Barclays (NYSE:BCS) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Barclays PLC reported a Q3 2026 income of £7.4 billion, up 3% year-on-year, with a profit before tax increase of 12% to £2.3 billion and an RoTE of 11.7% for the quarter.
The company announced a £500 million share buyback, contributing to year-to-date distributions of £2.8 billion, up 47% from the previous year.
Strategic investments in UK retail and corporate franchises are driving above-market growth, with all three businesses achieving an RoTE greater than 20% in the third quarter.
Barclays’ CET1 ratio remains robust at 14.2%, with expectations of capital flexibility from increased regulatory clarity.
The company expects to achieve its RoTE target of greater than 12% for the year, supported by consistent revenue growth and operational efficiency initiatives.
Barclays aims to reduce its cost-income ratio to the low 50s by 2028, with significant cost efficiency savings planned through technological advancements and process improvements.
The investment bank’s equities franchise showed strong performance, mitigating weaker results from fixed income intermediation.
Future guidance includes maintaining a focus on disciplined cost management and achieving positive operating leverage, with strategic investments continuing in key growth areas.
Full Transcript
OPERATOR
Welcome to Barclays Q3 2026 results analyst and investor conference call. I will now hand over to CS Venkatakrishnan, Group Chief Executive, before I hand over to Anna Cross, Group Finance Director.
CS Venkatakrishnan (Chief Executive Officer)
Good morning and thank you for joining the Barclays results call for the third quarter of 2026. In this call, and in our full year results discussion in February 2027, we will supplement our usual discussion with two features. First, we will explain the investments which we have made to date and which are delivering the results that we expected, and second, we will provide greater insight into the components of our profile and trajectory. This will illustrate the operational efficiency which we are driving for, particularly from technology, and it will show our future ambitions.
I will commence with a brief review of results, followed by a detailed discussion from Anna, and then return to these two features. I’m pleased with our year-to-date performance and I’m confident in achieving our primary financial targets. Our income in the third quarter was 7.4 billion pounds, up 3% year on year, and we reduced the cost-income ratio to 62% for the quarter and 57% year to date. We grew profit before tax in the quarter by 12% to 2.3 billion pounds, and we delivered an RoTE of 11.7% in the quarter and 13.8% year to date.
Given our returns and our robust CET1 ratio of 14.2%, we are announcing a 500 million pound share buyback. This brings year-to-date distributions to 2.8 billion pounds, up 47% from the same period last year. Our earnings per share is up 18% year on year for the third quarter and on track for a third consecutive year of 20% growth in EPS. We remain very confident in achieving the group RoTE target of greater than 12% this year, having achieved 12.4% in the last 12 months.
Let me share four main reflections on this quarter. First, the investment that we have made in, and the repositioning of, our UK retail and corporate franchises is driving above-market growth. All three businesses had an RoTE of greater than 20% in the third quarter. Second, I’m pleased to see the continued results of our investment in the equities franchise in the investment bank. Their strong revenues this quarter have helped balance the somewhat disappointing results from fixed income intermediation.
Third, increased regulatory clarity is providing us with greater capital flexibility and we will update on our expected CET1 operating level at the full-year results. Finally, as I will discuss later, multi-year investments in our businesses are delivering consistent returns and growth. This is the alpha we are creating. Including these investments, we are going to provide you with a clear path for absolute cost and efficiency savings to 2027. I will return to this at the end. First, however, Anna will take you through the financials in detail. Over to you, Anna.
Anna Cross (Group Finance Director)
Thank you, Venkat, and good morning everyone. With a quarter left in the original three-year plan, we are confident in delivering all group targets. As I take you through our results I will focus more than usual on costs, starting though with income. Group income grew 3% year on year in Q3, on track for the circa 31.5 billion target in 2026. This implies full-year growth of circa 8% versus the more than 5% CAGR target to 2028. We are building more consistent returns by growing stable income streams.
These now cover 125% of group costs versus around 100% before 2024, having grown for six consecutive years. This is underpinned by Group NII which has been around 50% of total income consistently since 2023. We are confident in delivering the 2026 Group NII target with 7% year on year growth in Q3, and we expect NII growth to continue underpinned by two levers. First, the quality of deposits, particularly in the UK. These support structural hedge income growth until at least 2030, as I’ll discuss later.
And second, ongoing lending momentum. Starting with UK deposits, around 80% of group deposits come from UK clients, including in Private Bank and Wealth Management and the International Corporate Bank. We bring these together for the first time on the left with total deposits up 3% year on year. Barclays UK retail deposits also grew 3% as shown on the top right. Current account customers hold around 90% of Barclays-branded UK retail deposits, with current account balances stable since 2024 as we show on slide 37 in the appendix.
Given our strong funding position, we take a relationship-led approach to savings, with Premier accounting for 90% of Barclays brand ISA growth year to date. But retail deposits are only one part of the story. The bottom right now shows the corresponding split of UK corporate deposits. We are the UK’s largest corporate bank with 220 billion of deposits across three divisions, Barclays UK, UK Corporate Bank and ICB. In the investment bank these have grown 4% year on year.
Current accounts are stable and support deep relationships with around 80% of UK Corporate Bank clients banking with us for more than five years. The breadth and quality underpin the structural hedge shown on the next slide. The structural hedge provides stable income and predictable growth for all divisions. Average swap rates of 4.2% year to date exceed the 3.5% planning assumption, supporting additional NII in future years. Given prevailing and expected swaps, hedge income is likely to grow until at least 2030 as you can see from the updated maturing yield disclosure on the left. Whilst higher rates undoubtedly help structural hedge income, we are also diversifying NII by growing lending. Total UK lending grew by 7%, consistent with the more than 5% target from 2025 to 2028. With a quarter to go we have deployed 28 billion of UK business growth RWAs towards the circa 30 billion target for the three years to 2026.
Mortgages grew by 7% year on year with 11 billion of gross lending in the quarter. Corporate and Business Banking lending grew 13% year on year excluding the run-off portfolio. Above-market growth in UK Corporate Bank reflects investment since 2023, helping to attract 1,500 new clients with around 40% borrowing from us. More on this from Venkat later. In summary, our progress in both deposits and lending is driven and sustained by investments in both service and capabilities.
Moving on to costs, we think about costs. We distinguish running the bank from investing in the future. In running the bank we aim to drive as much operational leverage as possible by delivering gross efficiencies to offset costs from business growth, inflation and BAU investment. We distinguish this from strategic investment to increase returns. Run-the-bank costs have increased by 0.3 billion, of which 0.2 billion relates to the acquisition of Best Egg and GoHenry.
Put differently, gross efficiencies have meaningfully offset additional costs from business growth, inflation and BAU investments. This is despite 0.3 billion of additional performance costs given 8% year-to-date income growth in the investment bank versus the low single digit target. We also increased investment by 0.2 billion year on year to harmonize systems and processes and grow fee businesses. This results in exit rate costs of circa 18 billion for 2026 as outlined last quarter.
We are also deliberately spending an additional 0.3 billion in H2 to structurally reduce costs supported by technology deployment. Inclusive of the Q1 motor finance provision and the change to material risk takers’ compensation mix, we expect £18.5 billion of cost in 2026. This is consistent with the high-50s cost-income ratio target. We said in February that costs would grow modestly from 2025 to 2028 and the group would deliver positive operating jaws each year.
These expectations are fully intact based on statutory total costs. So what drives this for the group? We expect run-the-bank costs to be flat or lower in 2027 versus 2026, reflecting higher anticipated gross efficiencies. This creates capacity for 0.4 billion of planned additional investment within our modest cost growth guidance. In absolute terms we expect statutory costs to fall to circa 18.4 billion in 2027. Cost-income ratio remains our North Star, so we would expect to flex business growth costs to the extent that income is higher or lower than expectations.
As a result, we are confident in making meaningful progress next year towards the low-50s cost-income ratio target in 2028, from a high-50s ratio this year. Our confidence in delivering these commitments is underpinned by the generation of cost efficiencies. In the past few years we have delivered around 0.7 billion of gross efficiency savings annually, facilitated by 0.3 billion of SCAs in the prior year, driving positive operating jaws each year.
