BARCLAYS PLC (BCS) Q4 2020 Earnings Call Transcript

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BARCLAYS PLC (BCS -0.98%)
Q4 2020 Earnings Call
Feb 18, 2021, 4:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the Barclays Full Year 2020 Analyst and Investor Conference Call. I will now hand you over to Jes Staley, Group Chief Executive and Tushar Morzaria Group Finance Director.

Jes Staley -- Group Chief Executive

Good morning. We all know that 2020 was not a normal year. The pandemic has caused fear and dislocation in societies around the world. It has caused huge economic harm and uncertainty, with hardship and stress for millions of people. And it has brought tragedy to so many families, including among friends and colleagues. In common with others, it has tested our resilience as a business, and our values as a corporate citizen. While we have faced significant challenges, I want to say first of all how proud I am of the way in which our colleagues at Barclays have responded to an extraordinarily difficult year. Their efforts have been the driving force that has enabled us to step up and play our full part in the battle to contain the damage that this terrible disease is causing all around us.

That commitment from our colleagues, and the core resilience of our business, meant that we have stayed profitable in every quarter of 2020. And that strength in turn has allowed us to support our customers and clients, and the communities around the world where we live and work. During 2020 we provided almost 700,000 payment holidays to our customers, we waived around GBP100 million in overdraft interest and banking fees and we have committed a further GBP100 million to charities supporting the most vulnerable, through our Community Aid Package. We have helped our clients raise GBP1.5 trillion in the global capital markets, and extended some GBP27 billion to companies through the U.K. Government's lending schemes. And we have been able to deliver all of that support while holding our top line steady. Overall, Group income was GBP21.8 billion, up 1% on 2019. But it is the composition of that income which shows most clearly how our diversified model has worked to absorb the shocks of 2020, and still deliver resilient overall performance.

Our consumer operations felt the impact of the pandemic most acutely, with Barclays UK income down 14% while our Consumer Cards and Payments business was down 22%. But at the same time, in our wholesale business, Corporate and Investment Banking income was up 22% for the year, stabilising Group income at a time of extreme stress.

Before provisions, we generated profits of almost GBP8 billion for the full year, these were heavily tempered of course in the approach we have taken in terms of impairment charges driven by the pandemic. Full year impairment charges were GBP4.8 billion, to take the Group's total impairment reserve to GBP9.4 billion, reflecting our cautious view of the impact of COVID. However, we were encouraged that the fourth quarter charge was down 19% relative to the previous quarter, at just under GBP500 million. And we expect 2021 full year impairment charges to be materially below the 2020 level. Overall Group profit before tax was therefore GBP3.1 billion, including generating a Profit Before Tax of GBP646 million in the fourth quarter.

The drivers of that performance were in the Investment Bank, where Markets and Banking both delivered their best-ever income performances, up 45% and 8% respectively. It's important to note that this standout Markets performance reflects not only the significant growth in the Global Capital Markets, but also material market share gains by Barclays. We have consistently grown share in Markets over the past few years, moving from market share of 3.6% in 2017 to 4.9% in 2020. And growth has been across Macro and Credit, and Equities.

Markets and Banking income together has grown 45% over the same period, relative to an industry wallet which has grown roughly 20%. Together, these data points illustrate the tangible momentum we have built in our Investment Bank, a business delivering improving returns year-over-year, and producing a return on tangible equity of over 13% in 2020, despite a high impairment charge. While Corporate income was down 13%, including the impact of lower interest rates, the CIB as a whole delivered income of GBP12.5 billion, up 22% year-on-year, and profit before tax of GBP4 billion pounds, up 35%.

Our Consumer Cards and Payments business in Barclays International did however make a loss of GBP388 million for the full year. This was driven by impairment charges, a fall in income caused by lower credit card balances, margin compression and reduced payments activity as a result of the pandemic. CC&P did however return to profit in the last two quarters.

Barclays UK profit before tax decreased by 47% during the year to GBP546 million, with performance in the year impacted by a significant reduction in income, and the COVID-related impairment charges we took. We did however see growth in mortgages in 2020, and the business has done a little better since the apparent nadir of the second quarter. We saw a profit in Barclays UK in the fourth quarter of GBP282 million.

