Barclays PLC Management Discusses Q4 2012 Results - Earnings Call Transcript

 |  About: Barclays PLC (BCS)
by: SA Transcripts


Ladies and gentlemen, welcome to the Barclays Strategic Review Analyst and Investor Conference Call. [Operator Instructions]

Antony P. Jenkins

Good afternoon, and welcome. Today is a very important day in the 320-year history of Barclays. We're setting out our vision for the future of the bank and our detailed plan to get there based on a comprehensive and granular review of each part of our business.

I want to talk about the challenges we faced and how the landscape for banking has fundamentally altered. Then I want to set out our goals for making Barclays the "Go-To" bank and the plan that will get us there. It is an approach that combines strong values, with disciplined focus on generating strong and sustainable returns. My absolute conviction is that there is no choice between doing well financially and behaving well in this business. Indeed, I believe that we will not be able to generate sustainable returns over the long term unless we act with good values.

My overall message today is simple: Barclays is changing. There will be no going back to the old ways of doing things. We get it. We are changing the way we do business. We are changing the type of business we do and we are setting out a new course for Barclays.

Before I go into the detail of our plans, I want to talk about the challenges we face. These are the context for our strategy. The drivers of growth for banks over the past 30 years, rising GDP, substantial reliance on leverage and deregulation, have either stalled or got into reverse. The global economy is set for a long period of subdued growth. The regulatory framework has become much tougher. And customer and client expectations are rising: Either we solve their problems as soon as they appear or they will rightly walk away.

Now there are those who take view that these changes are merely cyclical. Their plan is to wait until the economy turns, on the expectation that regulatory and societal pressures will recede, and then they can return to business as usual. They are wrong. This is a secular shift. It is permanent and it is material. Those banks that fail to understand this shift will fall behind. There must be a new approach for the whole sector.

Our goal is simple: to make Barclays the "Go-To" bank for all of our stakeholders. What do I mean by that? We want Barclays to be the instinctive partner of choice. We want that choice to be both rational and emotional because of what people think and feel about us. It's not an easy position to get to and it's certainly not an easy position to maintain. We have, after all, a range of stakeholders: shareholders, customers and clients, colleagues, regulators, politicians, the communities in which we work and broader society. Their interests will not always be the same. Sometimes, we'll need to work hard to reconcile these differences. But we want them all to feel that, in Barclays, they have a partner that they can trust to deliver.

I recognize that our stakeholders, especially our shareholders, want more than a goal. They want to see a clear path towards this destination. We have called this path TRANSFORM. TRANSFORM is our detailed plan to meet our goal, and I want to outline the key elements of our plan today. I will set out a series of actions we are taking and a number of commitments against which you can hold us accountable.

TRANSFORM has 3 elements: one, turnaround; two, return acceptable numbers; and three, sustained forward momentum. Turnaround was the immediate task of stabilizing the business after the events of last summer. Return acceptable numbers is our approach to delivering a return on equity above the group cost of equity. And sustaining forward momentum is about defining how we'll embed a culture and a way of working which delivers the right outcomes in the right way for all of our stakeholders. It's about embedding long-term change to deliver long-term returns. I'll talk about each element in turn.

First, turnaround. The job we faced in the immediate wake of the LIBOR crisis was to stabilize the bank and to allow it to move forward from the crisis of confidence that hit it. I made the decision early in the process of establishing TRANSFORM that we needed a common purpose and common values for the bank as a foundation for everything else that we seek to achieve. We had never had this at Barclays before. The purpose and values we have set out will ensure that there will be no return to the old way of doing things. Our purpose is helping people achieve their ambitions in the right way. Let me say that again: helping people achieve their ambitions in the right way. It is our answer to the question, "What is Barclays for?" and it will guide everything that we do. By people, of course, we mean our customers and clients. They must always be at the forefront of our minds. We must -- but we also mean everyone that has a relationship with Barclays, including our colleagues.

Our values are simple: respect, integrity, service, excellence and stewardship. These are not just words. We have defined the explicit behaviors we expect colleagues to exhibit if they are living up to these values. This is not window dressing or PR. They define the work we will do and the work we won't do. They define the way we hire, develop, promote and reward people. We will assess performance not just on what individuals deliver but on how they deliver it. We never want to be in a position again of rewarding people for activity that is inconsistent with our values. I am certain that the overwhelming majority of our staff will embrace this because I know the vast majority of them right across the group already live by these values every day. But for those who have doubts; those who are not sure that this is the way they want to work, be assessed or rewarded, I've made my views very clear: It's time to move on.

These are the essential foundations for our future success. And putting them in place is a key part of the turnaround of Barclays.

Another part of turnaround was ensuring that we delivered our financial objectives for 2012 and managing the range of legacy issues that we face. Despite a difficult environment, I am reassured by the good momentum signaled in our 2012 results, which Chris reviewed this morning. These results demonstrate our resilience, underlying financial strength and strong franchise. They also signal the quality and commitment of the people at Barclays. I'm extremely proud of the way our 140,000 staff have overcome the difficulties of the last year and shown the resilience necessary to deliver the results we announced this morning. It gives me great confidence in our ability to deliver our goal.

But I know that our financial performance has to improve to meet our longer-term ambitions, so I want now to discuss in detail the second element of TRANSFORM, return acceptable numbers, in other words, our plan to deliver a group return on equity above the group's cost of equity during the course of 2015.

Our financial plan is grounded in a detailed business performance review. This was a rigorous, root-and-branch analysis of 75 business units, informed by a cautious perspective on the economic conditions. Because the economic outlook is muted for most markets, we assumed only low-income growth, below historical averages. Some may say we've been too conservative in our assumptions, but we believe that these are prudent and a prudent basis upon which to build the plan. We've included Basel III capital attribution, estimates of other key regulatory costs and cost to achieve. We factored into our decisions the impact of head office allocation, that Chris mentioned earlier this morning, even though this is not yet final. The review was much more granular than we have ever undertaken before.

Lastly, we explicitly considered reputational risks through the lens of our purpose and values. We were sensitive to how we deliver returns, not just what returns we deliver. The analysis assessed each business against 2 criteria. First, the attractiveness of the market, reflecting overall size, profit pools, competitive positioning, regulation and, crucially, reputation risk. Second, our ability to generate a sustainable return on equity in excess of our cost of equity, with no attachment to prior assumptions or goals.

This naturally segmented our businesses into 4 discrete groups. Most of the businesses fell within quadrant 1. These are businesses where we will continue to invest and grow. The majority of the group's earnings and financial returns are already generated in quadrant 1 and will continue to be so in the future.