This was our planning assumption for 2026 to 2028. Having increased this for 2026 alone, we expect more than 1.1 billion dollars of gross efficiency savings in 2027. These actions involve an expected reduction of circa 5,000 full-time employees. Around 60% of the group actions relate to support functions, including fewer developers as AI makes our people more productive. Nowhere in the bank is this more relevant than in Barclays UK where we have taken more structural cost actions than planned in 2026. Whilst this acceleration means I no longer expect Barclays UK costs to fall in 2026 versus 2025, we are more confident in reducing 2027 and 2028 below the 2025 level. This is enabled by improved customer-facing technology which has reduced call centre volumes by 10% in the past year.
While technology improvements within call centres have increased colleague productivity, changes to the branch staffing model have also reduced employees per branch by around 10% in the past year with colleagues focusing on higher-value support, and following the successful integration of Tesco Bank, circa 0.2 billion of cost synergies are flowing through, with a majority split broadly evenly between 2027 and 2028. In 2027 we expect a high-40s cost-to-income ratio before falling to mid-40s in 2028.
Turning to impairment, consumer balance sheets remain robust and borrowers are behaving rationally, with a year-to-date loan loss rate of 55 basis points. The Barclays UK loss rate of 20 basis points benefited from a Tesco Bank debt sale and should normalise towards 30 basis points in Q4, whilst in US Consumer Bank 90-day delinquencies fell further as shown on appendix slide 45. We expect a seasonally higher reserve build and loan loss rate in Q4 given card spending.
Given this and a 552 basis points year-to-date loan loss rate we still expect circa 550 basis points for the full year. Turning to Barclays UK, RoTE was 21.2% in Q3 and income grew by 4%. Costs increased 6% driven entirely by 110 million of SDAs reflecting the accelerated actions I discussed earlier. NII increased 6% year on year and 4% versus Q2 to 2.1 billion. Structural hedge momentum was complemented by positive product margin effects as guided at Q2. This reflected dissipating mortgage margin headwinds, card seasonality and day counts. We still expect full-year NII around the middle of the 8.1 to 8.3 billion range as guided last quarter.
An increase in the structural hedge in early October will lead to a negative Q4 product margin movement, offset by higher hedge income, with no net effect. Moving to UK Corporate Bank, Q3 RoTE was 23.5% and 21.6% year to date. Incomes both increased 10%. We grew by 14% driven by structural hedge income and volume growth. As outlined earlier, lending grew by 14% and deposits by 1% supported by improved propositions, and the loan-to-deposit ratio was 38% and up 4 percentage points year on year. Moving to Private Bank and Wealth Management Q3 ROTE was 23.8% and 20.4% year to date. Client assets and liabilities grew 6% year on year and AUM 10%. This included $2.5 billion of net new AUM year to date, including $0.6 billion in Q3. The private bank has driven most of the client asset and liability growth in the past three years.
Part of the investment I outlined earlier will drive additional scale in UK wealth, including through advisor recruitment and recently launched marketing. These investments increased costs 7% quarter on quarter and we expect a similar increase into Q4. Moving to the investment bank, Q3 ROTE was 9.5% and 13.5% year to date. Income was broadly flat year on year, with higher RWAs reducing income to average RWAs by 20 basis points to 6.1%. With the investment banking loan book review now largely complete, we deployed additional RWAs to support deal activity, including in the UK. This will generate income in future quarters. Costs increased 72 million, driven entirely by 112 million of SDAs and changes to material risk takers’ compensation mix.
We expect Q4 MRT costs to be similar to the Q3 level of 55 million, including all H2 costs. We remain focused on delivering a circa 12% ROTE and positive operating jaws in 26, having delivered 2% positive jaws year to date. In US dollar terms, markets income increased 4% year on year, benefiting from past investments. Equities increased 47% and accounted for half of Q3 markets income. Equity derivatives were particularly strong and we grew prime, supporting 8% year on year financing growth. This offset weaker FICC intermediation with lower client activity in rates and credit in the second half of the quarter, and further adversity in September given macro movements.
Investment banking fees increased 2%. Strong activity in advisory and ECM offset lower DCM fees, reflecting deliberate risk and return decisions in a smaller, less thin wallet. M&A and ECM pipelines remain strong. Lower ICB income reflected 39 million of less thin marks and higher hedging costs in the corporate lending line. Transaction banking income grew 9% year on year, reflecting deposit and fee growth, particularly from trade and working capital.
Moving to US consumer bank, ROTE was 10.9% and 19.9% year to date. Income decreased 1%, with a Q2 American Airlines portfolio exit broadly offset by Best Egg and business growth. NII increased 3% year on year, with lower average balances more than offset by higher NIM. This reflected MIPS effects and a circa 10 basis points one-off benefit from a change in the recognition of future customer rewards. Higher interest rates do not materially affect NIM as assets typically reprice within a month.
Card and consumer loan volumes were as expected, though higher benchmark rates continued to weigh on market-wide pricing of consumer loans distributed through Best Egg. This created a circa 20 million non-NII headwind in the quarter. Costs increased 14%, reflecting a full quarter of Best Egg costs, and the cost-income ratio was 50%. We still expect a circa 12% ROTE in 26 excluding the AA gain on sale. Let me step back from the quarterly performance. In the past three years we have been transforming into a multi-product, digital-only US consumer bank with 23 million customers. The partnership cards franchise remains at its core. Balances grew 6% organically in the past year as we rebalance towards retail to improve diversification and risk-adjusted margins. This includes circa 20% growth in general measured balances since August 25th. The fully digital consumer deposit franchise shown in the middle has grown balances by 53% since 23 to 26.6 billion dollars.
These deposits are around 50 to 60 basis points cheaper than wholesale funding and now comprise 84% of total funding. Most recently, Best Egg has added consumer lending capabilities with circa $7 billion of annual originations. This allows us to deliver even more value to partnership clients and their customers over time. Bringing these propositions together will drive significant further growth in our most digital division. Our earnings momentum is driving consistently stronger capital generation.
We are on track to generate around 200 basis points of capital this year and expect more than 230 basis points in 28. This supports progressive shareholder distributions, including the 2 billion planned dividend for 26. We have now announced 10.7 billion of distributions since the start of the plan, even before any Q4 buyback. We take a prudent approach to both current and future regulatory requirements regardless of materiality. Noting recent commentary on our TRS exposure on private credit loans, our approach here is no exception. The conditions to classify the treatment as trading book were met and our approach supported by appropriate governance internally and external review, and this approach is unchanged under Basel 3.1 rules. For context, the mark-to-market of this exposure is small, currently around 300 million within the 15 billion private credit book and is equivalent to 1.5 billion of notionals.
Looking ahead, our plan and targets are based on operating around the top of our 13 to 14% CET1 ratio while fully absorbing RWA headwinds in 27. Put differently, the plan did not assume a reduction in Pillar 2A requirements as expected. Basel 3.1 will increase RWAs by 8 to 15 billion, equivalent to 30 to 55 basis points of CET1. We now have greater clarity on Pillar 2A, which will reduce the MDA by 59 basis points, more than offsetting the impact of higher RWAs. This gives greater capital flexibility and we will update on the expected CET1 operating level within the 13 to 14% range at full-year results.
Bringing this all together, we are delivering consistent revenue growth and amplifying this with positive operating leverage. This has driven the majority of the double-digit EPS growth in 24, 25 and year to date. In doing so we are driving more consistent shareholder returns. Buybacks of 5.8 billion since 2023 have reduced the share count by 12%, further compounding EPS growth and delivering growth in TNAV and dividends of 32%. But the plan does not end here.
So before we open for Q&A, let me hand back to Venkat.
CS Venkatakrishnan (Chief Executive Officer)
Thank you, Anna. Three years ago we presented a vision anchored in measured ambition and disciplined delivery and, as I told you in February this year and as Anna has started to show you today, our operational performance and our financial success are two sides of the same coin. With a quarter to go until the end of the original three-year plan, I’m very pleased to say that we have met or are positioned to achieve all of our primary group objectives. I want to illustrate that with examples across our businesses and then discuss the next stage of our execution ambition.
