Guy Stebbings

Guy Stebbings, Executive Director of Banks Equity Research at BNP Paribas Exane, asked for clarification on the Q3 NIM bridge, specifically the 'funding and other' component, including hedge accounting and reallocations, and whether sequential benefits are expected. He also questioned if further asset margin growth is anticipated beyond the Sainsbury’s impact and the competitive mortgage market, and if RWAs might be at the lower end of the full-year guide due to Q4 timing.

Answer

CFO Katie Murray clarified that the 3 basis points from 'funding and other' included a one-off 2 bps benefit from a hedge accounting solution for FX swap activity, not expected to repeat or reverse, and that asset margin growth is not particularly expected beyond the Sainsbury’s benefit due to intense mortgage competition. She noted that the RWA position is primarily a matter of timing, with more material CRD4 impacts expected in Q4, suggesting it won't necessarily pull RWAs down to the lower end of the guidance.

Guy Stebbings of BNP Paribas Exane questioned how the structural hedge benefits flow through to the P&L, asking if they could be offset by pressure on other items like mortgage spreads, and inquired about the current mortgage application spreads.

Answer

CFO Katie Murray explained that the structural hedge is performing as expected, with significant income locked in for 2025 and 2026. She stated that while the mortgage market is competitive, spreads appear to be stabilizing, and the bank evaluates products on their standalone returns. CEO Paul Thwaite added that NatWest is broadening its mortgage proposition into higher-margin areas like first-time buyer and buy-to-let products, which is driving market share gains.

Guy Stebbings of BNP Paribas Exane asked about current new business mortgage spreads, the impact of asset mix from the corporate book, and the bank's view on recent PRA comments regarding the financing of significant risk transfers (SRTs).

Answer

CFO Katie Murray stated the mortgage book margin remains around 70 basis points, serving as a good indicator for new business, though the primary focus is on returns. She confirmed a positive mix effect from the corporate book in the quarter. On the PRA letter, she clarified it has no read-across for NatWest, as it concerned financing SRTs in the trading book, whereas NatWest executes SRTs on its own assets and does not finance them.

Guy Stebbings of BNP Paribas Exane revisited the FY24 revenue guidance, asking about the threshold for an upward revision at this stage of the year. He also requested more color on the evolution of mortgage spreads, questioning if the headwind from repricing is sequentially reducing.

Answer

CFO Katie Murray explained that guidance is typically updated at the half-year unless there is something meaningful to share sooner, noting the bank is comfortable with its current position after a promising start to the year. She confirmed that with the back book margin now at 74 basis points and new business being written around 70 basis points, the headwind from mortgage churn is abating as expected.

Guy Stebbings from BNP Paribas inquired about the sustainability of the U.S. Consumer Bank's strong top-line growth, specifically regarding the 11.5% NIM and the non-interest income, asking if there were any lumpy items. He also asked about the strong volume in UK mortgages, whether the current gross lending levels are sustainable, and if competitive pressures are impacting new lending spreads.

Answer

Anna Cross, Group Finance Director, Barclays, explained that the U.S. Consumer Bank's performance is driven by operational actions like repricing, increased retail deposits, and a higher proportion of retail balances, which are expected to sustain NIM around 11.5% for Q4 and Q1. She noted non-interest income growth is due to increased volume and improved partner sharing agreements, with some seasonality. For UK mortgages, Ms. Cross highlighted a robust market with strong house purchases and refinancing, supported by Kensington's product breadth and a new broker platform. She cautioned about potential churn compression from five-year fixed-rate mortgages maturing from the 2020-2021 stamp duty holiday period.

Guy Stebbings asked about the sustainability and drivers of the US Consumer Bank's strong top-line growth, including any lumpy items in non-interest income and the NIM trajectory. He also inquired about UK mortgage volumes, competitive dynamics, and new lending spreads, particularly concerning the GBP 10 billion gross lending figure.

Answer

Anna Cross, Group Finance Director, Barclays, explained that the US Consumer Bank's performance reflects a combination of operational actions, with NIM driven by repricing, increased retail deposits, and a higher proportion of retail balances. She expects NIM to remain around 11.5% for Q4 and Q1, with a jump post-AA portfolio exit. Non-interest income growth is attributed to volume increases (GM and organic) and improved partner sharing agreements, noting the business's seasonality. For UK mortgages, Ms. Cross highlighted a robust market with strong house purchase, first-time buyer, and refinancing activity. She noted stable margins in the vanilla book and a benefit from Kensington, while acknowledging potential churn compression from maturing stamp duty holiday mortgages, which is already factored into NII guidance.