Quadrant 2 is comprised of businesses where our current returns are below expectation but where we believe we can reposition for growth through cost reduction or other changes and move to quadrant 1, delivering a return on equity above the cost of equity by 2015.

Quadrant 3 businesses require fundamental restructuring to get to quadrant 1, such as reducing the product offering, refocusing client lists or reducing risk appetite. We may also consider exiting some of these businesses through sale or closure where it is economic to do so.

Lastly, quadrant 4 consists of assets from legacy businesses or those affected by more recent structural or regulatory changes, which are now uneconomic. These portfolios will be managed by dedicated teams and exited over time, just as we have successfully done with our credit market exposures.

Your slides set out how the 2012 financials map to these 4 quadrants. To summarize: Quadrant 1 includes 39 of the 75 businesses. They will drive most of the growth over the plan period. And together, this group generates a return on equity in 2015 sustainably above the current cost of equity. Quadrant 2 includes 15 businesses, which currently generate over GBP 4 billion of income. We will strategically realign these businesses and expect them to be in quadrant 1 within the plan period.

Quadrant 3 includes 17 businesses which generate over GBP 2 billion of income currently. We plan to reposition these, monetize them or sell them off over time. The estimated costs of this are in the plan. These businesses are primarily in Europe or relate to non-client activity in the Investment Bank. Finally, quadrant 4 includes 4 uneconomic legacy businesses which contribute under GBP 500 million of income but currently consume over GBP 90 billion of RWAs on a pro forma Basel III basis. Over the plan period, we expect to reduce these by nearly GBP 50 billion.

While the majority of our businesses are well positioned and will generate sustainable returns in the future, we have a lot to do in the balance of the portfolio over the next 3 years.

Now let me take you through each of our business divisions, as we report them, since this perspective is the one with which you're most familiar. We have included further detail in the appendix of each of your slide packs, and I will use the slides on the screen to summarize the key messages for each. It's important that you understand the basis upon which we show their profitability and returns. We are presenting them on a Basel III basis, having included certain regulatory costs and have been deliberately conservative on revenue growth assumptions. We are, however, showing them prior to the allocation of head office, which we expect to reduce our measured divisional returns by 200 to 250 basis points and align them closer to the overall group return. Finally, we've made a conservative assumption that the group cost of equity remains at 11.5%, although many of our actions should help lower that over time. We hope that the additional transparency and disclosure will help you better understand our current position and future aims.

I'll start with the Investment Bank. The Investment Bank is our largest division, generating 60% of adjusted PBT in 2012. We intend to maintain its position as one of a small group of full-service, global investment banks. To reach that conclusion, we have to challenge the belief that it can continue to provide a compelling client proposition, while accommodating pending regulatory change, the current market environment and reputational concerns, and still generate appropriate returns to shareholders on a stand-alone basis. We believe that it will do just that, but subject to some important changes.

Let me emphasize, the Investment Bank will remain a large and very important part of the Barclays group. Our strong positions in the U.K. and U.S., complemented by our franchises in other parts of the world, give us the opportunity to compete as a true global player, with strong competitive advantages in our principal business lines.

The largest component of the Investment Bank is Fixed Income, Currencies and Commodities, or FICC for short. FICC is a well-diversified business that generated 63% of the Investment Bank's income in 2012. For several years, FICC has been preparing for changes in capital requirements. I take particular confidence in our successful implementation of Basel 2.5 in 2011 with little net RWA impact.

Competitors are retrenching here, and I am confident that we will be one of the true scale players. Given its scale, our FICC business has generated attractive returns and maintains a leading position. Continued electronification [ph] will require further technology investment that will advantage scale players like us. We must take aggressive action, though, to further reduce our legacy FICC positions which erode current returns. We will model this on the successful reduction of our credit market exposures from GBP 42 billion during the crisis to less than GBP 10 billion book value today. We will put assets with a similar profile alongside the remaining credit market assets, including an identified pool of pre-Basel III rates instruments.

The slides we've given you in the back of your pack show how we plan to reduce the RWAs associated with this portfolio from GBP 79 billion on a pro forward -- pro forma Basel III basis to GBP 36 billion in 2015. We will accelerate that reduction where it makes economic sense to do so.

In other areas of FICC, we have already started to reposition our activities where returns are below expectations. In commodities, for example, we have already largely completed the restructuring of the business to focus on core banking, financing and risk management. Importantly, we have ceased trading soft commodities, such as agricultural products, for speculative purposes as we do not see this activity as being compatible with our purpose. As a result of these actions, trading headcount in commodities is 1/3 lower and the average value at risk for this business has reduced 50% in 2012 compared to 2011. This is an example of us putting our words into action.

Moving on. Our Equities and Investment Banking businesses have significantly lower RWAs than our FICC business and so are not as capital intensive. We can generate high returns over the cycle when they operate at scale, but they require sharper cost discipline to secure the benefit of scale. As you know, we built out these businesses after the Lehman acquisition based on our expectations of the market environment then. And we are now well positioned in the U.S. and U.K. which together represents half of the global fee pool.

We continue to gain market share, as a consequence, in 2012. We finished ranked #2 in U.S. equity capital markets, up from #9 in 2009; and maintained a leading position in U.K. in global debt capital markets where we are #1 and #3, respectively. We have grown our equities client base from around 3,500 in 2010 to over 4,700 in 2012. We are confident that we'll be able to convert that scale into appropriate returns, particularly with greater cost discipline.

We believe that Asia and Europe offer significant opportunities to our global client franchise and remain a vital part of our equities and IBD platform. However, we now anticipate smaller regional fee pools in Asia and Europe, and we'll reposition our franchise there to fit the market opportunities. We have already reduced front-office headcount by 15% in these regions.

We are also already reducing headcount across other areas of the Investment Bank, not just Asia or in Europe, with a 1,600 headcount reduction in 2013. We expect these actions to ultimately generate, in aggregate, GBP 300 million of annual cost savings.

I am announcing today that we are also closing our Structured Capital Markets tax-related business unit. This demonstrates the change that we are instigating at Barclays. There are different components to the tax service that we have provided clients historically. Many of those are not controversial, delivering value as part of real client transactions, and we will continue to provide such services. However, there are some areas that relied on sophisticated and complex structures where transactions were carried out with a primary objective of accessing the tax benefits. Although this is legal, going forward, such activity is incompatible with our purpose and incompatible with the new tax principles we are publishing today. We will not engage in it again.

Combined with the broader changes that we are making across our Investment Bank to focus slowly on -- solely on client-related activity, this implies forgoing around GBP 500 million in average annual revenue. Again, we feel that this is the right thing to do.

