Robert Smalley

Robert Smalley of MacKay Shields asked about the potential for increased lending, RWAs, and RWA density in the private banking and wealth management segment following the Evelyn acquisition, and whether 2026 represents a low point for senior Holdco issuance with higher volumes expected in 2027 and 2028.

Answer

CFO Katie Murray stated that RWA density in private banking has been stable and is not expected to change significantly, despite some operational risk RWAs from the Evelyn acquisition. She noted that the private banking RWA pool is small (GBP 11 billion) and its density is comparable to C&I. Treasurer Donal Quaid confirmed that 2026 is indeed a low point for senior Holdco issuance, with expectations to return to roughly GBP 2 billion higher in 2027 and 2028, driven by the maturity profile.

Robert Smalley of MacKay Shields LLC asked about the impact of the Evelyn acquisition on RWA density in private banking and wealth management, and whether 2026 senior Holdco issuance would represent a low point compared to future years.

Answer

Katie Murray (CFO, NatWest Group) explained that RWA density in private banking remains stable and the Evelyn acquisition, being a capital-light business, will not significantly alter it, though some operational risk RWAs will be carried. Donal Quaid (Treasurer, NatWest Group) confirmed that 2026 senior Holdco issuance is expected to be lower due to the maturity profile, with higher issuance anticipated in 2027 and 2028.

Robert Smalley of UBS inquired about several areas: the outlook for provisions moving into 2026, whether the project finance loan pipeline is steady or lumpy, the reason for the high Net Stable Funding Ratio (NSFR), and the potential implications of loosening the UK's ring-fencing rules for the mortgage market and liquidity.

Answer

Group CFO & Director Katie Murray explained that while 2026 provision guidance is not yet set, the bank has been operating at the lower end of its through-the-cycle range. She described the project finance pipeline as inherently 'lumpy-ish' but smoothed by strong relationships. Treasurer Donal Quaid noted the high NSFR is an outcome of the strong deposit franchise, not an actively managed target, and stated it is too early to speculate on the impacts of ring-fencing reform, though the current regime adds cost and friction.

Robert Smalley of UBS asked about several topics, including whether provisions would rise to the 20-30 basis point range in 2026, the consistency of the project finance pipeline, the reason for the high Net Stable Funding Ratio (NSFR), and the potential implications of loosening the UK's ring-fencing rules on the mortgage market and liquidity.

Answer

Group CFO & Director Katie Murray addressed provisions, noting that while 2026 guidance is pending, the bank has recently operated at the low end of its through-the-cycle range. She characterized the project finance pipeline as inherently 'lumpy-ish' but smoothed by strong client relationships. Treasurer Donal Quaid explained the high NSFR is an outcome of a strong deposit franchise rather than an actively managed target. Regarding ring-fencing, he stated it's too early to speculate on specific benefits but acknowledged the current rules add cost and friction, without expecting changes to impact the highly competitive mortgage market.

Robert Smalley from MacKay Shields asked about the optimal mix and best use of Barclays' Investment Bank balance sheet, particularly concerning RWA rationalization in equity derivatives, TB, and M&A financing, and also inquired about the bank's exposure to private credit sponsor business and BDCs.

Answer

Group Finance Director Anna Cross referred to slide 64 of the presentation, explaining that IB RWAs deployed into banking have been reduced by two-thirds over the last two years, with capital reallocated to markets for better returns. She emphasized that the optimal mix changes over time, with a focus on capital discipline, and noted growth in DCM. Regarding private credit, she directed to slide 100, highlighting focus on top managers, valuation rights, larger businesses, and LTV, with no immediate concerns.

Robert Smalley from MacKay Shields asked about the optimal use and mix of the Investment Bank's balance sheet, particularly concerning RWA rationalization in areas like equity derivatives and financing for M&A. He also inquired about Barclays' exposure to private credit sponsor business and BDCs.

Answer

Anna Cross, Group Finance Director, referred to slide 64 for the IB RWA split, explaining that RWAs in banking have been reduced by two-thirds of the loan book over the last three years, with capital redeployed into the markets business. She noted that the optimal mix changes over time based on market opportunities and that this discipline has not hindered growth in capital-intensive areas like DCM. Regarding private credit, she directed to slide 100, emphasizing that sponsors are an important part of the business, with a strategy to lean into capital-light fee areas. She detailed Barclays' disciplined approach to private credit exposure, focusing on top managers, valuation rights, larger businesses, and LTV, with no immediate concerns.

Robert Smalley from Verition Fund Management asked for details on the high LCR, an update on exposure to non-depository financial institutions (NDFIs) like alternative asset managers, and whether the U.S. bank might pursue larger wholesale funding transactions.

Answer

Daniel Fairclough, Group Treasurer, explained the high LCR is a function of macroeconomics and a deposit-centric strategy, and while a methodology change will lower it, it will remain robust. He disclosed the NDFI exposure in the New York branch is about $20 billion. Anna Cross, Group Finance Director, elaborated on the strategic importance of these relationships. Daniel Fairclough also confirmed there are no plans to change the U.S. wholesale funding mix, as the strategy is focused on growing retail deposits.

Robert Smalley of Verition Fund Management inquired about the reasons for the high LCR and NSFR ratios, requested an update on exposure to non-depository financial institutions (NDFIs), and asked about the potential for larger, market-sized U.S. bank-level funding transactions.

