Barclays PLC (BARC) Earnings Call Transcript

Good afternoon, everybody. Welcome. Thank you. Thanks for joining us today in person and on webcast for the Investment Banking deep dive. I'm joined today in this by our 2 co-heads of the Investment Banking division, Cathal Deasy and Taylor Wright to whom I'll hand over shortly. Before that, I wanted to remind you of the key messages from our investor update in February as it concerns both this business and how it fits into the overall investment bank. Our Investment Bank has strong foundations with the right scale and breadth to succeed among the largest global peers. And we are very focused on our core strengths, driving diversified income across different products and geographies. Around 55%, as you can see, of our income comes from the Americas, which is the biggest financial market in the world. We have top tier businesses and our strong global ranking reflects our status as the only known U.S. domiciled investment bank that can consistently compete with the U.S. peers. We believe that our investment bank is both competitive and at the right scale. The resegmented investment bank, as we presented to you, accounted for 58% of the group's RWAs at the end of 2023, and it's expected to reduce to about 50% of the group RWAs by 2026. We will achieve this by growing capital allocation to other areas of the Barclays Group. In the investment bank's RWAs are expected to remain broadly stable at the 2023 year-end level, absorbing regulatory RWA inflation. A key priority for the Investment Bank is to improve RWA productivity. And as you can see from the top left of this page, over the last few years, we've increased RWAs in the Global Markets business and kept the ratio of income to RWA relatively constant. In contrast, on the top right, the RWA productivity has declined as RWAs grew in Investment Banking due to income mix and other factors, which Cathal and Taylor will address. Going forward, we expect to deliver a high single-digit income annual growth over through 2026 in the Investment Bank. We expect over half of this to come from execution of initiatives that we control, including over GBP 700 million of additional income from investment banking. We expect the remainder to come from a normalization of the industry wallet where we believe our assumptions are realistic. Over the past 3 years, we have invested deliberately in the investment bank, both in markets and in investment banking to the tune of about GBP 3 billion of cash investment. In markets, the vast majority of which of this was in technology spend. In Investment Banking, of course, is much more of the human capital business. And in 2023, we took advantage of a quieter business environment to reposition the business and to invest in talent in our focus sectors and products. We are now monetizing these investments and intend to grow future income with modest cost growth expected across the Investment Bank over the 3-year period. We will continue to make focused investments in our client franchise and expect this to be self-funded by efficiency savings. Overall, we expect to deliver an improved cost income ratio for the investment bank from 70% at the end of 2023 to the high 50s by 2026. So let me take -- now take a moment to remind you of our targets at the investment bank level, providing further context for Cathal and Taylor's presentation. We intend to improve the Investment Bank's RoTE to be in line with the group target of above 12% by 2026. Our high single-digit annual income growth target is firmly predicated on well-defined initiatives, which are in our control. The investment growth -- the income growth target monetizes investments in cost and capital which we have already made, driving positive operating jaws and resulting in a cost-to-income ratio in the high 50s. And we're keeping RWAs broadly stable over the life of this plan, thus limiting the proportion of the investment bank's RWAs to the rest of the group to around 50% by 2026. As you see in the first half of this year and as Cathal and Taylor will talk through the presentation, we are already making progress on this through disciplined management of the business. So with that, I'd like to introduce our Co-Head of Investment Banking, Cathal Deasy and Taylor Wright to take you through the remainder of this presentation. Cathal and Taylor are deeply experienced leaders with M&A and ECM heritage who have a disciplined and clear view of the steps which we need to take to run this business to meet our commitments to you, our shareholders. Cathal, over to you.