This is to reduce our cost structure and increase operational efficiency. Let me remind you of our retail strategy, the journey on which we have been, and the opportunity from here. This strategy has—first, we have repositioned the business into a multi-brand franchise, extending our client reach and the ability to tailor services to different customer needs. We acquired Tesco Bank in 2024 and it now accounts for 20% of card acquisitions and is a key lever in our deposit strategy.
We acquired Kensington Mortgages in 2023. The Kensington brand and capabilities enable us to lend to more complex borrowers, and balances here have more than tripled since the acquisition. And we are delivering a better client experience by investing in technology. This includes our mortgage broker platform, where we have reduced application times from 45 minutes to less than 15, meaningfully improving our broker NPS score from minus 51 to plus 70.
As a result, our market share is up 30 basis points since 2023 to 10.4%. The second pillar of our retail strategy is to establish Barclays as the premier UK bank. Improved customer service has culminated in Barclays having the highest Premier NPS among UK peers. As a result, since the end of 2023 we have increased Premier mass affluent customers by 27%, driving 23% deposit growth in this segment. In doing so we have shifted our deposit mix towards customers with larger balances and with the greatest need for long-term investment planning.
We have the customers, including circa 400,000 in Barclays UK, that could benefit from investment advice, and we now have the most compelling low-price, high-quality proposition in Private Bank and Wealth Management in the UK. These provide financial advice with no upfront fee and Direct Investing, our investment platform, with no custody fees. When it comes to UK corporates, we are uniquely placed to drive growth and investment. We have built the large UK corporate deposit trend by investing in transaction banking and having complete client coverage. This starts with business banking in Barclays UK through to FTSE 350 clients in the UK Corporate Bank, and as the only full-service UK investment bank we also serve the very largest FTSE clients in the International Corporate Bank. The UK corporate franchise has historically been the beating heart of Barclays, but it has lacked specific attention on time.
This changed after we resegmented the business at the end of 2023, gave it capital, and started reinvesting in technology. We are driving differentiated growth on both sides of the balance sheet, being growing materially faster than the market since 2024, driven by new and existing clients. With a loan-to-deposit ratio of only 38% in the UK Corporate Bank versus 50 to 75% of peers, we have further to go. We are driving growth by delivering a better client experience. Around 45% of our clients now use iPortal, our digital access platform exclusively, replacing five legacy platforms and we expect this usage to rise to 100% by the end of this year. All of this will drive greater product usage supporting our fee income and allow us to decommission legacy tech platforms in the investment bank. We are improving the returns footprint by altering the business mix and increasing productivity within a broadly stable RWA footprint.
We have increased income to average RWAs by 130 basis points since 2023 to now standing at 6.8% in the last 12 months. Ours is a story of discipline focused on greater client relevance where we now rank top five with 66 of our top 100 market clients, up from 30 in 2021. And to remind you, our target was for 70 out of the top 100 to be top five by the end of this year. We have driven structurally stronger, more predictable global markets income in two ways. First by growing the stable income base and second by reducing volatility and the seasonality of the intermediation business. We have increased finance income by about a billion pounds since 2023, reflecting the investment which we have made in liquid financing where we now rank fifth globally. This creates deeper relationships with 98 of our top 100 market clients choosing Barclays for their financing needs and we are rebalancing towards equities which now account for 45% of the year to date revenues in the markets business versus 32% in 2023.
Equity derivatives and prime have driven about 90% of this growth. The diversification of our revenues supports performance in a broader range of environments, with Q3 being a case in point where we saw a 50/50 split in revenues between equities and fixed income. We’re improving performance across our businesses through disciplined delivery and rigorous execution. We have done so by investing in and building a constellation of segment-leading businesses. These include consumer businesses with over 40 million retail customers globally, the largest UK corporate bank by deposits and a top tier global investment bank. As we move from the first three year plan to the second, we’re also transitioning to the next phase of our journey.
And this is to accelerate operational improvements and drive even greater cost efficiency through the technological transformation, reducing the unit cost of product, manufacturing, service and innovation. We are achieving this by standardizing our data, modernizing our infrastructure and harmonizing our processes. And we will employ AI at scale. But AI is the icing on the cake, not the cake investment underpinning. This is within the plan we have outlined in February and is being made possible by our operating leverage.
By continuing to execute our strategy with discipline and rigor, we are accelerating our ambition and securing structurally higher and all weather returns beyond 2028. Segment-leading businesses. Ambitious revenue growth, robust cost and operational efficiency, conservative capital and liquidity profiles, rigorous risk management and strong capital generation. These are the principles and goals by which we aim to live and prosper at Barclays. I’m now open to questions and answers.
As ever, please limit yourself to two questions so we can get around as many of you as possible. And please also introduce yourselves as you start your questions. Thank you.
OPERATOR
If you wish to ask a question, please press star followed by one on your telephone keypad. If you change your mind and wish to remove your question, please press star followed by two. Our first question for today comes from Jonathan Pearce of Jefferies. Your line is now open. Please go ahead.
Jonathan Pearce (Analyst)
Hello, good morning both. Hope you’re well. I’ve got two questions. One on capital, one on cost, please. On capital, the Pillar 2A drop 59 bips in equity terms, things about 105 basis points in total capital terms. It’s… I mean, it’s huge. Mathematically, it’s equivalent to about 50 billion of RWAs moving into Pillar 1, not the 8 to 15 that you’re flagging for Basel 3.1. So I just think we’re a bit more colour on this. Is there something else going on here?
Is this actually part of a much broader review of Pillar 2A and not just 3.1 and maybe as a supplementary to that, if you do land at 11.6%, which is what they’re saying in the slide this morning, very similar to Elder NatWest are at the moment and they’re targeting a 13% equity tier one. So I know you’re going to tell me we’ve got to wait a full year, but any insights into how you’re thinking about this, would you need to operate a little bit above or slightly higher buffer than those other two banks?
Maybe 13.5%. Be helpful for some color on that, please. Secondly, on costs. Thanks so much for the absolute cost guidance for 27. I think it’s really helpful. Afraid I’m going to ask about 2028 and I’ll keep it very simple. Are we okay to rely on the bridge, the absolute cost bridge that you gave us with full year results? 2025. So that’s slide 66. That gave us a cost line effect for 2028. And if not, how should we think about 28? Is it another year of run the bank costing broadly flat like in 27 and then the delta is investments.
How should we think about 28 costs, please? Thank you.
Anna Cross (Group Finance Director)
Okay, Jonathan, let me take both of those. So let me start with Pillar 2A. What we’re saying is that we’re expecting a reduction in our MDA of 59 basis points. And essentially where this comes from is we have an annual process around Pillar 2A that includes Basel, but it will include other things. So you’re right to say that the Basel component is part of it, but that is an annual normal process and is an ongoing piece of work. The second thing I would say is that Basel is a big complex change and so you have some quite mechanical offsets and then you have some that are sort of a lot more complex than that.
So I think it reflects both of those factors. Jonathan said, quite difficult to read from the outside, but as I step back from it, what it tells me is that we are well capitalized now in Pillar 2A for the capital environment that we’re going to go into, number one, and number two, it gives us more capital flexibility as we go forward in the plan because we had not anticipated this Pillar 2 reduction. The other thing that I would say in response to your question, I mean, obviously we will talk about the range within which we expect to operate at the full year, but you should expect us to operate an appropriate buffer to the MDA as we do now.
So don’t expect that to change. To go to your second question, what we said at full year remains intact. Specifically that you should expect modest cost growth and you should expect positive jaws. What we’re trying to highlight for you today is that in this phase of the plan there is an increased intensity of investment, but we are also highlighting an increased efficiency so that efficiency is up commensurately so that we can contain costs and make those two things true. So that’s how we think about it.
Venkat, anything you’d want to add?
CS Venkatakrishnan (Chief Executive Officer)
Yeah, let me add on both, Jonathan. First of all on capital, I think as we’ve made clear in our planning up to now, we had taken into account what we thought would be the increases coming from the Basel process that’s due to us in early January and that’s, as we said, 30 to 55 basis points. We had not in our planning process, as Anna just said, taken into account for this Pillar 2 adjustment offset would be negative. So of course net-net this is a tailwind as you point out.