Taken together, these changes will ensure that our Investment Bank is well positioned to be one of an increasingly small group of global investment banks that are gaining market share and improving margins over the next 3 years. By 2015, we aim to achieve an ROE of 14% to 15%, driven by RWAs of GBP 210 billion to GBP 230 billion and a comp-to-income ratio in the mid 30s.

Let me now turn to corporate banking, which is in the middle of a very strong turnaround. This has been driven by a reorientation of the business around a clear and consistent client proposition, focused on serving cross-border needs of our largest global corporates and financial institution clients as well as the needs of our domestic clients in the U.K. and Africa. We see an opportunity to grow these businesses further by accelerating the completion and the rollout of our new cash management platform and expanding the product offering across Africa, especially in trade-related services.

While the recent performance of corporate banking has been hampered by legacy businesses and unprofitable portfolios, the U.K. business has been continuously successful and delivers a return on equity above the cost of equity. Moreover, we have been reducing the legacy businesses and unprofitable portfolios through a dedicated team and will continue to do so. By 2015, we aim to double PBT in corporate banking, with a return on equity of over 10%.

U.K. Retail and Business Banking has a leading franchise in our home market. The majority of our businesses here are high performing despite the economic conditions in the U.K. We will invest further in our successful Barclays business franchise, which continues to grow. Innovation will be a key driver of success in this business. We launched Pingit and Barclays Mobile Banking last year and have several other innovative propositions in the pipeline for this year. We see significant opportunities to create a technology-driven franchise, with major improvements in customer service, controls and costs, and to extend those capabilities to other segments, like corporate and wealth. Over the plan period to 2015, we expect to maintain the current level of ROE in the high teens.

Next, Barclaycard. Here, we are gaining or maintaining market share as a result of our quality products, competitiveness and innovation. Barclaycard is now the eighth largest consumer payments business globally and is a top 3 player in all of its chosen geographies, except the U.S. where we are able to compete with much larger players due to our scale advantage. We will continue to grow our payments business, which holds significant opportunity. We have outpaced market growth over the past 2 years and expect to continue that trend while maintaining return on equity at or above 20%.

Wealth and Investment Management is a diverse mix of businesses operating in a fragmented global market brought together through the strategic investment plan Gamma that we initiated in 2010. We will continue to focus on delivery of the Gamma investment to improve the client experience and increase productivity to grow revenue. We aim to double PBT by 2015 as income continues to grow and the return on equity remains in the high teens.

Moving on to Africa. We expect economic growth in Africa to be higher than in other regions, with GDP growth forecasted at an average 4% versus 1% in the U.K. and 2% in the United States.

As you know, this is an important market for Barclays. We operate in 12 countries and generated PBT of over GBP 900 million across the continent in 2012. We expect to grow significantly over time.

In Africa Retail and Business Banking, we will complete the large transformation projects already underway, in particular the combination of the majority of our Barclays Africa operations with Absa. We have already expanded our retail and business products suites with multiple product launches, including premier, bancassurance and Barclays Direct, and rolled out new online and mobile banking channels across Africa, including Pingit and Barclays mobile. Through initiatives such as these, by 2015, we aim to increase the return on equity from 3.8% to above the cost of equity in Africa Retail and Business Banking.

Finally, in Europe Retail and Business Banking, we will reposition the franchise to focus on the smaller but more profitable mass affluent segment where we have an existing business that is profitable. We propose to significantly rationalize the retail network in all 4 countries and accelerate the runoff of legacy assets through dedicated management attention.

We expect to reduce the number of branches by 30% and headcount by 25% or a headcount of nearly 2,000. We will substantially reduce the cost-income ratio, leading to return on equity in the low single digits by 2015. Let me emphasize, there are no magic solutions here, but it is important to bear in mind that this portfolio will consume less than GBP 17 billion of RWAs.

I hope you can see the rigor with which we've completed this review. We've had to face facts and not shy away from the challenges at hand or hope that the passage of time will make things easier. Before I summarize what this means for the group, a few words on costs, RWAs, capital and funding.

First, costs. As part of transforming the way we do business, we will target GBP 1.7 billion of cost savings by 2015. This is in addition to the reduction that we've achieved since 2010. Rather than highlighting a target gross -- rather than highlighting a target gross of investment spend, which can be confusing, we are showing the more conservative net figure so that our progress is transparent. We expect this reduction to achieve a targeted level of GBP 16.8 billion in 2015. We'll share further details about how we'll deliver that reduction, but cost savings will come from across all businesses and will not be limited to further cuts in headcount. To make it easier to monitor our progress over the next couple of years, we have estimated the cost flight plan and included this profile in your slide packs.

Moving on to RWAs. In the full year results this morning, we spoke about estimated impacts of CRD IV on RWAs. Overall, we estimated increase as at December 2012 of GBP 81 billion. This gives us a pro forma starting point of GBP 468 billion. We have a lot of experience in adapting our businesses to absorb regulatory increases in RWA, notably in the way we adopted Basel 2.5, as I mentioned before.

Our plans include clear actions to reduce RWAs, particularly in legacy assets. We are also improving management of counter-party positions in the Investment Bank. Through these actions, we are targeting a gross reduction in RWAs of GBP 75 billion by 2015. The net reduction, however, will be less as we will invest in areas of high return, leading to our target of around GBP 440 billion for group RWAs in 2015. We have included within your slide pack an outline of where RWA growth is concentrated over the plan period.

Thirdly, capital. This remains a critical component of Barclays' financial strength and, along with our superior funding and liquidity positions, a source of competitive advantage, which we will preserve. Our target capital position is post Basel III, with a through-the-cycle core ratio of 10.5%. This implies a 1.5% management buffer above the minimum required by CRD IV and the 2% G-SIFI buffer applied to Barclays. We will build contingent capital in our additional Tier 1 layer over the next few years. We see loss-absorbing capital instruments eventually covering around 2% of Barclays' RWAs in our target structure.

As Chris indicated on the results call, our Core Tier 1 ratio was 10.9% at 31 December on a Basel 2.5 basis. This equates to a fully loaded pro forma Basel III core ratio of 8.2%. We expect to generate significant capital through profits over the plan period, largely offsetting regulatory headwinds and exceeding the 10.5% target I mentioned earlier.

On funding, we expect our wholesale unsecured volumes and associated issuances to come down, with the mix to change over the next 3 years in particular towards secured funding.

Last, on liquidity. The announced changes to Basel III rules on liquidity should allow us to reduce the volume of liquid assets that we hold and include a broader range of high-quality assets within the pool. This should reduce its carry costs to GBP 300 million.

