.

Lending momentum continued across all divisions while deposit growth supported full reinvestment of the structural hedge. We now expect Group NII of more than $13.7 billion in 26. Structural hedge income growth is predictable and benefits all divisions. Accounting for circa 45% of Q2 Group NII, it will drive around half of the planned Group income growth from 25 to 28 and remain a meaningful tailwind beyond. As a planning matter, these expectations are based on a 3.5% reinvestment yield.

Swap rates were above this level again in Q2 at 4.3%, further supporting NII in future years. Moving to cost, the Group cost-to-income ratio improved to 54% from 59% a year earlier. Year to date we have delivered 350 million of gross efficiency savings, including 200 million in Q2. Total costs increased by circa 300 million year on year, reflecting business growth actions. These include around 200 million of additional compensation accruals in Q2 in the Investment Bank to better align income and costs, and a decision to shift the compensation mix of material risk takers, our highest paid employees.

Reflecting regulatory changes, awards to be granted from 27 will move towards higher variable and lower fixed pay with a shorter vesting period. This will increase costs in H2 by 100 to 150 million, weighted to the IB, and provide greater cost flexibility from 2027. As referenced by Venkat, we anticipate taking additional structural cost actions in H2 26, funded by stronger H1 profitability. Our recent run rate is around 300 million in each of full year 24 and 20.

Having recognised around 100 million so far this year, we anticipate up to 500 million in H2. Given an expected ROI of around 100% within 12 months, these actions should drive a commensurate improvement in 27 gross efficiency. The Group's distribution plans and financial targets will not be impacted, including the high-50s cost-income target. Turning to impairment, the Q2 Group impairment charge of 571 million equated to a loan loss rate of 51 basis points.

Consumer and Corporate balance sheets remain robust and borrowers are behaving rationally. As an accounting matter, consensus unemployment expectations increased as we anticipated, consuming the post-model adjustments that we recognized last quarter in Barclays UK and US Consumer Bank. We retained a 68 million PMA in the Investment Bank, recognizing downside bias due to global macro uncertainty. For 26 we continue to expect a Group loan loss rate around the top of the 50 to 60 basis point range.

US consumer behavior remains resilient, as we show on slide 45 in the appendix. We had expected the American Airlines portfolio exit to increase 30-day and 90-day delinquency rates by circa 30 bps and 20 bps respectively. Instead, both rates fell in the quarter. This reflected repayments due to seasonal tax refunds which were larger than usual following US tax changes. Delinquencies in the General Motors portfolio also normalized as expected. Turning to UK lending, consistent execution of the strategy means that we have deployed 25 billion of UK business growth RWAs since 24, on track for circa 30 billion by the end of 26.

UK lending grew 5% year on year, consistent with our guidance and recent track record. Our mortgage application share increased versus Q1, having exceeded the stock share for the past nine quarters, and our retention experience remains strong. The multi-brand strategy is also working in cards, demonstrated by consistent acquisitions since Q1 25. As you can see in the top right, business and corporate investment appetite remained strong. Core business banking lending has grown consistently for six quarters and UK Corporate lending grew by 12% year on year, continuing the trend of growing faster than the UK market for the past 18 months.

The next slide shows how we are doing this as part of the Corporate & Investment Bank. Prior to resegmentation in 24, UK CB did not have the capital to lend nor the investment in technology that it needed. As you can see in the top left, this resulted in a loan-to-deposit ratio of 31% compared with 50% to 75% for peers, and a lending market share of 9% versus 22% for deposits. Since then we have been on a journey to rebuild UK CB. Whilst we have further to go, lending share has risen by 70 basis points and deposit share by 40 basis points, with the loan-to-deposit ratio increasing to 35%.

Lending has grown by 19% in the past two and a half years. We have attracted around 1,400 new clients in this time, with around 40% already borrowing from us, driving circa 70% of loan growth. The risk characteristics of these clients is similar to the existing book, as you can see from the default grade statistics in the bottom left. Pleasingly, we have halved the time taken for new clients to use four or more products. Investments in iPortal are delivering real benefits, with 65% of client interactions now self-serve.

There are further opportunities as we add functionality to the enhanced mobile app and migrate all clients to iPortal during 26, reducing the number of access platforms from five to one. Now turning to Barclays UK, we show the financial highlights on slide 16 but I will talk to slide 17. ROCE increased to 20.4%. Income grew by 7% year on year while costs were flat, supporting positive operating jaws and a 3% reduction in the cost-income ratio to 53%.

During Q2 we integrated Tesco Bank's finance and HR systems. We continue to expect a low-50s cost-income ratio in 26, though the anticipated SBAs that I discussed earlier may lead to higher costs in H2 versus H1. These will drive gross efficiency savings in 27, supporting lower year-on-year costs in 27 and 28. NII increased to 2 billion, up 8% year on year and 1% quarter on quarter. Structural hedge income momentum was partly offset by product margin headwinds, which were slightly more pronounced than in Q1.

The structural hedge top-up at the end of last quarter led to a switch from product margin to hedge income with minimal net effect. Maturities of higher-margin mortgages written in early 21 reduced product margin as expected, but the ISA market was larger and more competitive. In Q3 we expect a neutral to positive product margin despite competitive deposit pricing, reflecting card seasonality and day count. For the full year, we expect NII to be around the middle of the 8.1 to 8.3 billion guidance range.

Deposit balances increased 1.7 billion in Q2, with stable current and savings accounts. We priced time deposits selectively to deepen Premier customer relationships. The acquisition of Gohenry, which we expect to complete in Q4, provides further opportunities to drive our Premier strategy. Lending has grown consistently for two years, including 5% year on year growth in Q2, as the strong mortgage application volumes that I called out last quarter drove strong completion in June.

Moving on to the UK Corporate Bank, supported by the operational progress I outlined earlier, UK Corporate Bank delivered a Q2 ROTE of 21.3%. Income grew by 8%, driven by strong NII, up 15% year on year reflecting volume growth and structural hedge momentum. Loans increased 12%, and we grew deposits. Private Bank and Wealth Management ROTE was 26.9% in Q2, in line with the greater than 25% target in 26 and 28. Client assets and liabilities grew 8%, and favorable valuation effects contributed to a 15% year on year increase in AUM.

Net new AUM of 1.8 billion for H1 overall was broadly similar to the same period last year, with Q2 inflows of 0.3 billion. Income grew 5% while costs increased 12%. We plan to continue investment, including additional marketing and staff costs following the launch of Planning and Advice. While this investment will drive future growth, we now expect a mid-70s cost-income ratio in 26. Turning to the Investment Bank, we continue to drive stronger and more consistent returns by maintaining RWA discipline, improving income stability, and delivering operating leverage.

For nine consecutive quarters we increased RWAs modestly to support client demand, with around 40% of the year-on-year increase due to FX, whilst driving income to average RWAs up by 100 basis points to 7.7%. We did this in a disciplined way with stable VaR and no loss days, as we show on slide 40. More stable income from Financing and International Corporate Bank continued to grow, as did our focused businesses. Reflecting past investment, ROCE was 16%, up 3.8% year on year.