And then on the efficiency side, just to add context to Anna’s answer. What I would say is we have been investing in technology, we continue deeply to invest in technology, simplifying our processes, modernizing our infrastructure and I would expect this to yield results over time. And as we have clarity on it, we will share it with you.
Anna Cross (Group Finance Director)
Thank you, Jonathan. Can we have the next question please?
OPERATOR
Our next question comes from Alvaro Serrano of Morgan Stanley. Your line is now open. Please go ahead.
Alvaro Serrano (Analyst)
Thanks for taking my questions. First one is on the investment bank, obviously FIC you’ve called out, Venkat, I think somewhat disappointing I think is the word you used. And you’ve also explained that the intermediation sort of activity was slower in the second half of the quarter. Is there something you could sort of help us when we think about going forward? Is there any sort of particularly sort of bad sort of, I don’t know, marks in the quarter that should bounce back or is it the reasonable run rate obviously considering seasonality from here, maybe a bit of color in that sort of in particular FIC number, but maybe broader IB activity.
And related to that, Anna, you mentioned that you were, I can’t remember the word you used, but you were leaning a bit more with clients and increasing the RWAs to take advantage of opportunities. Is that going forward? Would you be more open to give the division a bit more balance sheet and RWA growth? Thank you.
CS Venkatakrishnan (Chief Executive Officer)
Yeah, hey Alvaro, thank you. There’ll be nothing particular to call out. I think this was one of those quarters where in parts of fixed income, in rates in Europe particularly and parts of credit, the intermediation was just a little weaker. You know, we still think we’ve got a very good strong client franchise. We see that in the engagement and the numbers. It was just one of those things where it was just sort of weaker for a period. So nothing particular.
I mean, of course we are giving this attention to try to understand how to improve it. I would say also there are other parts of fixed income products we’ve been investing a lot which did very well. So this is not a general fixed income story, it’s part of it. Our franchise continues to be strong and we’ll do better.
Anna Cross (Group Finance Director)
Yeah, let me just add to that before I go into— So I completely agree with Venkat. The things I would add is what we’re really pleased with is that areas that we’ve been investing in have done really well. So, you know, if you look at our performance in equities, if you look at our business in M&A, if you look at our performance in ECM, they have benchmarked very well with the US peer group and that would not always have been the case and it’s really reflective of the investments that we made and I think that diversification of income, particularly as we look forward into the fourth quarter, is important.
As for leaning in on clients, the RWAs in the investment bank have been broadly flat since 2022, actually well before the plan that we’re about to complete started even, and they’ve moved between about 195 and about 205. The thing that we called out that’s perhaps a little bit different is we are nearing the end of the three-year review of our investment banking loan portfolio. So you are seeing us lean in a little bit more there in terms of UK lending and whilst outside of our target, that’s completely consistent with our view case.
So that’s the only thing I would specifically call out, Alvaro, but thank you for the question.
CS Venkatakrishnan (Chief Executive Officer)
If I may just sort of pick up where Anna left off. When you look now, we’re 11 quarters into this three-year plan and you look at the investment bank, it has delivered exactly what we wanted it to deliver, outperforming in some respects and know, puts us in a very good position. I mean, go back 11 quarters. We said we’d do three things. We said we’d increase the revenues in the investment bank, we’d keep capital flat, which Anna has just said we’ve done five years, and we’d improve profitability, and nobody thought we could do all three. And here we are. Profitability is approaching group levels at RoTE, revenues have gone up.
The areas in which we’ve invested in, as Anna has said, equity capital markets, M&A and equities generally, and financing, the structural improvements in stable revenue streams and in financing return per unit RWA, all of that has worked and we continue to maintain our ranks in spite of others investing more. And the overall thing about RWAs or capital in the investment bank is we’ve always said it’s a proportional game, and that proportion is affected in part by what we do in the IB and part by what happens elsewhere. But in the IB we stuck to our guns. 200 billion pounds of RWAs has been the average over five years and the variation has been minimal, 5 billion this way or that way. So this is playing out as advertised, as desired, and it puts us in a good spot continuing forward.
Next question, please. Thank you, Alvaro.
OPERATOR
Our next question comes from Chris Kant of Autonomous. Your line is now open, please go ahead.
Chris Kant (Analyst)
Good morning. Thanks for taking the question. I just wanted to come back on capital please, appreciating that the greater than 15 billion capital return guidance you gave for year 26 was open ended. But I do think that was an area that somewhat disappointed the market in terms of the relative level of ambition on capital return versus the plan for 24 to 26. Given that you’ve been able to accelerate your investment plans because of the revenue surprises this year.
So you’re getting done what you hope to get done, but more rapidly. And given that you’ve now got confirmation on Pillar 2, which I think was foreseeable in terms of quantum, but it’s not something you had banked in the plan. Now you can bank that. Will you consider revisiting that greater than 15 billion capital return aspiration? Because I think the reason you left it open ended was you wanted to leave slack in the plan for either potential M&A or potential accelerations in your investment plans.
But in terms of M&A, given performance of the shares year to date, your acquisition currencies may be a bit softer than you would like, I would assume. And in terms of the investment, you’ve already been able to accelerate that. So is that something you’ll consider revisiting alongside reconsidering the 13 to 14 range? Thank you.
Anna Cross (Group Finance Director)
So thanks, Chris, for the question. So let me just recap on what we said at full year 25. The first was that we were planning at the top end of our range because we had clarity on Pillar 1, but we didn’t have clarity on Pillar 2 and other regulatory changes like, for example, IRB. We are clearly in a different position now. So we do have that Pillar 2 clarity. We’re very keen to get through Basel 3.1 implementation at the end of the year before we give further consideration to this point with you.
The second thing that we called out was that we were very clear that if you took the capital generation in the plan and the investments and the distributions in the plan, the capital generation was clearly bigger than the other two. And we said very deliberately that that gave us flex in order to either return that excess to shareholders or, alternatively, invest it in the business. But that was a very, very high bar. That remains exactly the same.
And our capital hierarchy is very clear: starts with regulatory, follows with shareholder distributions, thirdly investment in the business. So all of that remains as was. The only new piece here is the Pillar 2A. So we will come back at the year end, Chris, and we will talk about the range within which we operate. And you can see the focus that we have on returning capital to shareholders through the actions that we have taken in distribution in this plan alone, but specifically in this year.
I mean, we’re at 10.7 now, including the planned dividend that we have for the full year. And that’s before we’ve done a full year buyback. So I’m not going to be pressed for an answer now, but we are clearly considering these matters and we will come back to you. Thank you. Next question, please.
OPERATOR
Our next question comes from DI Stebbings of BNP Paribas. Your line is now open. Please go ahead.
DI Stebbings (Analyst)
Hi. Morning. I want to come back on capital and costs, please. On capital, just in terms of the P2A guidance, it’s clearly very specific to the start of next year, whereas the RWA range is still a little bit wide, so I just wonder if you could maybe narrow that range at all or whether the fact that the P2A benefit is coming in a bit better than most of us anticipated implies the other might be a little bit the upper end of that range at all. And then on the costs, thanks for the new disclosure and guidance.
I also want to come back on the 2028 costs, I mean before Q2 and the extra structural cost actions consensus, assuming a 28 cost of 18.4 billion. If we use Slide 9 in terms of sort of building blocks, we’re just trying to understand whether it’s sort of realistic to assume efficiencies can more than offset the business growth and investments from the 18 point we start from in 27, if you like. Thank you.
Anna Cross (Group Finance Director)
Thank you, Guy. I’ll take the first one, I’ll start on the second one and then invite Venkat to add. So we’ve given you a Pillar 1 range, if you like, an RWA range, just because, reflecting on what I said before, Basel 3.1 is a big and complex change and that range reflects the degree of mitigation that we will be able to implement as we go through that transition. It doesn’t relate to any specific FRTB point or anything. It’s more broadly an implementation range, given its complexity.