So by 2015, we will transform Barclays. We are going to focus solely on activities which support our customers and clients, measured against our values. We will concentrate on markets and businesses where we have scale and competitive advantage. By market, we will focus on the U.K., U.S. and Africa. This does not mean that we will turn our back on Europe and Asia, but we intend to reduce significantly the scale of our European retail and corporate operations, as well as reposition our European and Asian equities and IBD businesses to reflect market opportunities. We will close our Structured Capital Markets business unit.

We will manage our RWAs more efficiently, with plans to reduce group RWAs by GBP 75 billion gross, including aggressive runoff of legacy assets particularly in Europe and the Investment Bank. We will use this reduction to invest in high-return businesses such as U.K. mortgages, Barclaycard, equities and wealth, as well as to absorb the effects of Basel III and other regulatory headwinds. And finally, we intend to take out significant costs across the group by operating more efficiently.

So that's the future shape of Barclays. But of course, having a clear strategy to deliver returns above the cost of equity is only the first step. We must sustain forward momentum. This is the third leg of the TRANSFORM program. I see becoming the "Go-To" bank as a 5- to 10-year journey. Now that may seem too far away to matter, but as we execute our plans over the next 3 years, we must build the capabilities, the infrastructure and the leadership that will allow us to thrive in the market, as it will be defined in the future, not now. Put differently, we must ensure we do not adopt the short-term bias that fostered many of the issues that we face today.

There are 4 areas where we will focus our energy: culture, rewards, control and cost. First, culture. I described earlier how the introduction of our goal, purpose and values was an important first step, but it was only that. We now have to weave these into the fabric of the firm. The linchpin will be a balanced scorecard. This is designed to create a holistic assessment of performance for all stakeholders, grouped into 5 dimensions: customers and clients, company or shareholder, conduct, colleagues and citizenship. The scorecard will underpin performance assessment for our 125 most-senior leaders this year, and for all colleagues in 2014. We will be transparent about the progress that we are making through publishing an annual scorecard. This is a completely new way of measuring and reporting the performance of the business.

Second, reward. The balanced scorecard will play an important role in changing the way we reward our people, but we must do more on our broader pay policy. Our principles on reward remain the same: We will pay for performance and we will pay competitively for the best talent. But we recognize the dynamics of play, which mean that we must continue to shift the proportion of income which goes towards that reward. We need to give our investors a bigger share of the income we generate. We need to challenge the expectation that performance-related pay is de facto guaranteed regardless of actual performance. And we need to accept that society's expectations have changed. We reduced the "group compensation to net income" ratio from 42% in 2011 to 38% in 2012. This represents progress, but we will do more. Over time, we intend to move towards a ratio in the mid 30s.

Third, controls. In any business, good controls rest on the right culture. Individuals have to take responsibility for their behavior and ensure that it is consistent at all times with the company's values and code of conduct. Responsibility for ensuring that we are compliant with regulatory requirements, therefore, rests squarely with each of our businesses. But we must also have strong oversight in the form of a world-class compliance organization. I have decided that all compliance staff will report to me through a single global function head and operate independent of business management teams. In making these changes, I am sending a clear signal to deliver a culture in Barclays where controls and compliance are universally respected and rigorously observed.

Fourth and potentially the most important area where we must make progress: how we manage costs. Costs will be the strategic battleground for our industry over the next decade. The banking industry has, to date, managed costs largely tactically. I take a different view. The pressure on the industry demands a fundamentally different approach, and I think of this as strategic cost management. The breakthrough in this approach is reducing cost while improving controls and the customer and client experience.

Let me share 2 examples with you, and there are more in your slide packs. In 2011, we put in place a new customer on-boarding process in more than 850 branches across our African Retail business. The new process was designed around new technology, including customer identification on the basis of biometrics, eliminating manual paper-based processors with high rates of error. So far, we have reduced back-office validation times by 92% and shortened on-boarding times from 5 days to around 10 minutes, freeing up the equivalent of 500 full-time staff.

In the Investment Bank, we launched our box tool [ph] for institutional clients, and it has redefined the way that FX rates and futures are traded. This capability enhances the client trading experience and improves efficiency for us and our clients. Trades, affirmations and allocations all now occur electronically. For instance, despite the volatility that followed the crisis during which volumes and FX and government bond markets more than doubled, we were able to sustain service levels with limited impact on fixed cost because around 90% of these trades are now completed electronically. This platform also facilitates the rapid and efficient adoption of the technical regulatory reforms that we have had to implement across these markets. We continue to invest in this platform and to extend it to other asset classes.

We will also pursue opportunities to remove duplication. The granularity of the business portfolio of review gives us a much better view of this than we have had before.

I shared earlier how these initiatives will help us reduce cost by GBP 1.7 billion through the course of the plan period. Those cost savings are important in and of themselves, but I view the way in which we intend to achieve them as even more important to Barclays' long-term success. Barclays will not become the "Go-To" bank overnight. We will not achieve a return over the cost of equity until some time in 2015. And while there will be continuous progress, cultural change will take a few more years yet to embed. This may seem long to some of you, but it's realistic. And as we have set out earlier, progress will not always be linear.

In particular, in 2013, overall performance for the group may moderate versus 2012 due to the costs of reshaping our portfolio and of other actions to further reduce costs. For 2013, this will include GBP 1 billion of cost to achieve, including approximately GBP 350 million for headcount reductions in Europe RBB, but I expect performance to rebound quickly in 2014 and accelerate in 2015 as restructuring benefits are realized.

I see 4 risks to achieving our plan: a major macroeconomic downturn, a significant unexpected change in regulation, legacy issues and the failure to execute the plan. To address these first 2 risks, we have been deliberately conservative in our planning. While a number of regulatory reforms have not been finalized, we believe that the direction of travel on the principal reforms is clear. The plan that I have outlined anticipates the new landscape as much as possible. To the extent that the final shape of regulation differs from what we expect, our track record demonstrates a clear ability to adapt while still delivering against our commitments. I know that potential structural reform is an area of particular focus for many of you.

With respect to the ringfence in the U.K., we have analyzed the impact of this extensively. There will be a cost to transition to the new structure and to operate within it. While much remains uncertain, the work we have done has given us confidence that, that cost will be lower than the current market estimates. We will start the transition process now by beginning to implement actions that are not dependent on the detailed legislation and regulation that will come next year. We are also confident that we will be able to meet our recovery and resolution requirements in any scenario.

On legacy issues. As you know, we have a number of ongoing areas of litigation and regulatory review. These remain subject to varying degrees of uncertainty. While we have put in place robust processes to address them, we will remain vigilant and proactive.

Finally, execution risk. Execution risk is completely within our control and it rests squarely with me and my management team. We know that, but we also know that you need to be able to assess our progress. So importantly, we are making a series of financial and nonfinancial commitments today, which will allow you to monitor our progress.