Operating jaws were again positive despite additional performance costs in the quarter, and changes to compensation mix will support further cost flexibility from 27. We remain confident in the circa 60% cost-income ratio and 12% ROCE target for 26. Despite the near-term cost of these changes and anticipated SBAs, our strategy to improve the diversification of income is driving a stronger, stable income base and less seasonal variation. As we show on slide 41 in the appendix, we are rebalancing towards Equities, which accounted for 32% of income in Q2 versus 22% in 23, and Advisory and ECM, where circa 70% of fees were earned in the US.

By 2028 we expect the International Corporate Bank to become a larger part of the IB, driven by Transaction Banking, where we grew US dollar deposits by 16% year on year. Using the US dollar figures, Markets income increased 17% year on year. Equities income was up 44%, driven by Equity Derivatives and Prime Financing, both focus areas, whilst FIC was stable versus a strong comparator. Around a third of the growth in Markets income came from Financing, which grew 16% year on year and, for the eighth consecutive quarter, this reflected growth in prime balances, particularly in Asia, with around 80% of growth coming from Markets' top 100 global clients. Investment banking fees increased by 30%. Strong investment-grade activity in DCM more than offset a reduction in LevFin, reflecting deliberate risk and return-on-capital decisions. We participated in a growing advisory wallet with improved deal economics supporting 51% fee growth. The M&A pipeline remains robust, with our share of announced deal volumes due to complete in 26 increasing year on year. In ECM we participated in 9 of the top global deals in the quarter, with income up 91% year on year, and the IPO pipeline for H2 remains strong.

Turning to the US Consumer Bank, let me start by outlining how portfolio changes affect the operational metrics. In April we exited the American Airlines partnership, which reduced reported card receivables by circa $6.5 billion. The acquisition of Bessverger in May added around 11 billion of managed balances. As expected, these are originated-to-distribute, so do not materially affect reported balances, NIM, or funding mix. Shown here on an organic basis, we grew net receivables by 2% quarter on quarter.

The mix effects from exiting AA drove a 40 basis point increase in NIM, and the share of retail card balances increased to 24%. Given continued retail deposit growth and lower funding needs, the share of funding from core deposits increased to 82%, and the cost-to-income ratio was 39%, or 49% excluding the 225 million pounds gain on sale, Q2 RoTE was 30.2% and we remained focused on delivering a circa 12% RoTE in 26. Excluding the AA gain on sale, we delivered 10.5% RoTE in Q2 and 11% year-on-year income growth on this basis. In Q2 costs increased by 12% reflecting best day costs of 45 million dollars per month since the start of May. Volumes in the existing business and Best Egg were as we expected. NIM of 13.2% was broadly as expected despite deposit margin pressure and we still expect NIM greater than 13% for 26.

Higher benchmark interest rates in the quarter compressed market-wide pricing of originate-to-sell loans, creating pressure on the non-NII line. Depending on the persistence of this effect, quarterly income may not fully build back to the Q1 level during 26 despite volume momentum. Turning to capital, we ended the quarter with a CET1 ratio of 14.3% given capital generation of 62 basis points in Q2 and 115 basis points in H1. We have announced a 1 billion share buyback and an 800 million dividend equivalent to 5.9 per share pro forma for the buyback.

The CET1 ratio is 14%, consistent with our intention to operate around the top of our 13 to 14% CET1 range. Pending regulatory clarity, attributable profit growth should continue to drive strong capital generation and EPS momentum, which we amplify through share buybacks. Group RWAs were stable at 365 billion. Guidance for regulatory RWA inflation in 27 remained unchanged at 19 to 26 billion. This includes Basel 3.1 changes on 1 January and implementation of IRB in US Consumer Bank, which we now expect in half two. 27 group Pillar 2A requirements are expected to reduce following each of these events and we will provide further guidance as we get clarity on the broader regulatory landscape. We note the recent Financial Stability Report that believe more can be done to drive UK growth. Proposed leverage changes would reduce Barclays Tier 1 leverage requirements modestly by 8 basis points, supporting its position as a backstop measure. We continue to work closely with the Bank of England to promote international alignment and competitiveness of the UK financial services sector.

As usual, a word on our overall liquidity and funding on slide 32. We have strong and diverse funding including a 75% LDR and an NSFR of 136% and we are highly liquid across currencies with an LCR of 158%. These measures reflect purposeful and prudent management of our balance sheet, delivering resilience, thus ensuring we have capacity to support customers in a range of environments. TNAV per share increased by 39 pence or 10% year on year to 423p.

This mainly reflected organic earnings which should drive the overwhelming majority of future TNAV growth. To summarize, operational progress at 23 continues to support strong returns and EPS growth and we remain well placed to deliver all group targets for 26 and 28. Over to you, Venkat, for concluding remarks.

CS Venkatakrishnan, Chief Executive Officer

Thank you, Anna. We are continuing to build upon the momentum of our delivery in the first two and a half years of our plan. We will further strengthen the foundation for an all-weather RoTE by accelerating investment and delivering operational progress. I will now open to Q and A. As ever, please limit yourself to two questions per person so that we can get around as many of you as possible. Please also introduce yourselves as you ask your questions.

OPERATOR

Thank you. If you wish to ask a question, please press star one on your telephone keypad. If you change your mind and wish to remove your question, please press star followed by two. Our first question for today comes from Callum of Goldman Sachs. The line's now open. Please go ahead.

Chris, Analyst at Goldman Sachs

Yeah, good morning everybody. Two questions from me. You talked about a commensurate improvement in group efficiency in 2027 from the £300 million of additional STA spend in H2. So could you comment then on how you feel about the 18.2 billion of opex that consensus has in for next year? Does that feel too high or too low when you think about the FTA tailwind on the one hand versus some of the higher compensation costs on the other hand? And then second on equities, I get the mid-40s print that looks a bit low versus peers, but it's basically in line on a two-year stack.

I just wondered if you could give any color on sort of regional trends, growth in the US and APAC, whether how much that would have been higher versus what we see here in EMEA and in financing. I was surprised that was flat Q on Q. It seems like prime was really strong across the street in the second quarter. So if you could unpack that financing sequential evolution a bit. Maybe it's fixed financing versus prime, maybe it's balance sheet discipline.

Just anything you have to say there on that topic as well, please. Thank you.

Anna Cross, Group Finance Director

Okay, Chris, I will start and then I will ask Venkat to make some comments. So what we have said is that we expect to take up to a further 300 million of structural cost actions in the second half because we see compelling opportunities to get a good return on investment and drive the long-term sustainable returns of the business. In so doing, we expect a commensurate improvement in the gross efficiencies. Now what we haven't done is given absolute targets in costs.