Lest we forget, Barclays UK is a business which, in the decade prior to 2020, regularly produced high returns, as did Consumer Cards & Payments. These remain good businesses, with strong fundamentals, and I expect to see performance improve in both of them as the economy returns to normal. That said, beyond the immediate impacts of the pandemic, U.K. retail banking does face some strategic long term challenges, near-zero interest rates, lower charges for overdrafts and other services and the provision of many core banking services for free.

In response, we continue to invest in our technology platform, offering digitised finance to enhance our relationships and experience for our customers. And we continue to focus on running the business efficiently, so that we can generate appropriate profitability, while continuing to deliver support to our customers, clients, and communities. Overall, Group operating expenses, excluding litigation and conduct, rose 1% to GBP13.7 billion, including roughly GBP370 million of charges for structural cost actions. This translates to a Group cost to income ratio 63% flat versus 2019. We remain attentive to costs, and continue to target a Group cost to income ratio of below 60% over time. 2020 Group RoTE was 3.2%, and earnings per share were GBP8.08. We expect to deliver a meaningful improvement in Group RoTE in 2021, and remain committed to a target of above 10% over time.

At the same time as navigating the effects of the pandemic on our business, and working hard to support customers, clients and our communities, we have continued to strengthen Barclays for the long term. In this respect, in 2020 we made particular progress on our approach to climate change, setting an ambition to be a net zero bank by 2050, as well as a commitment to align all of our financing to the goals of the Paris Agreement.

In late November we set out a plan and a methodology for how we intend to achieve this. Our own operations are already net zero, and our commitment extends to the financing we provide to clients, covering capital markets activity as well as lending. We will also expand this approach to cover our entire financing portfolio. But we have started with energy and power which between them account for up to three quarters of emissions globally. We've also set clear goals to help accelerate the transition to a green economy, including GBP100 billion of Green Financing by 2030 and directly investing GBP175 million in sustainability focused start-ups over the next five years.

Barclays Capital position strengthened significantly through 2020. With our CET1 Capital ratio increasing by 130 basis points in the year, including 50 basis points in the fourth quarter, to stand at 15.1% at year end. We anticipate some capital headwinds in 2021, from pro-cyclical effects on RWA's, the reversal of regulatory forbearance applied in 2020, and increased pension contribution. Nevertheless, we remain significantly above our CET1 ratio target of between 13% and 14%, and well above our minimum regulatory requirement, with prudent provisioning for impairment. Given the strength of our business, we have therefore decided the time is right to resume capital distributions.

We have today announced a total payout equivalent to 5 pence per share for 2020, comprising a full-year dividend payment of 1 pence per share and we will execute a share buyback of up to GBP700 million. We expect to comment further on capital distributions when appropriate. So in summary, Barclays remains well capitalized, well provision for impairments, highly liquid with a strong balance sheet and competitive market positions across the group. I expect that our strong and diversified business model will deliver a meaningful improvement in returns in 2021. At the same time, we will remain committed, to playing our part in supporting customers and clients, our colleagues and our communities, as we emerge from the COVID-19 crisis.

I'll now hand it over to Tushar, to take you through the results in more detail.

Tushar Morzaria -- Group Finance Director

Thanks, Jeff. I'll comment first on the full-year results, then summarize the fourth quarter performance. Our priority during the pandemic has been to support the economy serving our customers and looking after the interests of colleagues and other stakeholders. It's been a very challenging year but the pandemic has shown very clearly the benefits of our diversified business model. Despite the effects of a pandemic, reported a statutory RoTE of 3.2% or 3.4% excluding litigation and conduct. Litigation and conduct was just GBP0.2 billion but we had a large PPI charge in Q3 last year, so I'll still reference numbers excluding litigation and conduct. Impairment charge of GBP4.8 billion, up almost GBP3 billion year-on-year reduced PBT from GBP6.2 billion to GBP3.2 billion. However as you can see from this bridge, the increase in CIB income of 22% more than offset the 19% decline in consumer and other businesses.

With income up 1% overall we delivered neutral jaws and the cost income ratio of 63%, slightly in excess of the Group's target of below 60% over time. TNAV increased from 262p to 269p over the year. Our capital position is also strong with the CET1 ratio strengthening further in Q4 to reach 15.1%, up 130 basis points over the year. And as a temporary guard rails which the regulator announced in December, our statutory profitability allows us to distribute 5p in aggregate, by way of dividend and buyback. We plan to launch a share buyback of up to GBP700 million by the end of Q1, which is attractive for us from a financial point of view at current share prices, and is equivalent to 4p per share.