Guy Stebbings inquired about Barclays UK, asking for details on a historic swap maturity's impact on H1 Net Interest Income (NII) and whether the H2 exit rate supports future consensus. He also asked about the U.S. Consumer business, seeking commentary on the impairment outlook and confidence in the 2026 guidance.

Answer

Group Finance Director Anna Cross confirmed confidence in the full-year NII guidance of over £7.6 billion, explaining the swap impact was a non-operational accounting timing issue that is now resolved. She advised using H2 2025 as a baseline for future NII. Regarding U.S. impairments, she noted the Q2 decline was seasonal and the bank is comfortable within its group guidance, even with expected charges from the GM portfolio acquisition. Group Chief Executive C.S. Venkatakrishnan added that the U.S. economy has been remarkably resilient.

Guy Stebbings asked about Barclays' US Consumer business, seeking clarity on the drivers for the increased reserve build beyond the post-model adjustment and questioning the bank's commitment to its growth strategy in higher-risk segments amid market uncertainty.

Answer

Executive Angela Cross explained the Q1 impairment charge increase was seasonal and the post-model adjustment was a proactive measure, as underlying consumer behavior remains stable. Executive Coimbatore Venkatakrishnan affirmed the growth strategy, emphasizing a disciplined approach focused on partner selection, industry diversification, and borrower creditworthiness to generate stable, risk-adjusted returns.

Asked for clarification on the U.K. deposit pricing strategy in a competitive environment and for more details on the drivers behind the strong deposit growth seen outside the U.K.

Answer

The bank's U.K. pricing strategy is to be competitive for its franchise but not to chase the highest rates uncommercially, which led to some balance outflows but also contributed to low impairments. The strong deposit growth outside the U.K. was driven by inflows from global corporate clients seeking higher yields, providing stable, long-tenor funding.

Guy Stebbings of BNP Paribas Exane inquired about mortgage spread dynamics, specifically the back-book to front-book churn, and the mix-effects within deposits, asking for clarity on the timing of personal current account (PCA) outflows versus ISA inflows during the quarter.

Answer

William Chalmers, Executive Director & CFO, explained that Q2 mortgage completion spreads were around 70 basis points, with maturing margins at 90-95 bps, and expects the headwind to ease around mid-2026. On deposits, he highlighted strong overall growth, noting that ISA-related outflows from PCAs were heaviest in April but tapered significantly in May and June, indicating a return to more normal patterns.

Guy Stebbings asked about the confidence level in the £13.5 billion Net Interest Income (NII) guidance for 2025, given the strong Q1 performance, and inquired about trends in new mortgage spreads and non-banking book interest expenses.

Answer

William Leon Chalmers, an executive, expressed that the company feels good about the £13.5 billion NII guidance, citing a strong start to the year. He noted that while the net interest margin is expected to tick up, there is slightly more competition in mortgage spreads for Q2. He also confirmed the expectation that non-banking NII will be up for the full year compared to the prior year.

Guy Stebbings asked for more color on the drivers of Other Operating Income (OOI) growth and whether the Q3 run rate is a good base for 2025. He also questioned the impairment outlook, noting the benign current charge versus more conservative consensus forecasts.

Answer

William Leon Chalmers, an executive, attributed the 9% year-to-date OOI growth to diversified contributions from Retail, Commercial, and Equities, with Retail being particularly strong in Q3. He suggested Q4 is seasonally slower but expects to consolidate Q3's gains, with strategic initiatives driving future growth. On impairments, he noted the underlying Q3 charge was ~24-25 bps (ex-debt sale) and expects a similar Q4. He described overall credit trends as stable and benign, with low arrears and defaults.

Guy Stebbings questioned why Barclays UK NII guidance implies a future headwind despite a strong Q1 run rate. He also asked about the drivers of US core deposit growth and the strategy for mitigating the impact of late payment fees.

Answer

Group Finance Director Angela Cross explained the UK NII guidance reflects the ongoing, albeit slowing, deposit migration and the time lag for mortgage growth to impact the balance sheet. She stated US deposit growth is product-led and direct-to-consumer. Regarding late fees, she noted that anticipated market-wide price changes and partner-sharing agreements were factored into the RoTE guidance.