Thank you, Venkat. Good afternoon, and thank you for joining us today. Taylor and I look forward to updating you on the investment banking franchise. And we've got 2 key messages we'd like you to take away from today's presentation. Number one, we're disciplined stewards of capital. And number two, the actions that we are taking will increase the returns of the investment banking franchise sustainably and importantly, in support of our investment bank and group targets. On the slide, you can see that the Investment Bank generated GBP 11 billion of income in 2023. GBP 7.2 billion from Global Markets and GBP 3.8 billion from investment banking which is the topic that we will cover today. Now let me draw your attention to the words at the bottom of the slide. I cannot emphasize enough the significant and accelerating partnership we see every day across investment banking and global markets in support of our clients. You will see the handshake icon throughout our presentation, reflecting how fundamental this is to our success of the business and how deeply ingrained the partnership is in or is across the Investment Bank. Taylor and I are focused on delivering for 3 key stakeholders. Our clients, being clear on who they are, and being relentless in serving them by aligning the full capabilities of the firm behind them. Our colleagues, they allow us to differentiate with our clients. We want to provide them with a franchise that allows them to do so consistently while also supporting them to grow and develop successful careers at Barclays. And importantly, our shareholders. For us, this defines our North Star of delivering attractive returns on a sustainable basis. Now just a word on terminology. We're going to use the term Investment Banking in a couple of different ways during the course of the presentation. First, in referring to the business that Taylor and I are responsible for Investment Banking; and second, the activity of Investment Banking which are the fee-based businesses of the firm. Taylor will take you through where we have come from as a business as well as the challenges that we're proactively addressing. Taylor.

Thank you, Cathal. Before we get into the details of the presentation, I want to direct your attention to Slide 8. Here, you can see that between 2019 and 2023, while the revenues in Investment Banking remain relatively consistent, income over average RWAs and Investment Banking fee share declined. During today's presentation, we're going to discuss how we intend to reverse these trends. In fact, over the past 18 months, we've already made many of the changes required to do so. We're also encouraged by our first half performance as well as some of the early proof points that we're seeing, and Cathal will take you through some of those as we go through today's discussion. All that having been said, we clearly have a lot of work ahead of us. When Cathal and I started as co-heads in Investment Banking in March of 2023, we inherited 2 businesses that historically have been managed independently. The first is a full-service scaled Investment Bank that provides advisory, capital markets and risk management services to our clients globally. And the second is an International Corporate Bank or ICB, anchored in the U.K. with a global footprint, serving financial institutions and large corporate clients. Each is a good business in its own right, but they were siloed. As an example, each business had its own set of priority clients, investment priorities and balance sheet commitments. We've now brought these 2 businesses together. And by orienting around a defined set of shared priority clients, we were able to ensure that we're allocating our human, intellectual and financial resources appropriately. It also makes it simpler for clients to interact with Barclays. And over time, it will enable us to deliver more solutions, further deepening those client relationships. So our clients enjoy coordinated delivery of complementary products and services, and our shareholders will also benefit from growth in complementary income streams, consisting of the highly reoccurring income from the ICB and the fee-based income from Investment Banking, which when paired together, reduce the overall volatility of the business, as you can see from the right-hand side of this slide. Now we'll look a bit more closely at the 2 individual components beginning with Barclays traditional fee-based Investment Banking business. Our geographic B footprint is oriented towards the most profitable market for investment banking globally, namely the U.S., where we earn about 2/3 of our revenue. As you can see from the right side of Slide 10, on this basis, we look very similar to the top 5 U.S. investment banks. Moving back to the left side, you can also see that we consistently have the highest fee share of any global investment bank outside of these U.S. competitors. At the product level, we have a top 5 DCM franchise. And we've continued that momentum in 2024 with top 5 positions in both investment grade and large finance. We also have a top 5 financial sponsors franchise. Maintaining leading positions in these areas is core to our strategy, but we need to grow other products around them. Specifically, our rankings of #8 in announced M&A and #7 in ECM year-to-date will need to improve as we aim to rebalance our business mix. Importantly, as you heard from Cathal and you can see from the handshake icons on the slide, the Investment Banking business is underpinned by a strong and collaborative relationship with Global Markets. Markets distributes the loans and securities that investment banking originates. And we jointly originate equity rates and FX derivatives as well as equity financing transactions. Now let's look at the International Corporate Bank. The ICB provides corporate lending and transaction banking services to our financial institution and corporate clients globally. These products and services are core to how our clients manage, operate and finance their businesses each and every day. They promote long-term sticky relationships and over 80% of the related revenues are stable and reoccurring. ICBs footprint is global and aligned with that of the investment banking business. In the U.K., where we serve FTSE 350 companies and multinational subsidiaries, the business is at scale and has the full suite of capabilities that our sophisticated clients both require and expect. In Europe and Asia, which are both much bigger wallets than the U.K., we're expanding our presence, growing regional capability and scale. And in the U.S., which is the largest addressable market and where over 40% of our priority clients are based, we presently generate less than 10% of our ICB income. So this is a real focus area for us over the 3-year plan. Here, we are building out our transaction banking capabilities to enable us to do more for our existing lending clients, delivering them more products and thereby improving returns. These capabilities will also help us win new clients, driving further income growth more generally. And finally, our transaction banking capabilities span both the ICB and the U.K. Corporate Bank, creating platform synergies from shared technology and infrastructure across these 2 business. I'm now going to turn to the 4 key historical challenges that we're focused on addressing, and I'll start now on Slide 12. So while we're presently at scale in the right markets and have strong foundational capabilities, the business has underperformed in recent years. First, from 2019 to 2023, we lost 110 basis points of global fee share. Over that period, M&A fee share declined by 130 basis points as a result of a combination of attrition and inconsistent prioritization of advisory services. ECM share also declined by 30 basis points as our sponsor business was insufficiently integrated with our individual coverage teams, leading to less success than we would like in sponsor exits by IPOs. Are we having a microphone problem? Yes. Okay. Sorry. All right. Second -- are they both on now? Is this mic working? No. Okay. Sorry. Second, while we're proud of the strength of our DCM franchise, our investment banking fees are too skewed towards balance sheet-driven products. And although we earn our revenues in the same markets as the top 5 U.S. peers, our 54% share of revenues from DCM versus their 38% means that we're earning those revenues in a less capital efficient way. Third and moving to Slide 13. We've not been sufficiently coordinated across clients. Today, only around 1/3 of U.S. Investment Banking's priority clients also use us for ICB products and services. Additionally, about 1/4 of Investment Banking lending RWAs are currently allocated to clients who use one or no additional products beyond the loan itself, and this typically yields an insufficient return. Separately managed loan books and client priorities across ICB and Investment Banking had also created unnecessary inefficiencies. Fourth and finally, and as you heard from Venkat, and you can also see from the right-hand side of this slide, the businesses lack consistent capital discipline. With RWAs increasing 25% and RWA productivity declining 80 basis points between 2019 and 2023. So what's changed in the way that this division is now operating. The starting point when Cathal and I took over as co-heads was the opportunity we saw to bring these 2 businesses together. We have now done that. Aligning the business across the business -- across a shared set of priority clients allows us to put the full capability of Barclays behind them. We've hired strategically in areas where we want to grow. And that's a process that's largely complete, while also focusing on retaining our top talent within the organization. We've empowered our bankers to succeed while also giving them tools to more effectively measure their progress and performance against our targets. Importantly, we have a more disciplined and accountable approach towards how we allocate capital and we're running the business more efficiently from a cost perspective while also investing selectively in our ICB product offering and appropriately rewarding performance. Our North Star is delivering higher returns on a sustainable basis. So I'm now going to turn it back to Cathal who's going to spend about 20 minutes, taking you through the detail of our key initiatives before handing it back to me to wrap up.