In addition, we are paying a dividend of 1p and reaffirming our intention going forwards to pay dividends supplemented as appropriate by share buybacks. The level and form of distribution was determined by the current circumstances and you shouldn't read anything particularly into the level of overall payout ratio or the mix chosen on this occasion. We'll update the market further on distributions at the appropriate time.

Few words on income cost and impairment for the year before moving on to Q4 performance. This slide shows the split in the 1% income growth with a 22% increase in CIB, more than offsetting declines of 14% and 22% in the BUK and CCP respectively. In the CIB, our share gains in markets and the momentum across the businesses, position us well for the future. However, conditions remain challenging for the consumer businesses with reduced unsecured balances and a low rate environment as we show in the next slide.

We've highlighted in the chart on the right, the continuing headwinds from balance reductions in U.K. and U.S. cards. We saw some signs of recovery in consumer spending, in both the U.K. and U.S. in Q3 but further lockdowns hit spending over the Christmas period and this is continuing in Q1. As a result, credit card balances were down in Q4 in the U.K. and flat in U.S. in dollars rather than seeing the usual seasonal increase.

We've also put in the slide the reminder of the specific headwinds that the consumer businesses are experiencing. Although customer support actions affecting BUK fall away in 2021, effect of low unsecured balances and interest rate is continuing.

Looking now at costs. Full year costs were up 1% overall at GBP13.7 billion due to an increase in structural cost actions to around GBP370 million, but underlying costs were flat year-on-year. The bank levy increase, but is expected to be lower in 2021, with decreases in both the rate and scope of the levy. The COVID pandemic has resulted in additional costs for the Group, for example, building out the teams to help customers in financial difficulties, and these will remain elevated in 2021. However, the Group will continue to drive cost efficiencies, while investing in the franchises where appropriate.

You're already familiar with the increase of GBP2.9 billion in the impairment charge, this has been driven by deterioration in the economic outlook, as a result of the pandemic and has led to significant increases in the charges in each businesses as you can see. However, this book up in provisions in Q1 and Q2 has not yet been followed by material increases in defaults. As you can see much lower charges for Q3 and Q4 in the second chart. We've shown the charge for each quarter split into Stage 1 plus Stage 2 impairment mostly relating to balances which on past due, which I'll refer to as the book ups, and the Stage 3 impairment loans in default.

As you can see, most of the elevated impairment in Q1 and Q2 was from book ups while most of the Q3 and Q4 charges were on Stage 3 balances. We've shown on the next slide, the macroeconomic variables or MEVs we've used in the expected loss calculation. We've updated the MEVs slightly in Q4, however I would emphasize that with the reduction in unsecured balances and given the ongoing level of government support, the models on their own would have generated a significant provision right back in Q4. However, there is significant uncertainty as to the level of default, we'll see as support schemes are wound down. We have therefore applied significant post model adjustments totalling GBP1.4 billion as you can see on the table.

The increase in our total impairment allowance by GBP2.8 billion to GBP9.4 billion, which broadly maintained our increased level of coverage as you can see on the next slide. Based on forecast unemployment levels, we would anticipate an increased flow into delinquency in 2021 but given our level of provisioning, we would expect a materially lower charge for 2021. Unsecured balances have come down significantly from GBP60 billion to GBP47 billion through the year and coverage has increased from 8.1% to 12.3% with even higher coverage in the credit card books.

The wholesale coverage has almost doubled over the year to 1.5% and a large proportion of this is in selected sectors, which we consider to be more vulnerable to the downturn. We've included in the appendix, the usual detailed slides on unsecured coverage, selected wholesale sectors and payment holidays.

Turning now to Q4 performance. Q4 income decreased 7% year-on-year as continuing strong performance in CIB, both markets and banking was offset by income headwinds in the BUK and CCP. Cost increased to GBP3.8 billion including Q4 structural cost actions of GBP261 million and an increased bank levy charge of GBP299 million. Impairment decreased GBP31 million to GBP492 million year-on-year, of which GBP444 million was Stage 3 defaulted loans. Despite the headwinds, Q4 was still profitable with a PBT of GBP0.7 billion and an RoTE of 2.2%.