Answer

Daniel Fairclough, Treasurer, attributed the high liquidity levels to macroeconomic factors and a deposit-centric strategy, noting the LCR will moderate but remain robust. He disclosed the NDFI exposure in the New York branch is about $20 billion. Anna Cross, Group Finance Director, described the relationship with NDFIs as intertwined and important for the lending ecosystem. Daniel Fairclough also confirmed there are no plans to change the U.S. wholesale funding mix, as the strategy is focused on growing retail deposits.

Robert Smalley from MacKay Shields inquired whether Deutsche Bank anticipates lumpiness in the resolution of its commercial real estate (CRE) exposures in upcoming quarters. He also asked about the impact of the German yield curve, which is at its steepest since 2019, on the bank's balance sheet funding and what curve movements would be beneficial or detrimental to the outlook.

Answer

James von Moltke, CFO, stated that lumpiness in CRE resolution is not generally expected, as adjustments are typically portfolio-level, with lumpiness only occurring from events around a few larger single exposures. Richard Stewart, Group Treasurer, explained that credit spreads are more critical for funding than the yield curve. He noted that the bank benefits from a steeper credit curve and tighter credit spreads, and while well-hedged for parallel rate moves, its hedging strategy allows it to benefit from higher long-term rates over time.

Robert Smalley from MacKay Shields followed up on commercial real estate, asking if lumpiness in resolutions should be expected going forward. He also asked how the steepest German yield curve since 2019 is impacting balance sheet funding and what curve movements would be beneficial or detrimental.

Answer

James von Moltke (CFO) stated that lumpiness in CRE resolutions is not generally expected, as adjustments are typically granular, unless there's a specific event around a single larger exposure. He also mentioned past portfolio sales confirmed reasonable valuations. Richard Stewart (Group Treasurer) explained that credit spreads are more important for funding, as interest rate risk is managed at issuance. He noted that the bank benefits from a steeper credit curve and tighter credit spreads, and their hedging strategy benefits from higher long-term rates over time.

Robert Smalley from MacKay Shields asked for specific details on commercial real estate (CRE) issues, including concentration areas, the strategy for troubled loans (restructuring vs. nursing), and potential Q4 charge-offs. He also sought clarification on the 40%+ of Stage 1/Stage 2 loans that are off-balance sheet positions, questioning if they are primarily timing issues and if this overstates the Stage 1/2 numbers.

Answer

CFO James von Moltke explained that CRE concentrations are primarily on the West Coast (California and Washington State), accounting for 60-70% of credit loss provisions. He noted that they work with sponsors on troubled loans, marking portfolios to recent appraisals, and while it's too early to call an end to the trend, they are closer to the end. Regarding off-balance sheet Stage 1/2 loans, Mr. von Moltke confirmed they are mostly derivatives and committed facilities from trading businesses, with migrations typically temporary and associated provisions nominal, acknowledging the IFRS 9 requirements.

Robert Smalley inquired about specific issues within commercial real estate (CRE), particularly regarding West Coast exposures, restructuring plans, and potential Q4 charge-offs. He also asked for clarification on the 40%+ of Stage 1/2 loans being off-balance sheet positions, their nature, and if current disclosure overstates these numbers.

Answer

CFO James von Moltke confirmed CRE concentration in West Coast exposures (California, Washington State), noting intensive work with sponsors on value preservation, though the tone has deteriorated. He stated that the portfolio is marked to recent appraisals, and while it's too early to call an end to the trend, they are closer to the end. Regarding off-balance sheet Stage 1/2 loans, he explained they are overwhelmingly derivatives and committed facilities, mostly from trading businesses, typically temporary, and associated provisions are nominal, adhering to IFRS 9.

Asked about the investment banking pipeline for the second half of the year, lending exposure to alternative asset managers and BDCs, and whether an accelerated timeline for resolving the CRE portfolio is possible given improving price visibility.

Answer

The investment banking pipeline is strong but execution is dependent on market stability. The bank has minimal BDC exposure and will follow up with details on other non-bank financial institution lending. Resolving the CRE portfolio remains a granular, ongoing process, and an accelerated timeline is not confirmed as price discovery is still idiosyncratic.

Robert Smalley of Verition Fund Management LLC asked about the Investment Banking pipeline for the second half of the year, particularly in Europe. He also requested details on the bank's lending exposure to alternative asset managers and BDCs, and followed up on whether improved price visibility in CRE could accelerate a portfolio workout.

Answer

CFO James von Moltke described the Investment Banking pipeline as strong, especially for M&A and Equity, but noted that execution depends on market stability. He expects debt capital markets to recover after the summer. On CRE, he stated that full price visibility is not yet present and the workout remains a granular, idiosyncratic process. Group Treasurer Richard Stewart noted that BDC exposure is de minimis and offered to provide more detail on alternative asset manager lending offline.

Robert Smalley of Verition Fund Management LLC asked about the strength of the Investment Banking pipeline for the second half of the year, particularly in Europe. He also requested details on the bank's lending exposure to alternative asset managers and BDCs. Lastly, he followed up on CRE, asking if an accelerated workout timeline is possible now that there is more price visibility in the market.

Answer

James von Moltke, President and CFO, described the M&A and equity pipelines as strong but noted market instability was causing delays, with an expectation for debt capital markets to recover after summer. On CRE, he stated that pricing visibility is not yet 'full' and the workout process remains granular and idiosyncratic, though the bank is actively exploring all risk-mitigating options. Richard Stewart, Group Treasurer, noted that BDC exposure is de minimis and offered to provide a more detailed breakdown of lending to alternative asset managers offline.