Great. Thank you, Taylor. So building on the changes Taylor has described. Let me take a moment to set out the 4 key execution initiatives we are implementing to achieve our objectives in Investment Banking. I'm going to describe those through the familiar lenses of simpler, better and more balanced. First, we are simplifying our engagement with our clients through the creation of something we call treasury coverage. We brought together DCM and risk management coverage while also invest with the ICB while also further investing in our ICB product proposition. Then through the lens of better, the second initiative is to improve capital stewardship across the organization. And next is to better focus our client footprint to allow us to consistently align the full capabilities of the firm behind our priority clients. And finally, we expect our revenue mix to become more balanced by increasing our share in advisory and ECM. These execution initiatives underpin the delivery of our financial targets. Income growth of above GBP 700 million, excluding moves in the wallet. This income growth primarily comes from asset-light fee-based businesses and incremental revenue from existing clients. We will be better stewards of capital and together with higher revenue, this will drive higher RWA productivity. Coupled with strong cost discipline, we expect this to drive higher and more sustainable returns in support of the investment bank and group target of above 12% by 2026. Now taking each one of these initiatives in part, starting with simpler. The rationale for an integrated treasury coverage is compelling. Given the breadth of our capability and our trusted relationships, we should be doing more with our clients. And as you can see from this slide, when our lending clients take one product, on average, it fall below hurdle rate. As Taylor said earlier, this currently comprise about 1/4 of our lending portfolio. So there's a clear opportunity to do better. In contrast, a significant proportion of our clients already take 4 or more products. On average, this results in over 3x higher income over RWA. As you can see on the right of the slide, there is also a geographic opportunity. Only 1/3 of our U.S. Investment Banking priority clients take transaction banking services from us. This represents an attractive opportunity and meaningful upside. As you would expect, we do this well in the U.K. We're also doing well in Asia, where our capital markets and ICB colleagues work closely together, albeit with a smaller client base. On the next slide, let me explain how treasury coverage is simplifying our organization and delivering positive outcomes. Historically, each product team covered the treasurer separately or in a silo. And now coverage is coordinated through the lead treasury banker. It is simpler for the client to have a single point of contact. And rather than focusing on one product, our lead treasury bankers are empowered and also are comfortable to deliver the entire franchise and deliver more products to our existing clients. It also helps our team's be more solution. We are early in this journey, but I wanted to provide one example of progress. We started expanding our liquidity offering in the U.S. in 2019. However, through treasury coverage, the interaction-based our investment-grade team and ICB team in the U.S. has really come to life. After implementing treasury coverage, we doubled our U.S. dollar deposits at our New York branch in 2023, and we have doubled them again to the 8 months to the end of August of this year. This is an early proof point. And for us, it shows that U.S. treasurers want to do more with Barclays. They know and trust our teams. As you have heard earlier, over 40% of our clients are U.S. based. So this is a significant growth opportunity. There is one further benefit I would like to highlight. Our bankers who cover the C-suite at the client now know that the lead treasury banker is delivering for their -- the lead treasury banker is delivering for the treasurer. So they can focus our full attention and providing strategic advice and thereby drive our advisory and ECM ambitions. Now let's turn to how we're embedding disciplined capital stewardship. Capital discipline is very important to Taylor and myself. And Slide 18 outlines the steps that we have taken that are already changing behaviors across the business. Our focus on returns and improved execution means our colleagues are becoming better stewards of capital. So what has changed? We've tightened the approval process and raised return expectations within the organization. And as you can see from the bottom of the slide, if the hurdle rate is not met, we are saying no, and we recycle capital to higher returns elsewhere. If the business case is above hurdle, as you can see on the top of the slide, the client team is challenged on the robustness of future revenues. And this is resulting in a higher proportion of treasury coverage revenues, which are more stable and reoccurring. By aligning the full firm behind the client win more episodic advisory and ECM transactions land, the client returns move well above hurdle rather than relying on these deals to earn an acceptable return as we did historically. These -- each of these individually enhances returns on the loan portfolio. Together, they make a meaningful difference. Our lending portfolio has an average life of about 3 years. So about 1/3 turns over each year. Of the commitments we have reviewed this year, we have observed an increase in expected client returns. These changes are also impacting behaviors with client teams being more proactive in engaging with our clients to identify incremental revenue opportunities in the ordinary course of business. Now moving to financial sponsors. An important client and an important client base and position of strength for us. We have a top 5 global position with financial sponsors. Historically, this has been underpinned by the strength of our leveraged finance franchise and our leading credit business in markets. As you can see on the right-hand slide, over the past 5 years, our leveraged finance fee share with sponsors was 6.4%, broadly in line with U.S. peers. Order advisory and ECM share has lagged. Given the strong connectivity, we have with these clients, the opportunity is to grow share in these areas. However, we need to improve and deliver the holistic coverage across the entire bank what we call our sponsor ecosystem. Let me outline what we've implemented. First, we