Turning to Barclays U.K. The headwinds we referred to in the previous quarters, continued to affect the BUK with income down 17% year-on-year. Unsecured balances reduced further in Q4, with close card balances down from GBP16.5 billion to GBP11.9 billion, a decline of 28% over the year. Mortgage balances on the other hand, were up GBP5.1 billion year-on-year with a net increase of GBP1.9 billion in Q4, and pricing continues to be attractive. There was a significant increase in the BUK business banking lending over the year as Bounce back Loans and CBILS reach roughly GBP11 billion in aggregate. Loan balances grew by almost GBP12 billion in total to GBP205 billion. Deposit balances also continued to grow, resulted in a loan to deposit ratio of 89%.

Q4 income included higher debt sales, which contributed to the increase in income compared to Q3, Q4 NIM was up on Q3 at 256 basis points, but we expect a clear reduction in 2021 as secured lending continues to grow. This is expected to take full year NIM to around 240 basis points, absent any changes in base rate.

So the income outlook remains tough with low demand for unsecured lending and the headwind from the structural hedge, despite an expectation of continued mortgage growth. Cost increased 11% year-on-year, as COVID-related costs increased structural cost actions, more than offset efficiency savings.

The cost increase includes around GBP30 million of quarterly cost in our partner finance business, which was transferred from Barclays International earlier in the year. Impairment for the quarter was GBP170 million, down slightly year-on-year and well below recent quarters. Arrears rates continue to be stable.

Turning now to Barclays International. BI income was stable year-on-year at GBP3.5 billion, reflecting the strong performance in CIB, offset by lower income in CCP and RoTE was broadly flat at 5.9%. I'll go into more detail on the businesses in the next two slides.

The Corporate and Investment Bank delivered an RoTE of 6.2% in Q4, traditionally the weakest quarter of the year, up from 3.9% last year, with strong performance across markets and banking. Income was up 14% year-on-year at GBP2.6 billion on a flat cost base, delivering strong positive jaws.

Markets income increased 19% in sterling, the best Q4 level since 2014, when the investment bank took its current form, and up 22% in dollars. The full year Markets income of GBP$7.6 billion was also a high since 2014. FICC increased 12% with particularly strong performance in credit. Equities income was up 33% with strong growth in derivatives and cash equities. Banking fees were up 30% year-on-year with good performance across debt and equity capital markets and advisory following some weakness in advisory earlier in the year.

Corporate lending this quarter wasn't distorted by the volatile mark-to-market moves we had in earlier quarters. The reported income of GBP186 million reflected limited demand for corporate lending with further paydown of revolving credit facilities.

Transaction banking income remained depressed at GBP344 million with further increases in deposits more than offset by margin compression. CIB cost were flat reflecting tight cost control, reducing the cost-income ratio from 80% to 69%. Impairment increased slightly year-on-year but was well down on the previous three quarters at GBP52 million. We've started the year in the Investment Banking franchise in good shape and are optimistic about the future.

Turning now to Consumer Cards and Payments. Income in CCP was down 25%, principally driven by U.S. card balances, which were down 22% in dollar terms. In addition to affecting balances, lower spend volumes were also a headwind for interchange in U.S. cards and for payments income. In the payments businesses, although volumes were down, e-commerce accounted for over 50% of the volumes. Card balances in the U.S. ended the year flat on September in dollar terms, rather than seeing an increase from Thanksgiving and Christmas spend. So the income growth, we were hoping for in 2021 is going to be tough to achieve in the absence of significant improvement in economic conditions. Costs were down 4% resulting in a 64% cost-income ratio. Impairment was GBP239 million, well down on the levels for Q1 and Q2, reflecting lower balances, with arrears rate slightly up in the quarter, but still well below the level our provisioning assumes.

Turning now to Head Office, the Head Office loss before tax was GBP416 million reflecting one-offs in both income and cost lines. The negative income includes the Q4 expense of GBP85 million relating to the first repurchase of half the outstanding Tier 2 contingent capital notes. This would roughly halve GBP100 million or so annual legacy funding costs in Head Office, we had guided for in 2021 and 2022.

The other main income elements, residual negative treasury items and negative income from hedge accounting will continue in 2021 and are expected to be at similar levels to the past. That would suggest around GBP300 million negative income in total in the absence of a resumption of the Absa dividend. Q4 cost of GBP222 million were above the usual run rate of GBP50 million to GBP60 million due to around GBP150 million of cost actions and the inclusion of a further GBP22 million of the community aid programme we announced at the start of the pandemic.