The way we think about costs is because returns are our North Star. Cost-income ratio is our North Star because to the extent that the business has a degree of momentum around it, we may incur further absolute cost. So that's what's really important to us. We believe that the cost-income ratio in 2028 will continue to be a low 50s print and we expect 2027 to be a meaningful step towards that from the high 50s cost-income ratio that we expect in the current year, but fully expecting a commensurate increase in gross efficiencies.

In terms of the equities print, that is very much driven by the investments that we have made in the business. What we see all the way across the investment bank is that we are growing in the areas that we expected to grow within. So particularly within equities, what you're seeing is a strong print in equity derivatives and also a strong print in Prime. We have some exposure to the Asian market through our Prime business where we're essentially satisfying the demands of our global clients.

And we noted that about 80% of that growth is currently coming from our top 100. So it's just reflective of that global strategy. Venkat, anything you would add?

CS Venkatakrishnan, Chief Executive Officer

Yeah, and I think just to add on to that, you should view this picture in terms of the longer term of what we said about the investment bank. So one is just starting big and then coming small. We said that we are going to operate with a stable capital base of around 200 billion pounds, give or take, and we've been there. Second is we expect that that would be a smaller fraction of the overall bank, which it is. Third, that we'd be increasing top-line revenues, increasing returns, which means costs fall relative to revenues and increasing capital efficiency.

And we've shown you a number of 7.7% return on RWA. So all of those things have been achieved over the full period and I believe in nine quarters out of ten within that. We also said we'll diversify the business both in terms of stable sources of income versus intermediation and then the role of equities versus fixed income. So, you know, there are slides here which sort of indicate that. Page 41 for instance, shows you the rising stable sources of income from financing and the international corporate bank at the bottom.

Equities is now 30-odd percent of the bank's revenue in markets. And that is, you know, to be desired. This is the house that fixed income built. I'm very happy, I'm fond of staying, but it's increasingly the house on which we lean on equities. And as Anna said, the regional shift has gone a little bit towards Asia, helping our large clients access the Asian markets. Our balance sheet has grown a little to take advantage of that. But you should continue to see this business operate with the principles and the cadres which we've set out two and a half years ago: stable capital, increasing capital efficiency, revenue improvement, disciplined cost management, higher returns and a more diversified business in terms of stable sources of revenue versus intermediation, equities versus fixed, financing versus the rest.

Chris, Analyst at Goldman Sachs

Thank you.

OPERATOR

Next question, please. Our next question comes from Alvaro Serrano of Morgan Stanley. Your lines are open. Please go ahead.

Alvaro Serrano, Analyst at Morgan Stanley

Good morning. Thanks for taking my questions. First of all, on deposit competition in the UK, you call out product margin being slightly weaker, presumably that's the ISA season, deposit dynamics. And the question is really what's the level of confidence that it's just the ISA season because loan growth is strong. Presumably we've seen in other regions that driving persistent deposit competition. But you're obviously confident because your UK and I guidance is pointing to 3% quarter-on-quarter growth runway more or less for the next couple of quarters.

So maybe if you can expand on your confidence why this is transitional and NII should accelerate from here and we shouldn't worry about that deposit competition dynamics. And the second question on US cards, US Consumer business, Consumer Bank. I don't think I've heard it this time but apologize in advance if I didn't catch it, but I think you were talking to a 14% NIM in the second half as a run rate for US cards. Can you sort of touch on that if that's still the expectation and be a bit more, expand on the broader revenue picture for the second half.

I know you touched on the securitization margins, but just what to expect as a run rate going forward. Thank you.

Anna Cross, Group Finance Director

Okay, thank you, Alvaro. I'll start on both of those and then Venkat may have some comments. As we called out in our prepared remarks, we have seen a high level of deposit competition in the second quarter of the current year. You're absolutely right. That relates in large part to the ISA season. We saw an ISA season that was 7% higher than the previous year and very competitive in terms of its pricing. Now most of our maturities were actually in the first quarter, most of the market maturities were in the second quarter, and that allowed us to somewhat stand back and price very selectively and use our Premier proposition to really defend and maintain our market share, which is what we have done. And about 85% growth that we've seen in the ISA balances year on year are driven by our Premier customers, which is exactly what we want. So we think we've done a good job. That said, you can see some marginal pressure in that product margin. We said that we expected that product margin cash impact broadly flat quarter on quarter and you can see it was a little worse. And that's essentially down to that fact.

As we look forward from here, we have confidence in the NII progression across Q3 and Q4. And, you know, if you recall what we said at the outset of the year, we felt that Q1 to Q2 would be a bit more muted. Initially we said stable, then we expected a little bit of growth, which has clearly been somewhat challenged. But from here on in we continue to expect growth. Why? Because in the second half of the year we see cards seasonality. There is a day count component.

We have seen mortgage margins somewhat recover after the compression that we saw in the Q1 swap bottom volatility and, very importantly in relation to deposits, a couple of things. Firstly, you've got the concentration of the ISA market behind you, but secondly, remember that term deposits are in large part one-year products and we saw the start of this more intense competition in the second half of last year. So as we go forward from here, what you're going to see is that the maturing margin and the prevailing front book margin are somewhat converging in the second half of the year.

That was not true for the market in the first half. If pricing stays where it is, they'll be broadly neutral by Q4. So we're taking all of that into account and we expect sequential growth in BUK NII into Q3 and then again into Q4, so moving into USCB. So in the quarter we've seen two impacts that relate directly to the elevated level of rates versus what we expected. And I should say that the underlying business is performing as we anticipated. So we're seeing good underlying cards growth, particularly, for example, within our General Motors portfolio.

We're seeing good volumes within Best Egg. The NIM progressed to 13.2% as we expected with the roll-off of AA. We do expect NIM progress from here, and I expect it to elevate into the third and fourth quarter because rates are a bit more elevated, deposit margins are a bit more compressed and therefore you might see that hold it back a little bit. But I do expect to see further progress from here. The more material impacts in US cards are actually around non-NII, as you called out, and again that's rate driven and it's just because the reference rate is a little bit higher than we anticipated but APRs haven't really moved.

The prices of those securitized loans going into the market is a bit compressed versus what we expected. But as we step back, Q2 has been a really pivotal quarter in terms of what we expect from this business on a go-forward. Ben, you might want to comment a bit more.

Ben

Yeah, I mean, look, first on this business, you know, we've been talking about this for a number of years. At its core it's a partnership card model, but we've been building beyond that. First, we've been rebalancing it towards retail. That's on the top right of page 28. The second is we've been increasing the amount of deposit growth, especially on the retail side, and its share of total deposits. That's the bottom left and middle of page 28. Third is we have built essentially a digital bank in the US now with 25 million customers and our single branch.

It's got deposits, it's got cards, and now we have Best Egg direct-to-consumer loans. In a way, this part of the bank has been the leader for the bank in digitization, in efficiency, in harmonizing systems — all the things we are investing in and which some of our SCAs are about. And what you can see at the bottom right is the cost efficiency in that group where the cost-income ratio is, you know, I think the best in the group at around 39%. And it allows two things.