changed the leadership of the sponsors group globally and in the U.S. while adding to the leadership in Europe. Second, these individuals have reoriented the strategy of the sponsors group to focus on deal partners to deliver differentiated industry insights, investment opportunities and advice on transaction and process structures. This is to assist the partners and our sponsor clients deploy their capital and realize attractive returns. Our sponsor team is at the full promoter relationship, ensuring Barclays consistently delivers across the ecosystem, leveraging industry, advisory and ECM teams, which have also been strengthened to service this client base. So let me give you an example. Blackstone is the largest alternative asset manager globally. So far this year, we've announced 7 M&A transactions and 5 ECM transactions with them, including 2 sell-downs of their stake in the London Stock Exchange Group. It's worth noting that Barclays was the only lead bank on all 5 LSE sell-downs, 3 of which were completed last year. This coverage also extends beyond Investment Banking to the entire firm. We have completed a series of transactions across syndicate, equity derivatives and financing in global markets and partnered with Blackstone to exit the first credit risk transfer transaction in the industry for our U.S. consumer bank. This demonstrates why unified coverage with markets is increasingly important as these clients become more diverse and sophisticated. We believe our alignment across the ecosystem and coordinated coverage by the newly cast financial sponsors team will deepen our value proposition with financial sponsors and grow our share in advisory and ECM. Now let me talk about how we've changed processes and made investments to strengthen our industry teams to support our advisory and ECM franchises. Across our sector coverage, we have created 40 subverticals for planning and review purposes versus 11 previously. Focusing on clients, revenue, fee share, capital and returns. This is to drive empowerment and accountability deeper into the organization. Over 60% of the Managing Director hires we've made since the beginning of last year have been to strengthen coverage and in particular, industry coverage. The remaining hires have been primarily in advisory and ECM. We are particularly focused on 4 industry groups shown on the right of the slide, which represents almost 70% of the global advisory in ECM wallet. The Energy Transition Group, which we created earlier this year by combining energy, power and fintech, has grown share by 220 basis points since full year 2023. Industrial has grown share by 60 basis points and health care by 40 basis points, although there is more work to be done to increase our absolute share. In technology, we changed leadership and have strengthened the team by adding several proven coverage and M&A bankers across a number of the tech subverticals. These teams are gaining traction with clients, and we are confident in their future performance. It's also worth noting that each one of these industries is a collection of subsectors. We enjoy leading positions in many of these, such as midstream energy, power, transportation, semiconductors and health care services to mention just a few. Now turning to advisory and ECM we're increasing our share is one of our key execution. This year, M&A activity started much like 2023 ended large corporate transactions driving volume, particularly in the U.S. As we progressed through the year, activity broadened and transaction sizes -- activity broadened to transaction sizes of less than $10 billion and activity rebound in Europe. We consider the advisory wallet to still be below what we would expect as mid-cycle, particularly given sponsor activity is still yet to fully recover. Our advisory revenues in H1 are up in the second half of last year, and our share of 2.9%, as you can see on the slide, has grown from last year, taking into account deals that have announced but are yet to close. It's important to acknowledge we're early in the journey to improve our advisory franchise. It will require sustained and consistent execution. We are confident we have the right strategy, people and processes in place to win with our clients and drive the necessary gains. In ECM, the annualized wallet was ahead of last -- the annualized wallet is ahead of last year, but remains below 2019. IPO volumes would disproportionately drive revenue remain materially below recent years and our expectations. As also shown on the slide, to date, we have taken 150 basis points of share versus 2023. Our IPO franchise will benefit from our investments in industry coverage, particularly tech and healthcare, which represent around 45% of the global ECM wallet. ECM and advisory are both capital-light businesses. So driving share and revenue gains disproportionately enhance the returns to the business. Importantly, these businesses also drive additional opportunities across event financing, deal contingent FX and other risk management solutions as well as equity derivatives and margin loans. All of which are executed in a partnership with markets. Before handing back to Taylor, let me highlight our U.K. Investment Banking franchise as a proof point of success. And where key elements of what we discussed today have been embedded for many years. We integrated our treasury model back in 2018. We pivoted our U.K. advisory team to be more origination focus, aided by the strength of our leading corporate brokerage franchise, which is now ranked #2 in the FTSE 350. Our total U.K. Investment Banking fee share has increased from 7.3% in 2019 to around 10% in the first half of this year. And importantly, our rank has remained consistent throughout this period. Acting as only one of the 2 underwriters on the National Grid, GBP 7 billion rights issuance is a particular success for our U.K. franchise this year. National Grid is a good example of a long-standing and trusted relationship in the U.K. The relationship with the company goes all the way back to 1990. It started in the Corporate Bank and developed from there. In 2010, they appointed us as our corporate broker. And since then, we've announced several multibillion pound M&A transactions for them as well as the rights issuance earlier this year. Nonetheless, we continue to have an opportunity to grow in the U.K., particularly in M&A with sponsors and nonbroking corporate clients. With that, let me hand it back to Taylor to pull these initiatives together and conclude.