Moving on to capital, we finished the year with a very strong capital position. The CET1 ratio was 15.1%, up materially from 13.8% at the end of 2019, and an increase of 50 basis points in Q4. This reflected capital generation from profits across the year, regulatory support and the cancellation of the full year '19 dividend at the start of the pandemic. The strengthening of the ratio was achieved despite the increase of GBP11 billion in RWAs. You can see the elements broken down in the bridge on the top half of this slide. IFRS9 transitional release didn't move significantly this quarter as the bulk of the impairment charge didn't qualify for relief. In Q4, the main contributors to the increase were profits and 30 basis points from the new regulatory benefit of software assets. We're expecting the software benefit to be reversed at some point this year by the PRA, and I'll say more about the flightpath for capital on the next slide.

We're happy with the headline, Capital ratio of 15.1%, but I wanted to remind you of some factors which will reduce the ratio in 2021, particularly in Q1, and why we are comfortable to run at a level materially below 15.1%. We've shown at the start of this bridge a couple of easily quantifiable factors which will affect the ratio in the early part of the year. The proposed buyback of GBP700 million is not reflected in the ratio and would reduce the year-end ratio by 23 basis points. In addition, the temporary PVA relief brought in last year was reversed on 1st of January, and the IFRS9 transitional relief reduces. So you could think of a rebased ratio at the start of 2021 of 14.7%. This is still well above our target range of 13% to 14%.

I would remind you that our MDA hurdle is currently 11.2%, and we've included the usual slide in the appendix, showing how that is calculated. Our target range is designed to allow for fluctuations in the MDA. For example, if a U.K. counter-cyclical buffer is reintroduced. Going forward, we remain confident of generating capital from profits, although I'm not going to forecast a precise level of capital generation. We've shown here a number of additional headwinds to the ratios that we are aware of, on top of the expected reversal of the software benefit. The two that are most difficult to forecast are the migration of impairment into Stage 3 defaulted balances which will not qualify for transitional relief and potential procyclicality which could inflate RWAs. This didn't materialize during 2020 in the way we had expected, but we are likely to see some effect from credit migration during 2021. Nevertheless, we are confident that the balance of these elements will leave us with sufficient capital generation to continue distributions to shareholders and be comfortable in our CET1 target range. Both spot and average leverage ratios were at or above 5%.

Finally, a slide about our liquidity and funding. We remain highly liquid and well funded with a liquidity coverage ratio of 162% and a loan-to-deposit ratio of 71%. This positions us well to withstand the stresses caused by the pandemic and to support our customers. So, to recap, we were profitable in each quarter of 2020 generating a 3.2% statutory RoTE for the year despite the effects of the COVID pandemic, which led to significant reductions in income in the consumer businesses, and an increase of close to GBP3 billion in the impairment charge. I've summarised on this slide, the various comments on the outlook we've made. While the income outlook for the consumer business is challenging given the economic environment, the CIB is well placed for 2021 and beyond.

We continue to see the benefits of our diversified business model coming through, allowing us to take a measured approach to costs, and continue to invest in the future of the Group despite the difficult economic environment. We have taken very significant impairment charges in 2020 but with GBP9.4 billion in balance sheet provisions, we expect a materially lower charge in 2021. We're distributing the equivalent of 5p per share by way of dividend and share buyback. Although we expect a reduction in our CET1 ratio in 2021, our starting point of 15.1% should put us in a good position to pay attractive capital distributions to shareholders going forward.

Thank you. I will now take your questions, and as usual, I'd ask that you limit yourself to two per person, so we get a chance to get around to everyone.

Questions and Answers:

Operator

[Operator Instructions] The first question today comes from Joseph Dickerson of Jefferies. Please go ahead, Joseph.

Joseph Dickerson -- Jefferies & Company -- Analyst

Hi, good morning, guys. Thanks for taking my question. I guess just a couple of things. So on the capital distribution, the PRA was pretty clear in the December document that you could move away from these, I think they use the word, temporary guardrails, and return to more normal levels of Board decision-making in respect of the half year and when I look at where the pro forma CET1 is, in addition of the fact you generated 81 basis points of capital in 2020 with the GBP4.8 billion impairment charges, so just on a fairly conservative basis, you've got somewhere between GBP1.5 billion plus of excess capital. I mean is that something you could seek to use for buybacks in respect of the half year. I guess how should we think about the timing of further buybacks given that your shares are meaningfully below book that's quite accretive.