On the financial side, there are 6 commitments that we are making. We will deliver a return on equity for the group in excess of the cost of equity during 2015. We will reduce headcount in 2013 by around 3,700 in the group, including 1,800 in the Corporate and Investment Bank and 1,900 in Europe RBB. We will reduce the cost base by GBP 1.7 billion over the period to 2015, giving a cost-income ratio in the mid 50s. We will reduce RWAs by GBP 75 billion gross by 2015. We will ensure our transitional common equity Tier 1 ratio exceeds 10.5% in 2015. And we will accelerate our progressive dividend policy from 2014, targeting a payout ratio of 30% over time. We will update you on progress against these commitments every 6 months.

On the nonfinancial side, there are 2 commitments relating to disclosures. We will embed our purpose and values across Barclays and publish an annual scorecard assessing our performance against the 5 dimensions I mentioned earlier. And we will provide greater disclosure and transparency around our financial results and performance, aiming to be industry-leading. We would welcome your feedback on the changes that we have made today and any further changes required.

We also recognize that it's important for you to understand our individual businesses in greater detail and take the measure of the management teams in each. We will, therefore, hold a series of focused sessions covering each of the major businesses to do just that. The first session will cover our corporate business on May 1, while the Investment Bank will be in late June. Both of these will be held in London. The dates of the other sessions will be announced shortly, with the aim of covering all the businesses by the end of the year.

I want to end where I started. Change is needed across the industry, and Barclays is leading that change. I am totally committed to this. We have a clear goal: to make Barclays the "Go-To" bank. We have a clear plan, our TRANSFORM program. We are turning the organization around, with a clear purpose and common values. We are reshaping the business to generate sustainable returns. And we are making long-term changes to culture, rewards, controls and costs to allow us to sustain that return in the future.

Together, this forms a credible plan that will meet all the needs of our stakeholders. We may sometimes fall short of the high standards that we have set, but I promise you, it won't be for lack of energy, effort or intent. And where we do get it wrong, we will put it right. From today, I am determined that no one will be able to question our intent or, indeed, my absolute commitment to the path I have set out. Thank you very much.

Now we have the opportunity to take some questions. We also have people on the phone and the Internet, so we'll deal with the questions in the room first. There are mics. Could you please say your name and the organization you represent? Perhaps, we could start over here with the -- this gentleman in the front, please.

Question-and-Answer Session

Raul Sinha - JP Morgan Chase & Co, Research Division

It's Raul Sinha here, from JPMorgan. Antony, if I can start on Slide 60. Apologies to go to the back of the slide, but this is where you talk about your RWA growth indications for the next 3 years. When I look at that slide, it effectively communicates that 75% of the growth in RWAs will come from the non-IB businesses. Is that broadly the kind of shape of capital allocation that we should think about in the long term for Barclays?

Antony P. Jenkins

Certainly, for the next 3 years. I think the important thing to emphasize is that, when we did the review of the 75 different business units, we did it very dispassionately so we didn't have a bias about any of them. And frankly, business units have to compete for capital, based on returns. That's our best view of the go-forward, but I think it's consistent with our view of the overall shape of the group, which is that, over time, what we'll see is that the Investment Bank will grow but it will probably grow less faster than some other parts of the group. So gradually, there'll be a balancing of the group, in that respect. But I think that's a pretty good indication of where we see RWA growth for the next 3 years.

Raul Sinha - JP Morgan Chase & Co, Research Division

And just a quick point of clarification on the exit businesses that you've talked about. I know that you are closing the SCM business, as you've said. When I look at Slide 11 where you talk about the revenue that you lose from the exit businesses, it looks like about GBP 400 million overall for about GBP 92 billion of RWAs. Is the SCM business included within that? And can you clarify what impact that might have separately on the group financially?

Antony P. Jenkins

Well, we say that there's about GBP 500 million of revenue from exiting the SCM business and various other small businesses that we're getting out of, but we're not going to provide more details than that. Could I just also ask, we got a lot of questions in the room, if we could try and limit it to one question per person. I know it's difficult, but pick your best question and -- go ahead.

Huw Van Steenis - Morgan Stanley, Research Division

Huw Van Steenis, Morgan Stanley. I was just interested with your targets, how consistent they are with the new structural rules in the States' foreign bank operations. I -- were they embedded in the assumptions here? And if not, perhaps you could give some initial thoughts about -- and you also mentioned in the release about Vickers being less costly than you initially estimated. Perhaps, again, a little bit more color on that, please?

Antony P. Jenkins

Yes. So 2 questions, but I'll take it as 1. I'll take it as 1 about the structure. So on the 165 in the U.S., that is still quite early days, but we believe that the structure that we're proposing will be able to accommodate that. On Vickers, we do believe that the cost will be less than the GBP 1 billion number we've talked about in the past. We're not being perhaps specific yet on quite how much less, but really it's driven by 2 factors. Partly, we believe that the markets anticipated the funding cost increase and partly because we've got a better handle now what it would take to deliver that operationally. I'm going to move -- I'm going to work my way across, so if we -- we will take a couple of questions here and then we'll go to the middle block. So the gentleman in front row and then the gentleman behind him.

Andrew Lim - Espirito Santo Investment Bank, Research Division

It's Andrew Lim from Espirito Santo. I'm just trying to square your dividend policy with your Core Tier 1 ratio target of 10.5%. And I think, when all is said and done, that Core Tier 1 ratio might be a bit higher than 10.5%, but you're having a definite payout policy of 30% of course. So are you aiming to have quite a bit of a buffer above that 10.5%? Or could we anticipate a higher dividend payout ratio?

Antony P. Jenkins

Well, of course, if you're right that we have a buffer, then those would be the choices, wouldn't they, to have and retain more capital or distribute more capital. I think what we're doing today is establishing a baseline set of commitments around the 10.5% and around the progressive dividend policy. Of course, if we're in a position to do better than that, that's a choice that we'll make at the time that we find ourselves in that position. Would you pass the microphone behind you?

Sandy Chen - Cenkos Securities plc., Research Division

Sandy Chen from Cenkos Securities. I just had a question on Slide 44, just looking at the -- looking at Investment Banking and I'm trying to put some things together. In terms of the organic growth, for RWAs, it's expected at some GBP 15 billion to GBP 35 billion of a total that should move from GBP 178 billion in risk-weighted assets to GBP 210 billion to GBP 230 billion. And what I'm trying to square that with is the overall target in terms of growth and profitability, the ROE targets. And does it bottom line down to aggressive cost cutting in the Investment Bank in order to reach the profitability targets that you've outlined?