Okay. Thanks, Cathal. I'm just going to take a couple of minutes to summarize and then we'll turn it over to you guys to take questions. So our journey for improving the Investment Bank begins with foundational strengths, an at-scale full-service platform in the right markets, now being managed and operating as an integrated business. As we discussed in the presentation today, we've taken deliberate actions. We've established treasury coverage. We've changed processes and made investments to drive increased M&A and ECM revenues with our sponsor and our corporate clients. And we've instilled capital stewardship at all levels of the organization. All of this is being done with a deliberate focus on alignment and execution, primarily around -- particularly around clients, while also embedding accountability at the banker level. These actions are all aimed at driving revenue growth with cost discipline to deliver higher returns on a sustainable basis. And while it's only been 6 months and there is some seasonality in the business, we can see early evidence of the benefits of our approach in our first half results. During the first half of this year, investment banking revenue grew 7% year-over-year, of which fee-based investment banking was up 21%. We generated 100 -- yes, we generated 100 basis points of improvement in income over average RWAs versus year-end 2023, and we gained 50 basis points in global investment banking fee share again versus year-end 2023. Cathal and I are confident that all of these actions will enable us to deliver the targets that we set for our division. And these will, in turn, support the broader investment bank targets that Venkat referenced at the start of the presentation. And just to reiterate what they are, to generate over GBP 700 million of incremental revenue from management actions by 2026, so that's excluding movements in wallet, to improve income over average RWAs above the 2019 level of 5.4% and to rebuild fee share back to the 2019 level of around 4%. Importantly, we've already made most of the operational changes and hires necessary to achieve that this year. It's all about executing consistently, and we clearly have more work to do, but the improved first half performance is an important first step as we continue our journey towards achieving that our 3-year plan. So with that, I'd like to invite you to ask questions.