And then secondly, I guess just on the card outlook both in the U.S. and the U.K., you gave a great deal of precision around the outlook for the UK NIM but a lot of that is linked to card spend and lend, and I guess what's the outlook there because you said you would need to see -- I think, Tushar you said in your comments significant improvement in economic conditions but we're starting to see that if you look at the U.S. retail sales data coming in for January at 5% versus 1% and the stim checks being dropped into people's bank accounts in January, it seems like there is -- the setup is quite prime for recovery in spend but you sound a bit more cautious. So I'm just wondering what the delta is there? Thanks.

Tushar Morzaria -- Group Finance Director

Yeah. Thanks, Joe, good to hear from you and why don't I take both of those questions. In terms of capital distribution. I mean, hopefully you've seen this morning that it's very important to the Board here that we are in a position to return as much capital as we can into shareholders' hands consistently. And hopefully the actions we've taken this morning or announced this morning are a good demonstration of that. I think I'll also agree with you that we feel very comfortable with both our starting capital position albeit we've called out some natural headwinds, but you can even see that as you -- pro forma for some of the numbers that we can quantify we're still in a very strong capital position. And we are capital generative. We expect to be more profitable this year than we were last year and that will no doubt help.

In terms of announcements for further buybacks or dividends or anything, I think that's probably something to talk about at the right time. Today I don't think we're in a position to make any announcements on that. Of course the guard rails are in place, the PRA will do their reverse stress testing and they'll come up with their conclusions thereof but even I'd agree with you that getting capital back into shareholders' hands is a priority for us and the actions that we've taken to date demonstrate our sort of, focus on that. And we have a very strong capital position to be starting from, in our view.

In terms of card balances U.K. and U.S., yeah, I think, kind of -- look, I think you're right in the sense that spending, I think as spending recovers that will be helpful in the U.S. in the sense that we start benefiting from the interchange fees that are available there and also actually even in the CCP segment we do include our much of acquiring business as well. And of course that will respond very quickly to the increases in spend level. I just think that the growth in card balances themselves might lack that a little bit, obviously folks have been saving and acting very rationally and it remains to be seen just sort of their propensity to take unsecured credit on, while there is still a reasonable amount of cash inc-- on deposits in bank balance sheets.

So look, I think it's a very sort of difficult judgment. We've tried to be sort of cautious, you'd expect us to be cautious, but there's -- as the world moves on and vaccines have their desired effect quicker than perhaps was anticipated and spend levels recover that ought to be a benefit, of course. But it's difficult to be precise in our judgment just given where we are at the moment.

Joseph Dickerson -- Jefferies & Company -- Analyst

That's fair. Would you agree that the recovery in spend and connecting that to lend is probably driven more by improvement in mobility and reopening as non-essential spend picks up where there is probably a greater propensity to evolve or balance? Is that kind of...

Tushar Morzaria -- Group Finance Director

Yeah...

Joseph Dickerson -- Jefferies & Company -- Analyst

Kind of the good result post that we would look for?

Tushar Morzaria -- Group Finance Director

Yeah, definitely, Joe. I mean usually on essential spend that tends to be driven more by debit card transactions and non-essential spend tends to be more where credit cards are deployed. So I think that's a good lead indicator to see non-essential spend pick up, there's more propensity for that to improve card balances. That's a good lead indicator.

Joseph Dickerson -- Jefferies & Company -- Analyst

And sorry, just one more thing, just to make sure that we both agree that the PRA has said that you can return to more normal level -- more normal Board level capital decision making in respect to the half year unless with normal caveats around the economy not falling apart, etc.?

Tushar Morzaria -- Group Finance Director

Yeah, look I -- yeah, and we'll talk about more of that when the time is right, I think. Let's get through this season. Let's get through where there is a reverse stress tests and various other things, but look getting capital back to shareholders' hands is a clear objective for the Board here and hopefully our actions this morning are a good demonstration of where we've distributed I think the maximum that was allowed under the existing guard rails.

Joseph Dickerson -- Jefferies & Company -- Analyst

Great. Thanks.

Tushar Morzaria -- Group Finance Director

Okay, thanks, Joe. Can we have the next question please, operator?

Operator

Sure. The next question comes from Jonathan Pierce of Numis. Your line is now open.

Jonathan Pierce -- Numis Securities Limited -- Analyst

Morning, all.

Tushar Morzaria -- Group Finance Director

Hey, Jon.