So we are being cautious at this stage. That’s why we’re saying we will speak to you. So I wouldn’t narrow that range for you at this point. On your second point, you know, recognising 2028 costs, but also recognising that consensus for 2028 is very wide. And you know, what we would reiterate here is we do expect modest cost growth. We do expect the cost income ratio in 2028 to be in the 50s. All of that remains intact. And what we’re trying to help you here with is to understand that the way we are managing our costs is not by constraining investments, but by driving the operational efficiency of the bank in order to run-the-bank cost down and create operating leverage.
So that is our focus. You assume that that is going to continue in 2028?
CS Venkatakrishnan (Chief Executive Officer)
Yeah, absolutely. That is our focus. We think that the promise of technology and our implementation of the technology is being realized. We think more will be realized and we are going to drive hard at that realization. So know that there is a great ambition and focus and discipline to bring cost and cost efficiency. What you have seen in other parts of this plan in the last three years, which is business growth, customer service, capital discipline, revenue growth.
Anna Cross (Group Finance Director)
Okay, thank you so much for that. Can we have the next question, please?
OPERATOR
Our next question comes from Rob Noble of Deutsche Bank. Your line is now open. Please go ahead.
Rob Noble (Analyst)
Morning. Another one on capital? I’m afraid so. Just the opposite question. The USCB moving to IRB. I think you say there’s only going to be a minimal Pillar 2A change there. Why? Is that one smaller than the offsetting benefit that you get from Basel or is that something that could come down over time? Well, and then the leverage ratio as well. Should I expect the Common Equity Tier 1 component of the leverage ratio to come down? And could that potentially be binding you from going too low relative to 13%?
And then lastly, just on the outlook with rates at the moment, can you give us any color on what you think the rate curve will do to the UK business? Specifically, I presume we shouldn’t just reprice our hedges to higher rates. What do you think the main potential offsets within the UK business from a high rate environment?
Anna Cross (Group Finance Director)
Okay, thanks. Thanks, Rob. Look, in terms of capital and Pillar 2A with IRB, you might recall that in, I want to say Q1 2025, the increase associated with this was about 0.1% of RWAs. So we do expect it to be more modest, or modest. And the reason I say that is this is much more BAU. This is much more, you know, we’re used to implementing these models. It’s not the kind of big, complex change that we see with Basel. So I definitely wouldn’t scale them to try and get another Pillar 2, a meaningful Pillar 2 offset here.
That’s certainly not what we were expecting. We might see something modest. To be clear, we’ve got nothing in the plan, so hopefully that’s clear. So just on BUK and the rates curve. Okay, so I’m going to answer your question by going in a different direction to start with, so bear with me. I think the thing that is most prevalent in the market at the moment is obviously competition around deposits. And we think that that comes not from the structural hedge directly, but it’s actually coming from the fact that there has been strong lending in the sector. You see paydown of TFSME. You also see some deposit takers who are not loan makers in this part of the sector.
And what that’s doing is putting a bit of fund pressure into this area. And that’s manifesting in two ways. One is more covered bond issuance and the second is intense competition around term deposits. So that’s what we believe is happening. We would see that as being not transitory given what I just described. So what does it mean for us? Well, we’re in a slightly different position because clearly what we are doing here is we have a different funding reality. This business has a loan-to-deposit ratio of 90%. It has an LCR, last time we reported it, of about 167. So it has really good liquidity levels. But we will lean in because we are important. You know, we see the relationship and the ongoing relationship of deposits being really important here. But that means we can be more selective, if you like, more disciplined.
And of course, from our perspective, we have a very, very powerful structural hedge. So what you are seeing at the moment is that we’re able to balance these things in a few ways. So firstly, our focus on deposit is not just on term deposits. It’s actually more broadly across the relationship, and you can see that in the growth in our Premier current accounts. That’s really important. Secondly, as we approach the fixed-term market, we’re approaching it through the lens of relationships.
So about 90% of our growth year to date in ISAs is from Premier. So we’re being able to be very, very disciplined there and also that’s allowing us to balance the margin impact, if you like, on the business as a whole. And that’s why you’re seeing a broadly stable NIM. It’s moving around a little bit, but we’re being able to contain that point. So I wouldn’t drop the upside in the structural hedge straight through to the bottom of your calculation.
There will be some offset here and it’s coming from increased funding costs which are prevalent across the industry. But for those banks who have more liquidity and who have that more powerful structural hedge, they will fare better in this environment. Okay, sorry, on the leverage ratio, I mean, no, not really is the easy answer to that question. Venkat’s just reminding me before I go on to the next question, but thank you. Rob, can we have the next question please?
OPERATOR
Our next question comes from Pearlie Mong of Bank of America. Your line is now open. Please go ahead.
Pearlie Mong (Analyst)
Hello, good morning. So just picking up a little bit more on the UK maybe, so thank you for the color you’ve given just now. But if I look at slide 6, it does look like there’s continued mix shift between savings accounts and time deposits. And that’s consistent with the sector data we have seen. And I think in the last few weeks and months we have maybe seen more competitors coming in, Morgan Stanley and Raisin, and also NS&I maybe stepping up a little bit more as well.
So what are you seeing in terms of the front-end trend in terms of the deposit market? And I think you said that an increase in hedge in October would reduce product margin next quarter. So what is the underlying product margin you’re expecting excluding that effect? So that’s number one. And second question is on the USCB, I think the higher benchmark rate is maybe a 20 million headwind in non-NII. I suppose even if we were to add it back, total income is still a little bit below where Q1 was, and I think at the time you said that it wouldn’t be a bad guide to use Q1 as a guide for the rest of the year.
So what are the moving parts there and how should we think about that line going forward?
Anna Cross (Group Finance Director)
Okay, Perlie, why don’t I take those? So what you see in Barclays UK is that clearly there is growth in term deposits, but current accounts are absolutely flat and, you know, have been for some considerable time. And actually there’s a slide in the back of the deck, it’s in the appendix, that you can have a look at there. So I think what you’re seeing is intense competition, as I said, in terms of fixed term deposits, but somewhat churn within fixed term deposits, as opposed to migration out of current accounts.
In terms of product margin, you know, we’re not guiding, we’re not guiding to NIM at all. And all we were calling out is that flight path, or that chart, is actually quite difficult to interpret because, to the extent that we increase the size of the structural hedge, that means that that income is coming out of product margin and going into the structural hedge bucket. That’s the only thing we’re warning you about, net nil impact on margin. I would remind everybody, though, that particularly given the new disclosure that we’ve given you today, our deposit story is much broader than the UK, particularly across the UK, and you can see that in the strength of our corporate deposits, and equally you can see there the stability that we have in the underlying operational accounts, or current accounts, if you like, within Corporate. So very, very similar story there: an ongoing increase in deposits, but real stability in the core.
Your second question, which is about the roughly 20 million headwind. What we said at the beginning of the year was we expected to build back by the end of the year to broadly the same sort of level as we saw in Q1. The only difference that we are calling out is in those sold prices on Best Egg. Everything else remains the same. So we’ve got good underlying organic growth in cards. They’re growing at about 6%, exactly the same as we’re seeing in the UK, actually. Best Egg originations were 2 billion in the quarter. We said it would be 7 billion over the year. So all of that loan origination, you know, the NIM is at 13.7. Deposits are up by 15% year on year. So all of those factors are playing out exactly as we said. And impairments are well behaved. And impairments are very well behaved, actually.
I mean, they’re flat, despite the fact that AAA has left the platform and we would have expected that to have about a 30 basis point impact. So the only thing we are calling out that is different, Perlie, is that 20 million. So hopefully that gives you a good guide, but thank you, Perlie. Next question, please.
OPERATOR
Our next question comes from Chris Hallam of Goldman Sachs. Your line is now open. Please go ahead.
Chris Hallam (Analyst)
Good morning, everybody. Thank you for the question. So, within financing in the IB, is it possible to provide the split of growth or of revenues between equities and FICC? You mentioned on slide 29, I think it is, that 90% of the equities growth year to date has come via prime and derivatives. Therefore, it seems as though FICC financing must have been particularly weak in Q3. And I’m wondering how much of that would have been the conditions you flagged in late September versus a proactive decision, if at all, to reallocate capital between FICC and equities.