Please do say your name and limit yourself to 2 each, so we have a chance to get on everyone. Thank you.

This is Raul Sinha from JPMorgan here. If I can have 2, please. Just the first one on Slide 13, where some of the numbers, obviously, you just referenced, I really wanted to ask you about the -- what you think is the long-term right number in terms of income to RWA for the investment banking franchise. Because obviously, you've improved to 5.6% in the first half of the year. That's already better than 2019. Obviously, you're flagging there's a significant pickup still to come. So how do we think about where is that eventual target getting to? And then the second one is just on the sectors. You very helpfully provided us the market shares across the sectors that you're doing quite well and I was wondering if you could pick out for us maybe some of the sectors that are the drag on the franchise. And maybe if you could talk a little bit about how easy is it to come back in the sectors? Because if you look at your overall market share and you compare them to the sectors where you're doing really well, the market shares are very high in the sectors you do well. So that must imply that there must be some sectors there that perhaps that required a lot of work. So if you could give us some sense of the turnaround needed in the challenging areas from a sector perspective, that would be very helpful.

Do you want to take the first one and I'll take the second one? What was your name again? I'm sorry.

Raul.

Okay. Thanks for your question. So look, on the income to average RWAs, look, our target is to deliver average income over average RWAs in excess of 5.4%. As you point out, we're already above that. That is going to modulate. It's going to move around a little bit. And really, what we're trying to do is deliver an outcome from a return perspective taken together with the revenue generation that we're committing to the cost discipline that we're implementing and the RWA is basically flat for the Investment Bank. That contributes to the group RoTE of greater than 12% in 2026. So above 5.4% does that and our process of recycling around RWA is around the higher performing clients and higher-performing opportunities, we'll drive that as high as we can. But the commitment that we're making today is to bring it back above that 5.4% level in 2019.