Jonathan Pierce -- Numis Securities Limited -- Analyst

Two from me well, please. Hi, there. Firstly, the NIM in the U.K. Bank, could you give us a sense of the trajectory of the NIM as the year goes on, and we're just stepping lower and lower through the years such that we probably exit below 2.4%, would that be correct? And maybe as part of that, can you give us an idea of what you're thinking on mortgage margins as the year goes on? I notice you're leading the charge back down in terms of some of your headline rates.

The second question is on -- just a technical one I guess, so on capital headwinds in the first quarter you've got still quite a big hedge fund portfolio and looking at the report and accounts 25 basis point shift up in the yield to bits you by GBP400 million, GBP500 million, which is capital as well. So is -- based on what curves are at the moment given the big move up in the last few weeks, is there another headwind coming in Q1 may be 15, 20 basis points from the bond portfolio revaluation? Thanks a lot.

Tushar Morzaria -- Group Finance Director

Yeah. Thanks, Jonathan. Why don't I take both of them as well. NIM trajectory, I think it's actually quite a difficult one for us to forecast because you've got a few moving parts on that. You've got the yield curve itself, now that's obviously been steepening in recent times that probably wasn't put into when we were sort of running our own projections, and who knows if that continues to steepen or flattens out, again we don't know. Obviously steepening is helpful to us, probably more helpful in the after years but we will have some benefit in current year.

Front book mortgage margin is of course, another one that's going to have -- be driven by sort of dynamics of supply and demand in the mortgage market and it's held up actually reasonably well, and some of the headline rates that you see -- I know people do scan and pickup, just going to be careful that you correlate that to where most of our production has been and is likely to be. So we do expect in the forecast we gave some moderation to front book mortgage margin but it's actually probably held up kind of OK, actually a bit better than perhaps we might have forecast.

Now again, we -- that the real thing here will be what happens on the other side of the -- there's a stamp duty or the day, if you like that the chancellor announced what his plans are around that at the March budget. So I think we'll have a better picture then as well. Volumes also, I guess, is another one that's not that straightforward to forecast again in an uncertain year. Mortgage volumes have been actually, again, pretty robust. So I think that's probably helpful.

And the earlier question, Jonathan, on the recovery and unsecured balances, of course, it's a very high margin product. If there is an increase in non-essential spend then you probably see an earlier recovery in unsecured balances and that may be helpful in the margin. We try to be cautious in all of these. And the things have moved pretty fast. Yield curve steepened a lot probably since when we were doing this and quite frankly, the Pfizer vaccine rolled out is -- probably surprised us a little bit as well. So yeah, let's hope that optimism continues but we shall see.

Jonathan Pierce -- Numis Securities Limited -- Analyst

So saw here today the message that actually you think all else equal based on what you see right now, you could do bit better than 2.4% on the NIM.

Tushar Morzaria -- Group Finance Director

It's possible. Of course, it's possible to break first and sitting here in the first six week in February's forecast in the next sort of 46 weeks or something of NIM, but yeah at the moment, look, the dynamics are probably marginally helpful. I'd agree with that.

Jonathan Pierce -- Numis Securities Limited -- Analyst

Okay.

Tushar Morzaria -- Group Finance Director

In terms of just the other point, Jonathan, on mortgages, the trajectory. No, I wouldn't expect us to be below or well below 240 basis points at the end of the year. We'll be sort of gradually grinding down on the current projections but not sort of going well below 240. Your second question...

Jonathan Pierce -- Numis Securities Limited -- Analyst

Okay, thanks.

Tushar Morzaria -- Group Finance Director

Yeah, your second question, is there another headwind due to sort of AFS or fair value of OCI. Not really. It's not significant. If it was, we'd have called it out and the other thing of course is when you have significant moves in currencies and yield curves typically that's a reasonable trading environment for the other side of the businesses and that's obviously a very important part of our opportunity set here, so no, I wouldn't call that a headwind.

Jonathan Pierce -- Numis Securities Limited -- Analyst

Okay, thank you.

Tushar Morzaria -- Group Finance Director

Thanks, Jonathan. Can we have the next question please, operator?

Operator

Sure. The next question comes from Jon Peace of Credit Suisse. Your line is now open.

Jon Peace -- Credit Suisse -- Analyst

Yeah, thank you. So my first question is, could you help us maybe size the material improvements in impairments you're expecting for 2021? A few European banks suggested that the impairment level might come back close to a through-the-cycle rates. If I annualize your second half 2020, that's probably similar -- a little bit above your through-the-cycle rates, I mean could -- do you think you could sustain that H2 2020 run rates in impairments for this next year as you think about things?