One is high cost efficiency. This is what we are trying to do everywhere. That's what the SCAs announced this quarter are about. Second, it allowed us to bring in a lot of change quickly because of the tech platform. So we transitioned American Airlines, we've integrated Best Egg, and we've announced a product launch on Samsung with both their cards on the way for a digital wallet. So, you know, we're very ambitious about this part of the bank and hopefully you'll continue to see strong results coming from it.

OPERATOR

Thank you. Okay, thank you. Thank you, Alvaro, for the question. Next question, please. Our next question comes from Guy Stebbings of BNP Paribas. Your line is now open. Please go ahead.

Guy Stebbings, Analyst at BNP Paribas

Hi. Morning. Thanks for the questions. The first one was back on the US consumer. There's obviously a lot going on in the quarter with AA and Best Egg. I think we've previously said that the Q1 figure of 983 with maybe a little bit of a growth was sort of a reasonable gauge into Q3 and beyond. I'm just trying to check. I think you made an earlier comment because it all suggests maybe that wasn't the case. Can I just sort of check that comment you made earlier in terms of when we get back to that Q1 run rate?

I seem to remember at Q1 as well you talking about a couple of upside to consensus US consumer NII — it moved a bit — but maybe able to reflect it all on where market expectations now sit for that business would be helpful. And the second question was on cost investments. I mean, clearly a very good revenue performance helped by the IB giving you that sort of extra capacity for investment. Appreciate you yourself scope for further investment here.

But as we look out to 2028 and the cost-to-income, which you maybe highlighted being the North Star, is your convictions improving as to where you land within a low-50s cost-income ratio, given that incremental investment you're making? And just wondering if you can look at where market expectations — and 54% — was actually ambitious enough, if you like. Thank you.

Anna Cross, Group Finance Director

Okay, thank you, Guy. So if you recall, and clearly you do, in Q1 I said I felt that Q1 was a good basis for subsequent quarters. I think, given those two rate impacts that I've called out, it feels like it will take us a little bit longer to build back to that base, Guy. That's really what we're seeing here, both primarily in terms of those sold securitization prices. Although remember, as a bank we do have some optionality here. So we have probably greater optionality than some participants in that market in that we can choose to hold some on the balance sheet if we feel that's the right thing to do.

But, you know, as Venkat said, our conviction about this business strategically is completely unchanged by a quarter's rate expectations. And we still feel that we have the organic momentum in the existing cards business, in Best Egg, and in what we have announced in respect of Samsung. You might also remember that in Q1 I talked about a pipeline of future partners where we would bring everything into one place for them. And that's really what we were referring to when we reflect that Samsung partnership.

More to go there. In terms of NII in 2028 — well, I'm not going to mark-to-market this every single quarter. What I would say is I made a comment, clearly analysts have responded. Thank you. And as I see the movement, I see it in the two particular areas that I called out at the top. One was US cards and one was our UK corporate bank. If I can move on to cost investments. I mean, as Venkat said, what we are focusing these investments on is exactly what we said we would do in our investor update in February.

So it is around platform modernization, it's around process optimisation, it's around change delivery modernization, and, in so doing, making the organization simpler on a permanent and enduring basis. So clearly what that investment does is it gives us greater confidence that we will be able to achieve our results in the short to medium term. So these are exactly the investments that we anticipated that we would be making. But two things have really changed since that investor update in terms of timing.

The first is just the momentum of the earnings. I mean, our earnings per share are up 43% in the second quarter and that allows us to make these investments whilst balancing our primary two commitments, which are progressive returns and progressive distributions — so ensuring that everyone is sharing in that momentum. And then the second thing is, the more work we do, the clearer the view that we have on the opportunities that are in front of us to make the bank more efficient.

And that's why we have the conviction in the ROI. So from our perspective, it gives us more confidence about a RoTE target which is open-ended for 2028 and, actually just as importantly, beyond that point, because we said what we were doing here was somewhat deliberately not optimizing the short-term ROI of the business, but to be looking forward and creating, yes, a progressive ROI pathway, but a sustainable and higher level of ROI in 2028 and beyond — what we called an all-weather rating.

So that's really what we're trying to achieve, but see it as more conviction in 2028 and beyond.

CS Venkatakrishnan, Chief Executive Officer

Yeah, I mean, look, just to add a few things to Anna. First of all, absolutely we have much more conviction today on the cost-income ratio target for 2028. It is in the low 50s. Second, as I said in the answer to the previous question, look at the US Consumer Bank as a bellwether indication of how this works in practice. What happens is that we invest in technology and processes and systems and you see a result in cost-income ratio. So that's why we have the greater conviction.

Third, reiterate Anna's point. We are using the benefits of our higher returns over the last two quarters to invest in the things that we said we would. First, share the distributions with you, our shareholders. Second, of course we will capitalize progressive returns to you, our shareholders, and importantly to continue to hit and invest in the business so that we can achieve these targets with greater confidence and speed. That's how you should read everything today.

OPERATOR

Thank you so much, Guy. Can we have the next question, please? Our next question comes from Jonathan Pierce of Jefferies. The line is now open. Please go ahead.

Jonathan Pierce, Analyst

Hello, good morning. I've got two questions, please. The first is really just a clarification of some of the answers as you've given in the last 30 minutes on both net interest income and costs on the NII. It's sounding, Anna, from what you were saying, as though US CB forecasts for 2028 have maybe got to sort of the right place, but UK CB is still a bit low. I know you don't want to be marking to market every quarter, but it would be helpful just to get a sense as to whether I've read between the lines correctly there.

And then on the cost income ratio. Again, totally understand you don't want to be bound to an absolute cost number next year, but consensus is at 55.5% on the cost income ratio. That feels a meaningful step down from this year towards the low 50s in full year 2028. Are you comfortable with consensus cost income ratio for next year? So sorry to focus on consensus and guidance. The second question is the dividend. Nice increase in the dividend in the first half.

In the last four years, the first half dividend has tended to be 30 to 35% of the full year. Is that the sort of shape we should expect moving forward? Because if it is, it's obviously pointing to a slightly higher dividend this year than consensus has got in and probably a little more than the 2 billion pound that you talked about as well. So if you could help us with the shape of the dividend, that would be good. Thanks.

Anna Cross, Group Finance Director

So, Jonathan, let me take your first clarification point. So I'll just repeat what I said. I'm not going to market to market. Clearly the analysis community has listened and we've seen a movement in that community incentives for 2028. We have confidence in all of our businesses and we have confidence in the UK Consumer corporate bank as well as the US Consumer bank. So, you know, we've seen both of them move up in terms of cost income ratio with its high 50s this year, our expectation low 50s in 2028.

We haven't given you any guidance on at all for 2027. But what we are saying is that given that we are committed to progressive returns year on year and progressive distributions, you should expect us to be making a meaningful step between the high and the low position in 2027. And then coming to dividends. You're right. Over the last few years we've typically done 1/3, 2/3. We've made a deliberate shift towards a 40/60. And the reason that we've done that is we feel it's more reflective of our US and our European peers and it is more consistent with our general desire to get distributions into the hands of shareholders more quickly.