And then mindful of the group revenue target for this year, would you be able to tell us whether those conditions persisted into November and how we should think about FICC seasonality to trend in Q4 this year versus the typical patterns we can see from prior years? Second question, the small box you have on slide 10, I think that’s probably one of the clearest call-outs we’ve had in the sector on the tangible benefits of AI-enabled savings. And it feels like the opportunity set there basically shifted higher probably between February and July, which partly explains the additional SCAs. So looking ahead, is the annual efficiency opportunity you see now in 2028 also greater than perhaps it was earlier this year?
Anna Cross (Group Finance Director)
Okay, Chris, I’m going to start, then I’m going to hand to Venkat, and then I’ll pick up on slide 10 and I’m sure he’ll have something to say as well. So just, I mean, I think like most participants in the industry, most of the growth in financing has come from prime. We’ve also seen a very, very strong performance in derivatives in equities. So I wouldn’t attribute all of the growth to prime. And this really isn’t a capital matter. Prime and fixed income financing are leverage heavy, not capital heavy.
So capital would not be in consideration here. Venkat, do you want to talk about that?
CS Venkatakrishnan (Chief Executive Officer)
Yeah. So Chris, I mean the way I think about it is fit it into a couple of things. First of all, financing revenues grow because of relationships, because that’s really, really important. You have to get on somebody’s financing platform. As we said, 98 of our top 100 clients have a financing relationship with us. That financing relationship is strong both in equity and in fixed income. We’ve been one of the top fixed income financiers forever and ever and we continue to retain that market position.
So that’s structural, you know, capability, the relationship with the client. And for us, differentiating is we look at it as one. So the client has one offering which they receive from us as opposed to different salespeople coming in with different offerings. That structure then, cyclically or seasonally what you get is what’s happening in the equity markets, what’s happening in proportions of the equity markets. Over time people have called out what’s been happening in semiconductor stocks, what’s been happening in Asian equities. And those are things that seasonally come up and down. And in fixed income it is levels of rates and types of spreads and therefore what are people trying to borrow and lend.
So what I would expect coming into the fall, it’s very hard to say. You know, equity market volatility can certainly go both ways in terms of how people want to borrow. And I think in fixed income, what you’ve got is greater interest because of some greater spread volatility than you’ve seen in a long, long time, which should, coming off the low base it has had, increase interest, and rates are higher and that should help. But these are very crude ways to describe it.
Anna Cross (Group Finance Director)
Okay, so let me start on slide 10 and then I’ll ask Venkat to comment. I mean, what you see here is that we’ve got pretty good cadence, Chris, going where we’ve been spending typically around 300 million, getting about 700 million back. That’s because the gross efficiencies that we are targeting relate in part to people actions over the last couple of years, but also sort of more general process improvements, et cetera, which have fewer costs associated with them.
I think more specifically to your question, look, the changes that we are making in the third and fourth quarters of this year are sizable in terms of the impact. They relate both to the simplification of the organization and to some of the impacts that we’re starting to see from AI. So I would say that they are very large in comparison to what we’ve previously sort of undertaken. So I wouldn’t necessarily expect that to repeat, nor indeed the SCA, as you can see in our cost disclosures.
But I think what we are seeing is that the technology opportunities here continue to indicate that there are, you know, further things that we can do to make the organization much, much more efficient. And Venkat, you might want to pick.
CS Venkatakrishnan (Chief Executive Officer)
Yeah, I think there is a confluence of a couple of things happening here. One is what Anna just said, the technology opportunity set has increased and its capability has increased. Second is what do you have to do to harness that? To harness that, you have to build the infrastructure to improve your processes. Modern technology framework, simplified processes. Now that requires perseverance and investment which we’ve been putting in. And, you know, given the capital generation which we’ve had, given the, you know, the success of the plan so far, that has given us both the capability and the will to make those investments.
So what you’re seeing is technology being able to deliver more, AI sits on top of this technology. You’ve seen the capability financially and otherwise to make the investments and the will to do it in a sustained way. So, you know, we’ve presented today what we’ve done for 2026, and we’ll continue to persevere hard at this over the next few years.
Anna Cross (Group Finance Director)
Next question, please.
OPERATOR
Our next question comes from Jason Napier of UBS. Your line is now open. Please go ahead.
Jason Napier (Analyst)
Good morning. Thanks for taking my questions. I guess the first one for Venkat, I think Barclays is executing, you know, really energetically on strategy through, you know, restructuring and the acquisitions that you’ve made. And I’m not sure the market is giving you much credit for that. And so I wondered whether you could start off by commenting on the sort of recent news flow and the tone of that news flow around capital allocations and TRSs in the IB.
You know, the share price has proven reactive to that sort of coverage. You know, CEO and as a risk professional, I mean, how do you think about risk in the business, the forecastability of earnings and how do you talk to the market about those sorts of factors, please? And then secondly, one for Anna, just coming back to slide 9, and I want to say thank you for the Absolute Cost Guide. I think that is helpful given some of the questions we were getting. But focusing on slide 9, your numbers for business growth, inflation and investments are nearly 8% of starting costs. So two things. Number one, are we to think that those are the sorts of numbers that are required or might be normal for the bank? There’s 1.4 billion in total.
And then secondly, just in really high-level terms, what are the sort of areas that are absorbing that kind of money in 2027, please. Thanks a lot.
CS Venkatakrishnan (Chief Executive Officer)
Hey, Jason, thank you. First of all, very, very good questions. Let me begin with the first one. And I think the first one, and thank you for recognizing the effort we’ve been putting in into what you call energetic execution and disciplined execution. Appreciated. A few words. So there’s a philosophy here. There’s an approach, there’s an attitude, there’s a process by which we carry it out. And then there’s what I would call, you know, noise in the market.
Our philosophy is clear on execution, on making these plans. We’ve laid it out for the last three years. We laid it out in February for the next three years. And we’re telling you what we are doing, whether it’s on revenue, whether it’s on business, whether it’s on capital, whether it’s on costs, whether it’s on investment. And you know, we will do our very best to continue to carry it forth in that disciplined and hopefully predictable way. And when it comes to risk and whether it’s regulatory aspects or otherwise, you know, we take this really, really seriously. I said earlier today on a TV interview that for 10 years at Barclays, I’ve been Chief Risk Officer, head of the Markets Division for a brief period and CEO. In this entire period I have laid great stock on the importance of following the capital rules in letter and in spirit and being very prudently capitalized. And we aim to do so and we are careful about what we do in these matters.
Anna has spoken earlier about these TRSs, both in terms of our approach and the quantum involved. And so what I will say to you is our commitment to continue disciplined execution, careful stewardship of the company’s resources, including capital and liquidity. And we’ve been very clear even on capital that, you know, you’ve seen the flow or the CET1, the capitalization ratio over the last number of quarters, coming to the level where it has, staying at the level where it has because we said our most important thing is to be well capitalized and well provided for in capital and liquidity.
So continue to expect to see that disciplined execution, energetic execution as you say, and prudent stewardship of our resources.
Anna Cross (Group Finance Director)
Okay, thank you, Venkat. So let me take everybody back to slide nine. So the numbers that you’re talking about, Jason, include business growth and inflation. And I just want to be very clear about what we put in there. That also includes investment, BAU investment in our ongoing businesses. So all of the benefits that you are seeing coming through in Premier, in Corporate, in Equities, etc., are all contained within that number. We think that is a cost of doing business and therefore we’re giving you a very fulsome run.
The bank cost here that includes inflation, includes that BAU investment, includes the cost of acquisitions also. And I genuinely think that you can’t separate that from efficiency because by growing the bank you have the opportunity to create operating leverage. It’s not just through SCAs as I mentioned before. It’s actually about process improvement and the volume benefit that you get when you—or reducing marginal cost benefits that you get when you start pushing more volume through an existing platform.
I will contrast that with from the investments on the right hand side that relate to future fee growth. So think, well, think Transaction Banking and think some of the technology changes that Venkat called out at the full year. So I would really urge you to take them together. And the way we think about it is this is at least a neutral run-the-bank cost. Our objective here because the intensity of investment has gone up, the intensity of efficiency has to go up.
So expect us to be pushing that collection, if you like, on the of things that are bridged by the arrow very hard. That’s what we’re saying. Okay, thank you. Can I have the next question, please?