Very good, Raul. So I'll pick up in the industry. Maybe we get the industry slide back up on the screen, it would be great. So Raul, the industry growth we have here are the industry groups that represent the largest part of the wallet. So we didn't cherry pick. It's probably evidenced by our technology market shares going in the wrong direction here, for example. And so look, I think that's a good example maybe, and I'll use that to answer your question. We changed leadership in the technology team after Taylor and I came in, and it was clear that we also needed to invest in the quality of the bank, particularly in certain areas. We do well in semiconductors, but we've added, particularly in software and we've added in Internet. And we feel very good about those people. And we did that in the West Coast and the East Coast, in particular, in the United States. So that loss of market share of 80 basis points. We've put up here. We're not hiding away from it, but we'd look to reverse that relatively strongly. I would say on industrials, even though we're taking share, the rebuilding of that team is ongoing. We hired a new Head of our Industrials team, Spyros Svoronos. So that market share, I would say actually maybe that was a little bit in terms of the upside. But again, we feel very good about the team. The other point I would make is that our health care and our energy transition groups have both benefit of consistent leadership from before Taylor and my time and now our time. So the consistency of leadership and consistency of execution is most important. But I think what you should take away is that when we try to add talent, we're successful in adding talent. We've got a deep bench as we did in the energy transition group. We brought many people through the organization. We gave them more accountability and you can see the results on the screen. And then there's other -- our FICC franchise is not on the page, but it enjoys a market share of 4%. It's one of our higher market shares after energy transition. So I think this is represented on the screen and hope that gives you the color that you're looking for.

Guy Stebbings from BNP Pariba Exane. I've got 2 questions were, one, really around Slide 16 and one around Slide 17. So on Slide 16, you referred to about 1/4 of lending client RWA, which doesn't meet the hurdle rate. I'm just interested as to where that number might evolve to over time, where does one quarter effectively go to what sort of time frame we're looking at? I think you talked to sort of 3-year type lending cycle. So just how that should evolve? And then the second question was on Slide 17. In terms of that doubling of deposits and then doubling again, could you talk some of the sort of economics around those deposits, how sort of profitable they are? And what could we be looking at if we were to roll forward a few more years in terms of the size of that deposit base?

So to pick up on those ones. So first of all, on the RWAs. Look, clearly, the objective is to get it lower and maybe -- very good. Thank you. And I think it's happening in 2 ways. We have to wait for the -- to have a look at a commitment, and that's truly 3-year period and 1/3 a year on average. And the second one is that we're driving this discipline to the organization today. So as I mentioned in my prepared remarks, what we're finding is that transaction teams are looking at commitments that go out to our clients. It's obvious we know where there's capital out that's not generating the returns that we would want, and they are working hard with those clients today. So I think there's 2 ways this is moving. We're moving because we're adding incremental revenue ahead of maybe reviewing good commitment, in addition to waiting for the commitment and they can make a decision to recycle capital. I'm not going to give you a target as to where we're going to move it to. But I would say that, clearly, there's an ambition to move that number down. But importantly, across the rest of the 75%, there's also an ambition to drive more products into our existing client base over our existing capital, which is incremental revenue over our existing capital base and that's across the other 75%. So we have a client that's got 3 products, we want to do 4. If they got 5, we want to do 6, and we're very optimistic by that.

And actually, before you hit before you hit the second one. Guy, just to clarify, the statistic is actually 25% of the lending RWAs in investment banking, the client has one additional or no additional product, right? And so almost by definition, that has to be below returning. So as we are able to sort of bring the treasury coverage model to life with those clients as we are able to sort of focus the more consistent and systematic strategic coverage of those clients. The intent is to drive more clients over that capital. And so obviously, we'd like more clients to not be in that bucket, but those clients in that bucket, this process is designed to sort of elevate them anyway by driving more products over that capital.