See it as consistent with the move to the quarterly buyback. So what you should be expecting is that at the half year we are at 9 billion of our at least 10 billion guidance that we gave you for 24 to 26. We paid 800 of the 2 billion dividend already, so you should be expecting 9, 1 point plus another 2 quarters of buybacks. Clearly we said our distributions would be progressive and that's probably the limit of the guidance I can give you at this stage, Jonathan, but hopefully you can see the conviction that we have around distributions which are up 61% year on year.

Jonathan Pierce, Analyst

Okay, thanks very much.

OPERATOR

Thank you, Jonathan. Next question, please. Our next question comes from Benjamin Toms of RBC. Your line is now open. Please go ahead.

Benjamin Toms, Analyst at RBC

Morning both. Thank you for taking my questions. The first one's on PBWM. New AUM in PBWM in Q2 was relatively weak. Can you just give some colour about what's impacting performance here? I think I was a little surprised. My feeling was you've been quite active in trying to make your proposition more attractive in this space. And then secondly on BUK, you spoke in previous calls about your strong mortgage pipeline. Have higher swap rates and the new, the changes, potential changes to stamp duty, albeit potentially changed overnight, had much of an impact on your mortgage pipeline as we stand today?

Thank you.

Anna Cross, Group Finance Director

Okay, thanks, Ben. I mean, there's nothing I would particularly call out on PBWM. I can hand to Venkat for what we've been doing there, but in absolute terms these are not very large numbers and therefore they can be a bit lumpy. Clearly we have ambition for this business, for it to be much bigger so you can get some lumpiness quarter to quarter. As we look over the first half in totality, it looks completely fine and that's broadly similar to the previous year.

Let me just deal with mortgages and then I'll hand to Venkat on PBWM more generally. But what we've seen is a strong quarter in mortgages. As I mentioned before, we've seen somewhat of recovery in margins in application margins in Q2 after the compression that we experienced in Q1. Actually the gross completions were very strong. We had a 10 billion pound quarter. That's the biggest quarter we've ever had. And June in particular was a very significant month for us.

So no signs as yet. There's real wage growth in the economy and good demand for mortgages as we see it across the bank. Our gross share has exceeded our stock share now for many, many quarters. And clearly we have quite a breadth of proposition now with Kensington and Place. The only thing I would call out is that we have seen a slight change, if you like, in the mix of what people are looking at. So a couple of things. Firstly, people are remortgaging quickly given, if you like, that uncertainty in the market.

And secondly, we're seeing a move to lower tenors and more tracker products relatively speaking just as customers are seeking to secure, if you like, a lower rate in a slightly more uncertain environment. So that's the only thing I would call out at this stage. Venkat?

CS Venkatakrishnan, Chief Executive Officer

Yeah, look on PBWM. And of course I'll reiterate what Anna said that you'll see, given the size of this business, some movement quarter to quarter. But I think again the broader picture here is very important. The overall returns of this business are affected both by the growth of the business that you see, as well as our investment. Our investment comes not just in technology, but in the way in which we are constructing products, making them more accessible.

You know, our broad goal for the wealth management and directed investing part of this, which is much more of the mass market in the epa, is to make available low cost, transparently constructed and priced risk appropriate options to the investment public. We want them to invest in their financial futures. And in this quarter we've done two things to make that easier. One is that we removed custody pricing for custody targets for all customers in markets, direct investing.

So with that removal of custody charges, we've got the most competitively priced alternative for those who seek full service investment with the security of dealing with a large provider, particularly a bank. Another thing we did as part of our premier product in retail is that we've launched something called Planning and Advice which allows premier customers to access human led advice through our app, again with no upfront fee. So all of this is a form of investment in the future of financial planning and we expect to see the results of this investment over time.

But you're absolutely right to point out that this is an important area of focus here and hopefully a long term growth area for us.

Benjamin Toms, Analyst at RBC

Thank you.

OPERATOR

Okay, thank you, Ben. Perhaps we could go to the next question, please. Our next question comes from Chris Kant of Autonomous. The line is now open. Please go ahead.

Chris Kant, Analyst at Autonomous

Good morning. Thanks for taking the questions. I just wanted to come back on the UK and PBWM, if that's okay. On the UK and the 8.2B and implied NII figure, I know you said middle of the 8.1 to 8.3 range, but let's just work with 8.2 for the sake of argument. Is that specifically assuming 3.5% swap reinvestment in the second half? Because consensus is about 50 million higher on the full year, but it seems like maybe 30 million of that is just consensus assuming a foreign change reinvestment rate and perhaps sticking to the 3.5 planning assumption.

And also on this 8.2, if I think about the quarter over quarter sequential growth, it looks like you're implicitly saying actually into the second half the NII build is faster than consensus have in and that probably we get to the same 4Q exit run rate, arguably higher if we trued up for swap investment. So that's on the 8.2. And then just following up on the previous question on PBWM and your comments, Venkat, about the price point on direct investing paying off over time, can you just give us a sense of how you see this fitting into the broader customer strategy in the UK?

Obviously if you're not charging custody fees, I assume that the plan is not to kind of custody fees back up at some point down the line. So is this really just trying to improve customer stickiness? Is that how that fits into your strategy of rebundling the UK banking relationship now that you can cross sell a little bit more without fear of regulatory reprisal and that sort of thing? Is that how you see that playing into the strategy or is there some other revenue opportunity you're seeing, whether it's sort of taking that first free advice further and ultimately getting some IFA fees on a recurring basis?

I'm just interested to see where you see the revenue opportunity. It feels like a sensible thing to do from a broadening customer proposition perspective, but obviously you're not making money on the custody, so where are you making money? Thank you.

Anna Cross, Group Finance Director

Okay, Chris, I will start and then I will hand to Venkat. So at the beginning of the year we gave you a range of 8.1 to 8.3 on the UK and we said that the reason for that range was actually around how we felt around the uncertainty on the public dynamics in particular. All we're saying at this point in time is that with the outer season behind us and given the pricing dynamics that I called out before, we are basically, you know, there's a narrowing range of outcomes in the second half and us focusing on that middle of the range reflects that and no more.

In terms of the swap rate, we consistently apply a swap rate assumption of 3.5% to our structural hedge. We think that's the right sort of sensible basis for it. You're correct. We have seen over the first few quarters the actual rate of reinvestment being in excess of that. That has very little impact in the current year. However, it will increase NII in future years and it will lead to a stronger tailwind beyond the sort of length of this plan, if you like, beyond 2028.

So I think we told you that we expected half of our income growth to be coming from the structural hedge between 2026 and 2028. Clearly this will increase that conviction and it will increase our conviction around the NII in 2027 and 2028. Venkat.