Antony P. Jenkins

I think you get there through having to work every levers. So you have to work the balance sheet capital lever partly through running off legacy assets, and you all know we've done that successfully with our credit market exposures; partly through deploying capital prospectively to higher-returning activities; and driving the cost base down both operating costs and, as we've said, compensation costs as they relate to income. And we've made the commitment to get to the mid 30s on the comp-to-net income ratio. So you basically have to work all the levers to achieve the sort of returns. And crucially, the reason why that matters is because my view of the world is that we're going to be in a period of quite subdued economic growth. And that means that economies are going to grow more slowly, therefore there won't be big organic growth in the profit pools and revenue pools in the markets so we have to shape our business accordingly. Yes, we'll take 1 here, and then I'll go to the center.

Michael Helsby - BofA Merrill Lynch, Research Division

Sir, Michael Helsby from Merrill Lynch. I'd just like to ask you about compensation, actually, for the board. I was wondering if your board compensation is going to be tied to these new targets. And when are you going to -- would you [ph] communicate that?

Antony P. Jenkins

When you say board, you mean the executive?

Michael Helsby - BofA Merrill Lynch, Research Division

Exactly, yes.

Antony P. Jenkins

Yes. Our intent is to align not only the executive committee but also the senior leadership group, which is about 125 people's compensation to the performance of the group overall on the balance scorecard, incorporating the commitments that we've made today. And that is what we're implementing in the course of this year and through into next year. So yes, the executive committee, they will be measured against the targets that we've set and compensation will be aligned to that. I'm going to move this way now. So perhaps, the gentleman there, and then we'll...

Christopher Wheeler - Mediobanca Securities, Research Division

Chris Wheeler, Mediabanca. You've expressed your commitment to the Investment Bank, which I think everybody in this room would probably understand. However, in launching himself again in September, the leader of the opposition made it very clear that one of the key planks to his personally launch was breaking up the banks which, as you know, is a sure-fire vote winner. Assuming there's a change of government or your concerns about that, what are your contingency plans to deal with that not just in terms of corporate structure but in terms of, obviously, keeping the commitment, if you want, of the Investment Bank to his staff and to his clients?

Antony P. Jenkins

So I think, actually, what the leader of the opposition said and echoed by the Exchequer Chancellor was that, if the banks don't clean up their own act, paraphrasing, then they will. This seems to me to be not dissimilar from the power of electronification [ph] that the chancellor has been talking about incorporating into the legislation around ringfencing. It's pretty clear to me that, if banks aren't seen to be stronger contributors to broader society, then a variety of actions will be taken against them, some of them will be structural and some of them will be financial. As you know, we already have the bank levy, which is one of those actions. So it seems to me that the combination of running Barclays in the right way going forward and delivering the sort of returns we expect for our shareholders is the best defense from that sort of action by the politicians because, if we are behaving in a way the society expects, then we can, I think, defend against that. So it's really in our gift to demonstrate that we can act in the right way, and I am confident that we will. Can we go to the gentleman with the mic?

Gary Greenwood - Shore Capital Group Ltd., Research Division

It's Gary Greenwood of Shore Capital. I just wanted to ask you about European retail bank. I think you said that you're targeting a low-single-digit ROE by 2015. I was just trying to understand, why bother? Why not exit that business faster if the returns are going to be so low?

Antony P. Jenkins

Well, I think it's about what we can practically do in that business. We are a significant player in mass affluent in Iberia. I want to protect that franchise. But basically, this is a significant retreat from both corporate banking and retail banking. And if we need to do more in the future, we can always do that, but this is a very significant step forward on European Retail and Business Banking. And I think the nature of the challenges in the European market is such that, as I look across the group and I look at our 75 different lines of business, there are places where I can deploy capital and get much better returns than in the European Retail and Business Banking arena, which is why we're taking the actions that we're taking. Lots of hands. We'll go to the gentleman just there, and then we'll start all the way across here.

Arturo de Frias Marques - Grupo Santander, Research Division

Arturo de Frias, from Santander. One question on revenue from the Investment Banking again but not on the impact of -- on those businesses that you are exiting but on those businesses that you are keeping. You have said that you are being very conservative on your revenue assumptions. How have you modeled? And what kind of revenue losses have you anticipated because of all of these new approach because of tighter compensation rules, because of less staff, because of less RWAs, because of less liquidity, because of focusing only on what adds value to the clients, et cetera? How can you model the impact on the revenues of the businesses that you are keeping?

Antony P. Jenkins

Well, actually, one of the things I feel very confident in is the way we have modeled the business. We broke it down to an incredibly granular level looking at 75 different lines of business, looking at the costs associated with them, looking at the revenue potential going forward, looking at how we were positioned. And we concluded that, actually, in many of the Investment Banking business lines, there was the opportunity for some revenue growth. But overall, we've been relatively conservative on revenue growth. And as the question over here observed, we expect a disproportionate amount in revenue growth to come from outside the Investment Bank going forward. So we have factored in all of the items that you identified in your question in terms of the impact on the top line. We do not base this plan on a very aggressive revenue growth target. In fact, it really is a plan that builds off the numbers that we announced this morning for 2012. Can we go to the gentleman here and then, yes. And then if you can the mic forward.

Thomas Rayner - Exane BNP Paribas, Research Division

It's Tom Rayner, from Exane BNP Paribas. Just sticking on that similar sort of revenue question. Because if we look at your 2015 guidance on costs and, obviously, the cost-income ratio in the mid 50s, we can back out certainly a fairly tight range for revenue growth. And I just wanted to fully understand, obviously, you've factored in the impact of the RWAs coming down and lots of the other issues, to what extent have you factored in things that might be happening beyond 2015, like the ringfence and any other sort of regulation which may not sort of come into the actual implicit sort of forecast period? Can you comment on that, please?

Antony P. Jenkins

Yes. I mean, obviously, what we've built into the plan is what we know and what we can see and anticipate. We expect that most of the impacts of ringfencing, for example, will occur post 2015. But where we've identified something happens within the plan period, we've included that. The important thing to note, back to the previous question, is that this 75-unit analysis is really how we're going to run the business going forward. And every business unit will be, to put it bluntly, expected to earn its corn in the portfolio. And if a business is not delivering on the trajectory that we expect, then we'll cut back on it. And there are no favorites. I don't have any special businesses that I'm attached to. They all have to deliver or we'll cut back on them, as we have done. So I see this is somewhat of a dynamic progress recognizing that there is a lot of uncertainty still out there in the regulatory environment. On the other hand, I do think that the amount of uncertainty is beginning to settle, and that's allowed us to state, as I said previously, with reasonable confidence that we think that the costs of implementing the ringfence, for example, will be lower than we had previously thought.