And maybe we'll stick to the next Slide 17, just so we can get to Guy's second question. So Guy, look, I'm not going to get into -- so the first point is that the deposits are valuable to the franchise. There's no doubt about that. These are deposits we wouldn't put them on the balance sheet, and we didn't feel that they were accretive to the economics of the firm. So this is part of us driving improved revenue and improved returns for the firm. So that's our North Star. We wouldn't be going through the effort if we didn't think that was the case. So that's number one. Number 2 is, I think we will continue to grow that. Our Investment Bank or corporate banking offering in the U.S. is not as mature as in the U.K. or Continental Europe for that matter. So we find the liquidity offering alongside basic -- more basic cash management services and payment service we can add in the U.S. is important because we take a relationship that's very strong, particularly to our DCM franchise. We're top 5 in the U.S. with U.S. corporates in DCM. So really broadening that relationship to treasurer, this is an opportunity to do that. And then as we continue to invest in our ICB product proposition in the U.S. that gives us the opportunity and to put those products into that client. So it just helps us to mature and evolve that relationship as and when the product comes. So this is very much us using our existing capital and our existing clients in the U.S. to roll out our corporate banking product set. And it's products that are known well to Barclays in the U.K. and in Continental Europe, giving to clients who know us well in the U.S. So that's what makes us confident in terms of that rollout.

Alvaro Serrano from Morgan Stanley. A couple of questions, please. In terms of your market share wins that you've seen so far and where you want to go, can you sort of maybe give us a bit of color who you typically take market share from in the segments you've described? What I'm trying to get a picture of is these are you borrowing market share or we can sort of be reassured that it's sustainable? And a bit of color there would be appreciated. And the second question is, I see one of the points you make, the 64% of new indeed in coverage sectors. What's the typical lead time between the hirings and when they become producing? Or cruising speed, maybe the right question.

Go with that one?

All yours.

All right. Fine. So who are we taking share from? I mean -- look, I mean, it's a very competitive business, right? So in certain of these sectors, we're competing -- our largest markets in the U.S. And so the top 5 American firms dominate the U.S. market. So as we're growing share in the U.S. we're taking share from those firms in certain instances. Sometimes we're winning from -- by a boutique in an M&A situation and the Europeans are a bit weaker there. So there's nobody specifically that we're taking share from. If you look at the share changes over that period of time, there are -- there's a couple of the Americans have lost some share and a couple of the Europeans have gain some share. But it's a competitive market, and we'll take share in wherever we can get it. Look, I think on the new MDs and coverage, we have very good people in the building to begin with. And really, what we're focused on was hiring in areas where we wanted to grow and rebuild a little bit. It's reasonable to assume for strategic products, that it can take 12 to 18 months for somebody to become truly productive on the platform. Having said that, we can point to various MDs that we've hired in the last 12 months or so, who are already quite productive. And so it's going to be case to case. And we're very pleased with the team that we have on the field as of today.

Sorry, I missed your first question, Alvaro. Maybe just I'll add to the first part. So Alvaro, just -- we talked about how we're focusing our client footprint, okay? So we're very deliberate in terms of where we believe we've got a right to win with the client. And that's bringing the full capability of the firm whether it be it on the Investment Banking or in the Corporate Banking side. With that, we're looking to win with those clients on a consistent basis. And then that aggregates up into a view that gives us the market share, right? So what I want to take away from that is that we're winning with a client by client in a very disciplined and deliberate manner, the way we're running the business and the way we brought the coverage footprint down into 40, call it, performance cells, I think about it like that, okay, rather than 11 previously is to drive that accountability. And that's what gives us the confidence that when we win with clients that will be durable and will be sustainable. And we believe, based on the work that we've done, that focused client base, we win with them and we achieve our objectives on a client-by-client basis. That rolls up into the market share gain that we've outlined here today.

Andrew Coombs from Citi. If I could ask 3 questions, please. First, you mentioned that specifically to the Investment Banking business, the average RWA has gone from GBP 84 billion to GBP 79 billion. Can you just clarify the $5 billion decline, exactly which businesses that specifically has come out of? Secondly, you helpfully provided your ECM and M&A market share on Slide 21. I've attempted to back it out on your numbers, but I would just mention your comments on your DCM market share given all the changes you've made. And then finally, and this might be a bit unfair because it's in the appendix, but on Slide 26 on the wallet assumptions. I would suggest that your GBP 1 billion recovery for this year is actually now quite proven in the uptick in DCM, but many would argue the GBP 10 billion the next year is quite ambitious and there's quite a big uptick in ECM and M&A. So anything you can say in terms of your updated thoughts on those wallet assumptions and also the mix between the 3 categories?