CS Venkatakrishnan, Chief Executive Officer

Yeah. So first, I mean, it's a good question. I think the bottom line is we want to be able to serve our customers in the UK for the entirety of their financial needs. This includes deposits, this includes loans, this includes payments, and of course, this includes investments. And in order to do that, you've got to do two things. One is to widen the base of your customers and then the second is to broaden the products that you offer them. So the widening of the base of customers you have seen with our investment in Premier and in fact with our acquisition of GoHenry, which is for the next generation of our customers in the longer term.

And in terms of products, you've again seen it over. And by the way, the other widening of the base was with Tesco and the acquisition of Tesco Bank, widening the products. You've seen it with mortgages and Kensington mortgages, you've seen it with some of our credit card products like in Tesco and personal loans with Tesco. And now you're seeing it in investments and in investments, again, think of it in two ways. There's self-directed investment, which is where we removed the custody fees, where we want people to come in and invest, and of course we still charge for transactions in stocks and ETFs.

And then the second thing is to move on the journey of advice and guidance in your investment, which is what our planning and advice offering is, where again, if you're a Premier customer, there's no upfront fee, but there will be, you know, other ways in which we can help you. The idea behind all of this is to make it low cost, transparently constructed, transparently priced, and then risk-appropriate, tailored for people at different stages in the financial journey.

And you're right. What happens ultimately, we think, if this works, is that a customer is there with Barclays for the entirety of their financial needs and that we provide it to them safely, we provide it to them efficiently, and we provide it to them transparently and cost effectively.

Anna Cross, Group Finance Director

So, Chris, just before we leave new, just to put some numbers around it, I mean, we believe there are 400,000 customers within the UK customer base who would benefit directly from this kind of advice that Venkat's called out to. Clearly, that ability to connect them digitally, we think is an opportunity for us and sorry, I didn't really answer you on the exit run rate, so I won't give you a specific. But what I would say is that if you look in the first half, the product margin impact on that NII bridge has been negative.

What we expect in the second half is for it to be neutral to positive. So that would underpin that accelerating NII that you call out. But thank you for the questions. Can we go to the next question, please?

OPERATOR

Our next question comes from Edward Firth of KBW. Your line is now open. Please go ahead.

Edward Firth, Analyst at KBW

Yeah, thanks very much. Morning everybody. I just have two questions. The first one, in terms of this additional investment in the second half, I think previously you were committed to the UK costs falling every year for the next three years. I think that's the way you articulated it. Is that still your commitment? So even with that additional investment, will costs in BUK still be down each year for the next three years? That was question number one.

And then the second question was a slightly broader question. I get what you're saying about the NIM in the second half and the product margins will stabilize or even improve a little bit. But if I look at the totality of Barclays' NII, it seems that volumes have taken off way faster than I think, certainly consensus and certainly I expected. But your NII guidance is broadly the same or even a little bit, maybe a tad lighter, which implies obviously that the margin is going to be lower than we were all expecting.

Firstly, is that broadly a fair representation and secondly, are we talking about margins being there or thereabouts now going forward that I get what you're saying about the structural hedge momentum, but actually you're probably going to have to share, if you're going to keep this sort of momentum growth in volumes, you're actually going to have to share most of that again with customers going forward if you're going to keep your share in the deposit market.

Is that a fair understanding?

Anna Cross, Group Finance Director

Okay, Ed, let me start and I will then pass to Venkat if he's got any comments. So the answer to your first question simply is yes. So in incurring additional structural cost actions and in incurring some costs in, quite frankly, responding to regulation and getting to a more flexible pay mix for our MRTs, these are not permanent elevations in the cost base. That's not what they are intended to do. They're intended to drive the returns of the firm and they are intended to create optionality and efficiency in the cost base.

For BUK we still expect sequential falls year on year during this plan. And for the group as a whole, I expect positive jaws in every year of the plan. So that remains completely unchanged. That's what we meant when we said it's the momentum that allows us to do this without disturbing the commitments that we have to the outside world. And then on your second question, I think about it slightly differently, Ed. So we committed that we would put down 30 billion of RWAs in UK business growth across 24 to 26.

And at the end of the second quarter we are at 25. That is exactly where we expected to be. So the pathway between balance growth and NII growth is as we anticipated it. And the thing that's driving the growth in NII across Barclays is not price, it's capability builds. And that's true of every single product that we have. So if you go to mortgages, it's Kensington and it's the mortgage portal. That's what's allowing us to drive our market share up so that the gross share is higher than the stock share.

If you go to cards, it's Tesco and it's the customer journey. If you go to corporate, it's about the capabilities that we put down in terms of speed to market, speed to lending. And I could go on, but this is capability-led. It's not price-led. So we don't feel like we are under margin pressure. Now, that said, the UK market and indeed the US consumer bank market are extremely competitive, but they always have been and there's no real intensification of that beyond the comments that I've already made.

So, you know, we're confident in that progress because we feel it's being driven by capability builds and, quite frankly, in some areas building back to the level of share that is more natural for us, particularly in something like corporate.

Edward Firth, Analyst at KBW

Okay, I still have. The only thing I would add is that, I mean, on your slide 10, you show 1.2 billion of additional revenue from the hedge. And yeah, if I'm looking at your guidance, NII is not, or banking NII is not going to grow by 1.2 billion. It's going to be somewhat less than that. So that would sort of imply that despite all the volume growth, the underlying NII, if it wasn't for the hedge, we wouldn't be getting really any NII growth at all.

And I'm just thinking about what that means as we go beyond this year and into sort of 28, 29, 30. What's happening in terms of the underlying dynamics?

Anna Cross, Group Finance Director

Well, I mean, this is clearly the growth in hedge income. The other thing I would say is there is momentum from the structural hedge. We know that that is somewhat enhanced by the fact that our deposit stability is there and, you know, therefore it's important that we grow the deposit franchise also. The thing I would also say is look back over the last few quarters, Ed, and add up what's coming in from the asset balance column in the UK and you will see that you are getting to a building momentum of asset income.

I think you'll get to like 130, 140 million of additional income coming through in the UK alone on that metric. Clearly that is just building quarter in, quarter out. It's somewhat being led by mortgages, so the margin is going to be a little bit lower than the UK as a whole. If you go into corporate, it's exactly the same. The NII growth in corporate is being driven by lending as much as it's being driven by deposits. And this is really important for the long-term balance of NII.

Of course, at the moment this is being disproportionately driven by the structural hedge. But at some point in the future beyond 2028, it's really important that the diversification within NII comes through and those asset balances start to carry that momentum from there on in. That's what we're very much focused on.

Edward Firth, Analyst at KBW

Okay, great. Thanks so much.

Anna Cross, Group Finance Director

Thank you. Next question please.

OPERATOR

Our next question comes from Andrew Coombes of Citigroup. The line is now open. Please go ahead.