Thomas Rayner - Exane BNP Paribas, Research Division

And I've got, suppose [ph], just a naughty second one. You could comment on what you think the market estimate for the revenue impact might be? You thought -- you said it's lower than...

Antony P. Jenkins

Well, it's naughty on 2 levels. It's a second question. And as you know, we don't give forward guidance on revenues, so I'll just pass on that one. If you pass the microphone instead. Can we go forward first, then we'll go back? So this -- yes. Thank you, thank you.

Unknown Attendee

Can I just follow up on that last point? In terms of ringfencing, you mentioned earlier that you've got some sense of the funding impact from ringfencing coming in. I mean, I have no clue how to think about that conversations with some investors. I mean, there's no visibility. How do you get that, going forward? Can you elaborate on that, please?

Antony P. Jenkins

I think it is -- I mean, it's talking to investors, it's looking at the spreads on our debt and so on. But our view is that some of that is priced in. Now we're deliberately not being specific about how much lower than the GBP 1 billion is. It's just lower. And I think it will become clearer as we approach the actual event of the ringfencing being created, the process of creating a ringfenced entity and what's actually in it. But our assumptions what's in it will be essentially the GBP 6.5 million cutoff on turnover for business and then the individual consumers will be on the liability side. And then we'll match that with high-quality assets. So we're reasonably confident in the assertion, but I would agree that it lacks precision at this point.

Unknown Attendee

So would you think about exiting businesses if those costs get onerous? Is that the implication?

Antony P. Jenkins

Yes. I mean, my previous comment stands: The 75-unit analysis is a way of running the business. It's not a point in time. And we just have to be dispassionate. If a business isn't going to cut it going forward, then we have to reposition it or manage it down or exit it. Could you pass the microphone? Thank you.

Jason Napier - Deutsche Bank AG, Research Division

It's Jason Napier, from Deutsche. Just a question around the cost to achieve on the cost plan, GBP 2.7 billion sort of towards the top end of the range that we've seen at similar announcements in the industry. The cost objective is by division. A lot of the savings seem to be on closures or retrenchments of operations. Is there a rough split you could give on the GBP 2.7 billion just where it's going to go, plus by division, or confirming how much of it's for, for example, IT; how much of it might be for legacy asset losses on disposals; retrenchment of staff; and so on?

Antony P. Jenkins

Well, Jason, that's a very important question and it's worth spending just a couple of minutes on it because I see this as fundamentally different to the way that we and other institutions have tackled cost in the past. This is really about looking at all of our core processes, figuring out how to automate them, how to take out cycle time, take out defect, take out error, take out rework. And so much of this is not actually about retrenchment or about portfolio disposal. It's about, if you like, retooling the way we do business at Barclays. We included in the speech a couple of examples, there are more examples in this slide pack. But for me, this is really a discipline of constantly looking at how we run our businesses and trying to squeeze cost out, principally through the deployment of technology. And that means that a lot of what we spend the money on will be technology based. But it isn't a big bang. It's not we're going to go buy this massive piece of kit that will solve all our problems. It's really about having people who work deep in the organization, figuring out how to do stuff better. And I've long believed that this is a huge opportunity in financial services. And if the organization figures it out first or is among the first to figure it out, we'll have a competitive advantage because it -- you can only do it by learning, as we have begun to do in some of the examples that I gave you. So I'm pretty confident that we'll get value on the money that we spend. We have a list of things we're going to spend the money on, but again, we'll only spend it where we think it's going to deliver the sort of yield that we look for. Could you pass -- who's -- could we -- this gentleman over this panel up. Thank you.

Chris Manners - Morgan Stanley, Research Division

It's Chris Manners from Morgan Stanley here. I had a question for you on what exactly transition means, close [ph]. Looking at Slide 43, and Structured Capital Markets seems to be in the transition bucket, not the exit bucket so -- but you're closing it, so does that mean everything in transition will lose that GBP 2.2 billion of revenue as well? Or how do we think about that bucket?

Antony P. Jenkins

Yes, the transition bucket is really the bucket that's got about GBP 0.5 billion of revenue loss in it, and that's the way to think about it. And the reason why it's transitioning is because, although we think there are businesses that can get into quadrant 1, in the transition bucket, there's more doubt about whether they can, either because of the economics or because of the reputational issues. So they're either transitioning out or they're transitioning up, is why we called it that. But you should think about the GBP 0.5 billion in that bucket.

Chris Manners - Morgan Stanley, Research Division

Okay, so the exit revenue will be the GBP 0.5 billion in the transition bucket plus the GBP 0.4 billion in the exit bucket, so about GBP 1 billion or so.

Antony P. Jenkins

It's probably about GBP 0.5 billion in total, I would have that number in your mind.

John-Paul Crutchley - UBS Investment Bank, Research Division

John-Paul Crutchley, from UBS. I wonder if I could ask you a slightly broader question, Antony. Let's look at where we are in the industry at the moment with the legacy issues and costs we're facing? I mean, they're not Barclays specific, they're largely industry issues. And there were issues which were seen as commonplace back in the time when people were writing things like PPI and whatever else. So I understand how you look to the businesses and how you're looking to rearrange, but how do you go about trying to change the way you do business to ensure that in, 5 years time, we're not talking about legacy costs associated with this or that or something else? Because it does require potentially standing aside from what everybody else in the industry is doing at a certain time because it's not the right thing to do, or looking to fundamentally change the way the economics of the U.K. banking model works which seems to be very much pushing on one particular source of revenue to the source of -- actually, a more robust charging more -- some more [ph] across the entire industry. I just wondered, to what degree do you think you can actually lead that process forward to make sure that these generally are behind us when they put them behind us?

Antony P. Jenkins

Well, I think that is the fundamental challenge that confronts the industry. It's to make money in a way that delivers real value to customers and clients. And I think we've made a lot of progress in Barclays on this topic in the last 2 or 3 years. When I think about our retail bank, the way they're providing products now, like the Springboard mortgage which is designed to help one generation fund the mortgage for another in a very fair and transparent way; the way we've completely stopped selling investment product in the branches because we don't think we can do that in a way that's consistent with our values; the way we stopped selling packaged accounts but we give customers a menu of choices they can make; our deployment of our mobile banking app, which has over 1 million people using it now. With Net Promoter Scores of 63, so typically, banks have a Net Promoter Score of in the single digits. This is our 63, Apple is 67. So through the deployment of new technology, new capabilities; thinking about transparency; living by the values and behaviors, you can create a business which is more sustainable. Because, why? Fundamentally, our belief is we have to avoid these conduct issues of the past through running Barclays differently. And I believe, when you combine that with a plan we've laid out on returns, it makes it a much more investable proposition for everybody looking at the stock because it should be a more certain proposition. And that, I believe, is the way the industry should operate. I can't control the industry, but I can control the way that Barclays cooperate. And my executive committee and the board are 100% behind that approach. All right, we'll go over to this bank of people here. So we'll go right to the back and then forward.