OPERATOR
Our next question comes from Andrew Coombs of Citi. Your line is now open. Please go ahead.
Andrew Coombs (Analyst)
Good morning. Thank you for taking the questions. Just a couple of follow ups, please. Firstly, on the hedge allocation, I think at the start of this year you expected 55% of the hedge to be allocated to Barclays UK. That’s now increased to 70%. So, intrigued on why the allocation has changed so abruptly over the course of the year. And is 70% a good guide for the allocation going forward as well, please. And then the second question, a much broader question and it is a follow on from many of the ones you’ve already been asked. But you’ve reiterated the 31.5 billion revenue guide. If you take nine months annualised, it gets you to about 31.5. But usually you do see seasonality in the Investment Bank in Q4. So can you just talk through the puts and takes on that revenue guide and what’s giving you the confidence to reiterate it, please? Thank you.
Anna Cross (Group Finance Director)
Okay, thanks, Andy. So I think the disclosure that we have given you so earlier in the year was actually about the growth in the structural hedge income that confused everybody. So what we’ve done now is we have reverted to a much simpler table of income allocation. So not growth in income, but income itself. Which is why you are seeing that movement from 55 to 70. You are still seeing the allocation going down to Barclays UK; that doesn’t mean to say that it will go down in absolute terms.
Of course it won’t. But it’s just that the structural hedge income is growing faster outside the UK. That’s in part because of the equity structural hedge, but it’s also because the tenors of deposit relationships outside of Barclays UK are actually longer and that really speaks to the strength in our Corporate deposit book. So that’s what’s going on there. So apologies, but hopefully now clearer. To your second question. Look, the simple answer is year-to-date income growth is up 8% and 31.5 billion is 8% year-on-year growth. That’s a simple answer, but let me try and be a bit more helpful. So we still see a path to circa 31.5 billion. Although it’s clear that Q3 income was weaker than we would have expected it to be or planned to be. But here’s how I think about the building blocks and those building blocks reflect the diversity of income across the group and our strategy and, you know, the natural momentum that we’ve got in this business.
So let me start with the most certain, which is NII. So NII have been about 200 million up each quarter year-to-date. We expect that to continue. And what I should have said is to reach around 35 and a half billion, Q4 needs 31.5 billion. Q4 needs to be 500 million up. So 200 million of it we believe relates to NII. The second part of this I would call out is Financing. Financing has been on average about 150 million up year-to-date. The third piece actually relates to something we talked about earlier which is really the strength in our Investment Banking business.
We have very good line of sight to the M&A pipeline. We have good line of sight to the capital markets pipeline, although obviously that one is much more influenced by the uncertainty in the environment and therefore there’s a bit more uncertainty then there about when things will complete. But M&A is much more certain. And then finally that brings us to Markets which is the thing that we’ve been focused on here today. But again I just remind you we’ve had very good momentum in Markets all year.
FIC intermediation specifically has been weaker in Q3. So that’s how we think about it. We continue to work towards that number, Andy. But just to be really clear, our North Star for this year is RoTE and for that RoTE to be greater than 12. So that is the number that we are most focused on. Okay, thank you. Next question please.
OPERATOR
Our next question comes from Amit Goel of Mediobanca. Your line is now open. Please go ahead.
Amit Goel (Analyst)
Hi. Thanks, guys. So just stepping back to some of the previous comments and the implied kind of guidance. So I guess just basically on the back of the on the cost guide or the implied for 28. So we talked about modest cost growth and still sticking to the low 50s cost income ratio. So when I’m doing that I’m kind of getting to revenue expectation of or guide of around 36 billion plus. So I’m just, I mean that’s about 5% above consensus. So I guess my first question is really like, you know, what’s kind of driving that or where you see the kind of delta versus the consensus on that.
And then secondly, you know, if that is correct, then I guess that kind of points more to a RoTE of I guess closer to 16% versus the greater than 14 target and the kind of 15 that consensus has got. So just basically curious what your thoughts are there and if that is consistent or essentially you do expect to materially beat your RoTE guidance or am I missing something there? Thank you.
Anna Cross (Group Finance Director)
Okay, let me take that. So I’m just going to, I’m not going to comment on consensus numbers for 2028. I’ll just take you back to the guidance that we gave you at the beginning of the year, which remains intact, which is between 25 to 28. We expect, you know, a greater than 5% revenue CAGR between those years. We expect the cost income ratio to be in the low 40s and we’ve given you some guidance around absolutes and that we expect modest growth. And then the final point is that the RoTE guidance is greater than 14%.
Beyond that I don’t think we’re in a position to sort of to guide further. But hopefully you can see from the momentum in the business and the kind of confidence that we’re putting around our cost plans and intentions that we are very focused on meeting those points of guidance. Thank you. Can I have the next question please?
OPERATOR
Our next question comes from Edward Firth of KBW. Your line is now open. Please go ahead.
Edward Firth (Analyst)
Thanks so much. Good morning everybody. I just have two questions. One was on credit. I noticed that your stage three coverage is down quite a bit and it seems to be driven by Rest of World corporate loans where non-performing loans are up quite a lot in the quarter. I wonder if you could tell us something about what are you seeing there? Is that a specific one-off? So is that like a trend? And it’s interesting you’re not taking any additional provisions against that.
So I just wondered why that might be or what might the drivers be of that. So that’s my first question. And the second question is a broader question I guess to think out which I probably asked a derivative of this more than once before, but I guess it’s as personal now as ever. Rather as Jason said, you’re delivering a lot. You’re delivering arguably ahead of the plan in a number of areas but you’re still the cheapest bank in Europe. And probably the cheapest, certainly of a major size. And I’m just trying to work out, is that something that burns internally?
Is that something that you feel affronted by and if it is, what can you do about it? Because clearly delivering on your current plan and delivering on your last plan is not going to make any difference. We can see that the rating relatively is—you’ve come for four years. That seems that you think you can build a tenacity here. It’s not something that just ties, is my question. And then just related to that, is there any reason why somebody shouldn’t bid for Barclays, please.
There’s nothing in Barclays that stops that happening. So that’s my question. Thanks so much.
CS Venkatakrishnan (Chief Executive Officer)
So, Ed, please, could you repeat the last question? Your line is breaking up. Is there something anybody could be disappointed? Just that part. I didn’t understand that.
Edward Firth (Analyst)
Sorry. Can you hear better now? Sorry. Okay, so my second question was. Delivering very well on the strategy, arguably ahead in places, but you’re still the cheapest bank in Europe and probably the world. And I’m just trying to work out, is that something that sort of burns internally because after 10 years, time is not going to heal that? I don’t think so. Should we expect as you come to the full year, is there things you can do to try and address that? Is that something you want to address?
And I guess related to that, is there any intrinsic reason why a bank shouldn’t bid for Barclays? Is there anything in there that stops people taking advantage of that cheap price? Thanks very much.
Anna Cross (Group Finance Director)
Okay, so I will start and then I’m going to hand to Venkat for that lengthy question. So, Ed, the same. I looked at the same piece of disclosure actually, and it’s quite difficult to read because actually what the table shows is the full-year picture at the bottom and then the Q3 position at the top. And that movement in stage three is actually MSS. So it’s from the full year to now. It’s not actually a Q2 to Q3 movement. But appreciate that the disclosure is, you know, doesn’t necessarily make that intuitively clear.
So there is nothing beyond that that I would call out to you. It’s just MSS. Okay. So I’m going to…
CS Venkatakrishnan (Chief Executive Officer)
Yeah, right. Thank you. You’ve given me the toughest question of the day so far. Look, first of all, thank you for what you’re saying about the fundamental performance of the bank, which of course I agree with and I share. I think we are operating well and I am very gratified by it. I would not be human if I said that I was more gratified with the way the stock market was valuing us a few months ago than I am today. There are lots of factors that go into this. At a simple level, we control a lot of the inputs and those are the inputs which we manage. And I hope we get the right output. I think our strategy is now three years old approximately. And for the first two and a half years the outputs, I think, recognize the inputs and the inputs are, you know, as you say, earnings are going up, etc., etc. I personally have the greatest conviction in our ability to achieve our targets, our will to execute in a disciplined and energetic manner, and having studied mathematics for a lot of my life in the fundamental value that will come out of that, in the net present value of an ownership stake in Barclays.