Andrew Coombes, Analyst at Citigroup

Good morning. One follow up on the structural cost actions and then a brush question on the investment bank please, on the structural cost actions. You've talked about a commensurate improvement in 2027 efficiency. So is it fair to assume that these investments are more focused on the cost side as opposed to revenue growth ambitions? And linked to that, in your prepared remarks you talked about ESCA in the UK. You talked about higher cost income in PBWM.

So is it fair to assume that's where the bulk of these structural cost actions are being deployed? It is in the UK businesses. And then my separate question on the investment bank, obviously a very strong quarter for advisory, for ECM, for equities. It's something we've seen from your peers as well. Absolutely. Just invite you to talk a little bit about the sustainability of that industry wallet and comment on the AI Capex super cycle, where we are in that and how that impacts on your thinking about the wallet opportunity going forward.

Anna Cross, Group Finance Director

Okay, Andy, I'll take the first one and then Venkat will take the second. I mean structural cost actions are focused on the cost base of the firm and improving the efficiency and the effectiveness and the cost income ratio of the firm. I'd encourage you to think of structural cost actions as one of the investment options that we have. We're clearly investing in driving the revenue and we take the same approach here. We have the same degree of focus on the ROI here.

But you're correct in that it's focused on driving the gross efficiencies. That is, it's entirely cost-related but it is one of many actions that we take in respect of investment and we think of it no differently. I wouldn't think of it as particularly skewed to the UK. You should expect it to be more broadly focused across the organization given what it relates to, because it relates to platforms, it relates to processes, it relates to change agility that is relevant for every part of the bank.

We will come back to you as we have that detail on the additional cost that we talked about in respect of MRTs — so the 100–150 million. I would expect that to be more disproportionately focused on the investment bank. But note on the investment bank also, because of the momentum there, we are repeating our guidance both for RoTE and for CIR for the year. Venkat?

CS Venkatakrishnan, Chief Executive Officer

Yeah, and on the investment bank, you know, you're right that we're seeing very good momentum across the piece of the investment bank. I think AI Capex through the cycle is a bit of a tough question, especially in the kind of environment in which we find ourselves. But I think over the long term you're going to see investment in two parts. You're going to see investment in people building up their systems and their processes to take full advantage of AI because you get the best outcomes if you've got, you know, efficient compute platforms, homogenized databases and the like. And you will see that. And then of course, on the use of tokens and in the tokenomics of this, some amount of extra efficiency will have to take place where people distinguish between different types of languages, different forms of token usage and the ways in which it is put to work.

As far as our own share, through this we've had a prominent role in some of the very large debt offerings that some of the US hyperscalers have made. We continue to advise many of them in an advisory way and on capital planning and expenditure. I think it is important. And then there's of course all the ancillary stuff that comes into the industrial sector, including power and grid and construction, and we've got a fairly good industrial structure so you should expect us to continue to play a prominent role there.

Anna Cross, Group Finance Director

And Andy, if I might just add, of course we want to be able to take advantage of the cyclical opportunities in front of us, but it's really important that we continue to keep that structural discipline around the IB, which you can see us doing quarter in, quarter out. With that I might just go to the next question, please.

OPERATOR

Our next question comes from Amit Goel of Mediobanca. The line is now open. Please go ahead.

Amit Goel, Analyst at Mediobanca

Hi. And I've got two questions. So one, just coming back on the additional SCAs, I was actually a bit surprised by the 100% return on investment. So I just really wanted to understand a bit better, like if the returns on that type of investment are so high, why wouldn't the group be doing that kind of investment in any case? And why limit it at the amounts being done? Why not more? And then secondly, in terms of USCB, just trying to understand also the split or the expectation then for the NII versus the non-NII as we look forward.

Because if I understood from the call, the NII is in broadly the right place now. I think previously you'd mentioned at Q1 that you'd expect the non-NII to build to about 20% of total income and I think consensus is now actually at 24%. So I'm just kind of wondering whether you also think the non-NII expectation going out to 2028 is also a little bit too high at the moment. Thank you.

Anna Cross, Group Finance Director

Okay, thank you, Amit. Why don't I take those questions? So, on the first one, this is a plan of balance. We're trying to get a balance between progressive returns, progressive distributions and investments in the business. And, you know, you can see that balance in the first half. You can see that RoTE is 14.8%, you can see the EPS growth, you can see the growth in the distributions that I called out before. So we're really trying to ensure that, if you like, everybody shares in the momentum of the bank, and that's really important.

And it would be just as easy for us to not make those investments at all. But we don't think that is the right thing for the long-term returns and the sustainability of those returns as we look out to 2028 and beyond. So for us it's really a balance. We do, as we look at these investments, feel like it's the right time for us to do it, in part because of the momentum that we see that allows us to undertake them without disturbing our commitments to the outside world, but also that we have businesses that are primed for change and they are able to absorb that degree of activity, as Venkat called out before, using USCB as an example.

And clearly we have a degree of execution discipline now that we've demonstrated over the last few years. So we think it is the right time to do it. And as we go through the plan, you will see a balance of investment in the top line, investment to drive efficiency in this way while still delivering progressive returns and progressive distributions. In terms of USCB, look, we're trying, I guess, to focus more on total income in this business because the addition of Best Egg does make it a bit more of a complex mix.

I think we get to 20% eventually, but clearly that's going to take some time for us to build because what we are doing is we're originating balances through Best Egg and we're building up that kind of managed portfolio, if you like. But in terms of the overall income trajectory of that business, we have considerable confidence in it for all of the reasons that Venkat outlines. Okay, thank you, Amit. Perhaps we could go to the next question, please.

OPERATOR

Our next question comes from Pearlie Mung of Bank of America. Your line is now open. Please go ahead.

Pearlie Mung, Analyst at Bank of America

Hello, good morning. So we've talked a lot about cost. So it sounds like you want a balance between distribution, growth, various different things. Well, I think at this point, it looks like in the guidance income is now 500 million higher and incremental cost is 450 higher. So if there is another quarter of very strong IB income, et cetera, would a lot of this incremental income be just spent on SCAs? Because obviously, you know, if you are having opportunity to invest in things that give you 100% ROI, that probably suggests that you have many other opportunities to invest and improve the long-term efficiency of the company.

Is that the right way to think about it? Obviously distribution probably not in a bad place already. You're already on track to meet all of that, so that's that. And then the other question is just quickly on deposit mix in the UK. It does look like there's a bit more of a shift towards time deposits. Is it just a function of the ISA seasonality or is it the fact that the market is a bit more competitive and therefore rates are higher? And I suppose if you look at swap rates, looks to be probably staying higher for a period of time.

Would we expect, should we expect a little bit more mix shift towards time deposits from here?

Anna Cross, Group Finance Director

Okay, thank you, Pearlie, let me take those. But what we're saying on SCAs is that we normally do 300 million. We've actually undertaken about 100 million in the first half. That means that in an ordinary course of business we'd be telling you we expect to spend about 200 million in the second half. Actually we've added up to 300 million to that. So we're talking about undertaking around half a billion pounds' worth of structural cost actions in the second half.