Manus Costello - Autonomous Research LLP

It’s Manus Costello, from Autonomous. Can I ask a question about capital, please? If I look what you've committed today, you're talking about an incremental just over GBP 50 billion of RWA reduction versus what you've previously communicated. You've also reconfirmed a recent commitment to issue GBP 6 billion-ish of Tier 1 CoCos. Should we assume that those 2 measures give some indication of the size of the capital deficit, which the FSA finds in its capital review at the moment for Barclays? Should we assume that you've now addressed any outstanding capital issues once and for all with those 2 measures?

Antony P. Jenkins

What I can say is that we have a very detailed capital plan that's aligned to the financial plan we've described today. We've shared that extensively with the FSA at all levels of the organization, including me personally. And we're very comfortable with our direction of travel on capital and we're very comfortable with how that's viewed by our regulators. [indiscernible]?

Unknown Attendee

Can I ask on the legacy asset reduction? You're still going to have quite a bit of legacy assets left by 2015. Is that because you don't want to take hits so we're just letting them roll off? Could you not be a bit more aggressive in terms of timing?

Antony P. Jenkins

I think that question is really a question of economics. If we feel that we can exit things in an economically viable way, we will, but we don't want to take huge haircuts on positions if that's not going -- it's not going to bring any value to our shareholders if we do that. We are very happy with the flight path of the legacy assets reduction.

Unknown Attendee

Sorry to ask a follow-up, but if you just went forward, the GBP 36 billion will go to 0 by another 5 years after 2020 or just naturally?

Antony P. Jenkins

Yes, I think, probably a bit shorter than that. But as you all imagine, it's hard to forecast that, that far. I think we have another question here in the front. Then we'll take some questions from the web.

Andrew P. Coombs - Citigroup Inc, Research Division

It's Andrew Coombs, from Citi. Just a quick question on your revenue growth targets. At the group level, you're looking at GBP 29 billion of revenues, going to GBP 32 billion if you back out from your implied cost-income target. A large proportion of that seems to be driven by U.K. retail and Barclaycard, where you're looking for mid-single-digit growth and going from GBP 4.2 billion to GBP 5 billion -- or over GBP 5 billion on Barclaycard. Part of commentary on the call this morning was that net interest margins will probably be stable to straight flat going forward. So given it's entirely driven by market share growth, volume growth, so perhaps you could elaborate a bit on them, what you're seeing both in terms of U.K. retail and Barclaycard and the wide environment for competition.

Antony P. Jenkins

Yes, I think that's a very good analysis of the direction of travel on the topic of revenue growth. I would say the businesses Barclaycard and the retail bank have performed extremely well in the last 2 or 3 years, and we have continued to take share from our competitors. And if you look in the results that we announced today, you can see that in the growth of our mortgage book in the U.K., for example. So I am confident, actually, that the volume drivers of that growth trajectory are achievable. And the more we do these sorts of things I was describing in response to JP's question about how we run the business, the more we have products and services which are really compelling for customers, the more we'll be able to take share from our competitors. So I'm very comfortable with that. I'm going to move now and take a few questions from the web. So I'll just read them out because it'd be easy that way.

The first one is, "What are the most significant observable hurdles you foresee between now and 2015?"

So I would refer back to the speech where we detailed a number of the issues that we feel are potential risks to this plan. One is the economy. And if the economy becomes significantly worse than it is today, that could be problematic. The second is regulatory environment. And although, previously, I said that I expected more clarity and more stability in regulatory change, there's always the possibility that some regulatory requirement could affect the plan. The third is legacy issues. And we do have a number of legacy issues at Barclays, as you're all aware. I expect it will take a number of years for those issues to be resolved, but they will be resolved. And then finally, the biggest risk is execution risk, and that's down to me and my team. And we're confident that we can deliver this. And I just want to make a comment about that. I was asked earlier about the executive team, I just wanted to say that I do have confidence in each and every member of the Barclays exco. They are totally behind this plan and they will deliver it, under my leadership.

There's a question here about dividend policy. It says, "Do you intend to progressively increase payout towards 30%, starting in 2013?"

No. We said we would start to pay out in 2014 and move progressively towards 30% over time. So I think that includes all the questions we have on the web. I don't think we have any phone questions. So I think I'll take just 1 or 2 more questions in the room, and then we can call it a day. So I'll -- the gentleman at the back and then the gentleman here, and then we'll call it.

Ronit Ghose - Citigroup Inc, Research Division

It's Ronit Ghose, from Citigroup. Antony, you've spent a lot of time in your brief period as CEO thinking about the social or moral, ethical dimensions of being a bank leader in this time and age. When I think about the return targets that you've set out and also the profitability of other banks in the U.K., the business that affects the population in most retail banking, you're talking about high-teens ROE; in Barclaycard, 20% plus ROE. Is that socially acceptable to have twice the cost of capital?

Antony P. Jenkins

I think, particularly in the Barclaycard business, well, remember that, in the Barclaycard business, it's not just the lending businesses. There's also our payment businesses which consume very low capital. And therefore, those returns are, I think, the right returns for those types of businesses. We believe that those returns will remain broadly stable over time. And we think they're appropriate returns given the capital that we've got deployed against them. But you're right, it's something that we have to keep an eye on. And if we continue to innovate and continue to do the right things for customers, we continue to deliver a better customer experience, then I think we can justify those returns. And the final question, from the front here.

Raul Sinha - JP Morgan Chase & Co, Research Division

Just a follow-up from Raul Sinha from JPMorgan again. If you look at the profile of GDP growth across the geographies that you are concentrating over the next 3 years, I would've thought Africa probably stands out as the one which has got the best prospects of GDP growth. But when you look at the RWA or the capital allocation you want to give to that business, you're saying 2012 RWAs of 27 would only go to GBP 28 billion to GBP 30 billion over the next 3 years. Is there some element of repositioning between that business? Or is that just a very cautious appetite for growth there?

Antony P. Jenkins

I think it's a combination. Firstly, it's just the size of the absolute market. It's relatively small even though the growth rate is much higher. Secondarily, as you know, we are conservative in terms of our risk appetite. And I do think there will be some reallocation within the portfolio over time, but I think that it's essentially a question of the size of the market. I do believe, though, that Africa will be a very good market for us, going forward.

On that note, ladies and gentlemen, I will conclude the meeting. I thank you very much for your attention. If you have more questions, of course, our Investor Relation colleagues are on hand to help you. Thank you very much today.

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