And so if I look at it that way, I do think that the fundamentals and reason will prevail and they have for a long, long time. And I don’t think I should let six months affect us. There’s a lot going on in the world. But I think when I look at the stock and I look at what should affect stock price and something I’ve spent a good part of my life studying, it’s important for management teams to control the inputs to run a company well, to produce the returns for the shareholders, and then the shareholders will eventually, I think, value it appropriately.
Anna Cross (Group Finance Director)
Okay, thank you. Thank you, Ed, can we have the next question please?
OPERATOR
Our next question comes from Benjamin Toms of RBC Capital Markets. Your line is now open. Please go ahead.
Benjamin Toms (Analyst)
Morning both. Thanks for taking my questions. I’m sorry if I missed this already, but how much did your structural hedging notional grow by in October? I think you called out, I think when we spoke in Q3, the expectation was that the notional would remain flattish to the year end and current accounts have been flat in Q3. So I’m just wondering what assumptions have changed. I know Dan departed the bank in the quarter, so I’m wondering whether you have a new head of treasury who is looking at things a bit differently in respect of operating with a strict caterpillar in an elevated rate environment.
And then secondly, given the swap rates are elevated, can you give us some more color on what you’re seeing at the front end on the mortgage pipeline and banks think about spread holistically. Do you think you can grow mortgage spreads in the current higher rate environment to partially offset lower deposit spreads, if competition remains intense? Thank you.
Anna Cross (Group Finance Director)
Okay, Ben, we didn’t call it out. You can see it’s been broadly stable at the quarter end. You know, to the extent that we change the hedge notional, that means that we have more confidence in the stability of interest-insensitive balances. The caterpillar remains strict is the way I would describe it. But to your second question on swap rates and mortgages, look, when swap rates move around, we can see price volatility in mortgages. We’ve certainly seen that both through the quarter and continuing. I think what we are seeing is that the market has swung a little bit towards remortgage, certainly in the current environment. So we’re seeing good demand there. That is good for us because everybody forgets that before we bought Kensington, everybody saw us as a very vanilla remortgage bank.
And we have very, very good levels of retention. Our retention is around 80%. So very pleased with that.
CS Venkatakrishnan (Chief Executive Officer)
And can I talk about that? Part of that is the investments we’ve made in the technology for remortgaging. So, you know, the time went from 45 minutes to 15 minutes to get the application. These little things go a long way.
Anna Cross (Group Finance Director)
Yeah, absolutely. So I think, you know, in terms of mortgage spreads, there’s going to be a little bit of a mix thing here happening, I would call out. Your question’s a good one though. And rather than talking about mortgage spreads specifically, if I refer back to the answer I gave before, funding costs in retail banking have gone up. That is certainly true, just because, you know, that growth in lending, the reduction of TFSME and, you know, the other participants that I called out, and you’re seeing that in fixed-term deposits.
That’s going to have to come out somewhere. But it’s not something that I would call out right now. Okay, perhaps we could go to the next question, please.
OPERATOR
Our next question comes from Alberto Artoni of Intesa Sanpaolo. Your line is now open. Please go ahead.
Alberto Artoni (Analyst)
Good morning. Thank you. Thank you for taking my questions. You have two on the investment banking on FIC. Sorry for coming back on this one. You mentioned the lower level activity of clients. I was wondering if also you had some own proprietary trading that had some kind of impact or, you know, the market-making activity, sometimes the definition is a bit blurred and perhaps you had some position in your books that, given the fact that the rates and the spreads moved the way they did, may have had an impact on your performance this quarter.
And if that’s the case, could you please just give us a bit of color around that. And secondly, on financing, on the market activity, I see, of course, that very good part of your equity story as you’re increasing that component, which tends to be more stable. And so that’s very much a good development. And I was wondering if you see room for continuing, continuing increasing in that part of the business, also perhaps gaining market shares at the expense of the other banks, or you feel that you’ve now reached the market share you’re comfortable with and it will be difficult gaining market share going forward.
And also if there are any specific risks that you see in financing. Thank you.
CS Venkatakrishnan (Chief Executive Officer)
Yeah, thank you, Alberto. First of all, on FIC, on fixed income, there is nothing to call out. You know, this is a client-driven business with risk management limits. You can see our VaR numbers. You can, you know, we run all the desks very prudently, aim to do so, and so there’s really nothing to call out here. Second, on financing, one of the things we’ve said here is that 98 of our top 100 clients have financing relationships with us. And I’ve also said that what we aim to do is to do this with our very, very biggest clients and to do more of it with them. The risks in this business are always client selection. You know, there are names of prominent funds every now and then. There was one in this last quarter which can cause anxiety for banks if they deal with them.
I’m happy to say we didn’t deal with the one that was mentioned, but client selection is important. And then, you know, being watchful of volatility in the markets is important. But having said all of that, as I said, we focus on the larger clients with whom we have the deeper relationships. And I would look to gain share by doing more with them rather than expanding the universe of clients beyond what I think is prudent.
Anna Cross (Group Finance Director)
Okay, thank you very much for that. May we have the next question, please, which I believe is the last question.
OPERATOR
Thank you. Our final question for today comes from Nicholas Payan of Kepler Cheuvreux. Your line is now open. Please go ahead.
Nicholas Payan (Analyst)
Yes, morning. Thanks for taking my question. Just one on financing. One on the UK corporate lending growth, please. On financing, coming back on that topic, what constrains the growth in prime financing versus fixed income financing? And between those two, which offer the best return after funding, liquidity and balance sheet costs, please? And then on the UK corporate lending growth, as you deploy more and more deposits into lending, what do you see as a bottleneck here? Is it demand from corporate pricing, the credit appetite or even your platform? Thank you very much.
Anna Cross (Group Finance Director)
Okay, why don’t I start? I’m sure Venkat will add. So on financing growth, I think the simple point here is that fixed income financing — you know, Venkat often calls Barclays the house that fixed income built — we have always had a much stronger market share in fixed income financing than we have in prime. What we’ve been able to do is grow prime alongside fixed income financing and really leverage clients across both parts of that business. Venkat said running it as a single face to the client. So, you know, I think our ranking on prime is still below what it would be in fixed income financing. So that’s probably the simple answer. But I’ll let him add.
On UK corporate lending, the way I think about this is we are the largest, we are the largest bank for corporate deposits in the UK. Now we make that somewhat difficult to understand because it sits across three different divisions. But we brought that together for you today. We also have the lowest loan-to-deposit ratio. That tells you that we have very strong relationships and a real opportunity here to grow across Business Banking, across International Corporate Banking and UKCB across all three of those stripes.
And so I wouldn’t say, you know, there’s no liquidity constraint here. It’s really about growing those relationships and being open to lend to those clients, which we have been, and we’ve built capability. We’ve now got about 45% of our corporate banking clients on iPortal. That will be 100% by the end of the year. And that means that they can bring their relationship much more holistically together. So, you know, the growth that you’ve seen in our lending is even before that technology really starts to take hold.
Venkat, anything you’d want to add on balancing and prime?
CS Venkatakrishnan (Chief Executive Officer)
Yeah, just working backwards on the corporate lending. What you’ve seen over the last couple, three years is we’ve actually removed bottlenecks. The technological investment in iPortal is one of them and the other. So the focus is really strong and, for all the other reasons, I’ve said that, you know, we’re confident in this area and, you know, we are the largest corporate bank in the UK. Second, on financing, just the thing to add is that, you know, we view the relationship with the client holistically. We do fixed income and equities with both and that’s partly, you know, our working with the largest clients. So there’s not a competitive element between capital allocation between the two of them.
It is actually combined and holistic coverage. And that is the basis of that franchise, which is the strong client relationship. Listen, thank you, everybody. Thanks for your time. Thanks for your attention. Thanks for your tough questions and your encouraging words. And I always find this call a pleasure. Thank you.
OPERATOR
This concludes the Barclays Q3 2026 results analyst and investor conference call. Thank you all for joining. You may now disconnect your line.
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