In terms of an operational lift and the level of investment that we can deploy wisely on behalf of the shareholder, we think that's the right sort of level. So clearly, as we look forward from here, Venkat and I have at least as much confidence in the RoTE of the firm as when we started the year for 2026. And you can see that in the fact that we have upgraded our income twice, first 31 and then to the circa 31 and a half. So we think the momentum's in the business.

But, you know, this will be a big operational lift for us in the second half and we are very focused on ensuring that we deploy that absolutely wisely. So yes, that's our primary objective here. And then in terms of your second question, well, our current accounts are broadly stable. You know, we are, if anything, slightly better than the market. What we're really looking at here is some churn within the time deposit market and customers seeking yield.

You know, as we say, we feel like we've progressed through the ISA market well. I think what's really important, because we've had some comments this morning about the structural hedge in relation to this. So what's really important for the structural hedge is to realize, number one, the structural hedge in no way relates to time deposits. They are by definition interest rate sensitive and are excluded from the hedge. So all of this churn has no impact on that for us or indeed for others.

It's really the stability of the relationships overall and the current accounts. So everything that we see in the deposit market is very rational from customers and doesn't undermine our long-term expectations in terms of NII. Okay, thanks, Pearlie. Perhaps you could take the next question, please.

OPERATOR

Our next question comes from Nicolas Payan of Kepler Cheuvreux. Your line is now open. Please go ahead.

Nicolas Payan, Analyst at Kepler Cheuvreux

Yes, morning. I have two questions, please. The first one relating to the structural hedge. You mentioned that you expect the structural hedge income growth to continue beyond 2028. So I don't know if at this point you can share anything regarding maybe the maturity yields beyond 2028, maybe the kind of marginal growth you expect beyond that point. That would be the first question. And then the second question would be on your partnership in the US with Samsung.

Is there anything you can say maybe regarding the marginal contribution that you expect from this partnership on, let's say, two to three years' basis? Great, thank you.

Anna Cross, Group Finance Director

Okay, Nicolas, I feel we're going to disappoint you on both of these answers in respect of the detail that we will give. So we haven't given any detail on maturing yield beyond 2028. Of course we will do that in time. The only thing I would just anchor you back to is the fact that we are planning this on, we think, a very realistic basis at 3.5%, the fact that we have somewhat elongated the longevity of the slots that we are putting into this hedge, reflecting the length and the stability of the relationships that we enjoy across the bank.

And it's those two things that we feel will carry the momentum beyond 2028. We're just not in a position to give you that maturing yield at this point in time, although we will do at some point. In terms of the partnership on Samsung, we don't actually call out the economics of any individual partnership. But I think, you know, to Venkat's earlier point, this is one in which we are very excited. It's a de novo partnership, so it starts from zero.

And what you're seeing is the fact that we have built a digital card capability in order to bring this partner on board. And you should expect us to continue to build out the kind of capability that you would see in another digital wallet.

CS Venkatakrishnan, Chief Executive Officer

Yeah, I mean, think of this as more about a statement of capabilities in two ways. One is our ability to do this relatively quickly at a time when we were doing lots of other things like Desktag and American Airlines. And the second, what this means because, as Anna just said, it is a card capability later into a fuller digital wallet on the Android ecosystem, important player in the Android ecosystem and one of the world's leading tech companies, which is well known for its very high standards.

So that kind of a partnership is demanding of us, but, you know, it also makes us much, much better, not just here, but more broadly. So it's a capability expansion and hopefully a financial extension as well that you see over time.

Anna Cross, Group Finance Director

Thank you, Nicolas. Perhaps you could go to the next question, which I believe is the final question. Thank you.

OPERATOR

Our final question for today comes from Alberto Artoni of Intesa Sanpaolo. Your line is now open. Please go ahead.

Alberto Artoni, Analyst at Intesa Sanpaolo

Good morning. Thank you very much for taking my question. And just one last, just one clarification on cost, apologies for coming back on the topic. Given that your structural cost actions are going to be accelerated in the second half of the year. Just wanted to understand if that means that going forward, starting 2027 and 2028, you will have lower investments, lower structural cost, because you just brought this, the second part of 2026. Are you just accelerating and shifting this cost in the second part of 2026, or you're just increasing the amount of investment just because the opportunity is there for doing that?

Anna Cross, Group Finance Director

Okay, so don't think of it as an acceleration. Think of it as more, and I mean on both sides. So for the current year, we have increased, or we expect to increase, our spending on structural cost actions. But you will also note that we have increased our expectation of gross efficiency saves over the entirety of the period. So we're now saying that it was 2 billion. Now we're saying we expect to generate more than 2 billion of gross efficiency saves during that period.

So, you know, from our perspective, you should expect us to continue to balance returns, distributions, and investments, both in terms of the top line and efficiency. So clearly our priorities remain as they were: regulatory capital, followed by distribution, followed by investment in the business. If we see good opportunities to invest where we feel that is the right thing for the shareholder, we will do that. But don't think of this as instead of 27 and 28; it is additional, but only because we have certainty that we can deliver the right returns.

Alberto Artoni, Analyst at Intesa Sanpaolo

Okay, thank you very much.

CS Venkatakrishnan, Chief Executive Officer

On that note, we— Sorry, go ahead. Okay, thank you.

Alberto Artoni, Analyst at Intesa Sanpaolo

A quick follow-up on the— Because the guidance for 2028 has not been changed, if I got it right. So it means that you have more. But you talked about having more confidence. So I mean this type of investment that you're making, that you plan to make, additional investment that you plan to make, will increase your confidence in your ability to deliver the results. Is that the way to read this process? Thank you.

Anna Cross, Group Finance Director

Increased confidence.

CS Venkatakrishnan, Chief Executive Officer

Look, thank you very much. We appreciate the time and the attention you've given. We look forward to meeting some of you on the road in the next few days. What I would say to sum up is, when you look at these results as a whole, we are two quarters into the plan we announced in 2024. We're two quarters into it—two quarters into the plan we announced earlier this year. In every quarter, in every way, cumulatively and individually, we've been meeting our guidelines, sometimes a little more than others, but generally it's been a path of progress in returns, a path of progress in distributions, a path of progress in efficiency in the bank and in our capabilities in the bank more broadly. We are a bigger part of the UK ecosystem than we were. We maintain our strength, and a bigger part of the global ecosystem, especially in equities and financing. As we've spoken, we're using the increased revenues from this first half to: A) increase distributions to our shareholders; B) continue to remain safe and well capitalized; and C) invest in our business for the long-term benefit of this business, both in terms of the revenue capability, the cost efficiency, and the ability to bring better products safely and quickly to our customers.

And we want to do, as we said in the UK, on the entirety of the customer experience, and continue to be a great and important partner and a growing and important partner for institutional clients worldwide. Thank you. Have a good day.

OPERATOR

This concludes the Barclays Half Year 2026 results analyst and investor conference call. Thank you all for joining. You may now disconnect your lines.

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