And then if I could just ask a little bit about the investment bank and how have you started the year in 2021, I think you mentioned you were well positioned, a few of your peers have talked about revenues being up year-over-year, has it been the same for you? Thank you.

Tushar Morzaria -- Group Finance Director

Yeah. Thanks, Jon. Jon Peace and Jonathan Pierce. Wow, this is going to be a tongue twister for me but hi, Jon. The impairment and where we are, you're right to point out. We've also been running at a relatively low run rate in the third quarter and the fourth quarter. Really, the big wildcard here is when or if do we get to see defaults that our models are forecasting and we are not seeing it yet.

You could make the case that there's going to be plenty of government support out there, in which case we don't get to see those levels of unemployment or that degree of consumer stress and we may end up being over provided, but we're trying to do this as straight as we can. So we've actually even called out in our slide this morning had we just let the models run by themselves, we would have had a lower impairment balance as a result of that by about GBP1.4 billion.

We've taken up what's called a post model adjustment to supplement where the models were, and that's really because the model just can't cope with this sort of very unusual sort of economic picture that we're in at the moment with sort of big fluctuation from quarter-on-quarter in economic data. But look at the moment, it's fair to say that the impairment picture -- the underlying credit picture looks incredibly benign.

You can see that in our corporate -- for example, the fourth quarter tends to be the highest quarter for corporate defaults and you can see, we only had GBP52 million in the fourth quarter and that's extraordinary when you think about all the headlines that you're reading. Arrears rates haven't really budgeted on our unsecured credit. So it looks pretty benign but I think we need to wait and see when we're on the other side, if you like, with the economies reopening. And Jes, you might want to add anything on that.

Jes Staley -- Group Chief Executive

On your second question, Jon, about the IB in the first quarter. We don't comment during a quarter but I would say a couple of things. One, last year was a very robust market for the capital markets. We underwrote about GBP1.5 trillion worth of debt for sovereigns and corporates. That's in the public inventory now and the corporate bond market itself grew by 40% over the last two years, and then -- and that drove a lot of the secondary market activity underscoring the market's performance last year.

Also, we grew our markets business last year about 45% whereas the overall industry grew about 20%. So we continue to capture market share. I'm sure you saw the commentary this morning from Credit Suisse and Deutsche Bank. So I'll sort of leave it there.

Tushar Morzaria -- Group Finance Director

Thanks for your questions, Jon.

Jon Peace -- Credit Suisse -- Analyst

Thank you.

Tushar Morzaria -- Group Finance Director

Yes, the next question please, operator?

Operator

The next question comes from Alvaro Serrano of Morgan Stanley. Please proceed with your question.

Alvaro Serrano -- Morgan Stanley -- Analyst

Good morning. Thanks for taking my questions. Just one follow-up question on the NIM guidance in the U.K., please. The 240, so is that 16 basis points reduction versus the Q4 level. Can you maybe, I know it's difficult but quantifying in terms of your assumptions and the way you think about the guidance, how much of that reduction is structural hedge versus consumer sort of lending mix? So we can maybe sort of draw our own conclusions around the recent steepening and views.

And second, on the cost outlook. In the past, you've given more specific cost guidance, I realize you've taken some restructuring charges and you've also called out the COVID expenses will remain elevated, I think is the word you used. Maybe you can give more -- a bit detail, it's easier to get detail by division. I don't know if you can comment on BUK outlook versus the overall group. Thank you.

Tushar Morzaria -- Group Finance Director

Yeah, thanks, Alvaro. Why don't I kind of go for them. In terms of NIM in the U.K., I mean, the first thing I would say is just to sort of contextualize it. Of course, one of the comments that you probably picked up from our releases this morning in our slide where net interest income for Barclays is somewhere around 35%, 36%, 37% for the group but the U.K net interest margin is only a portion of that. So it's a relatively small part of our top-line and bulk of it has been sort of fee and other types of activities. But nonetheless, it's of course, an important area.

In terms of the mix of that structural hedge contribution, I guess two comments I'd make on that. As I mentioned a little bit earlier, Alvaro, we haven't captured in sort of latest yield curve movement and probably that's what prompted your question. So the steeper curve, how much of that might influence but the only thing I'll do is there is a slide in our appendices, which I'll get the IR team to point to you, Kevin already commented already where we've given a sort of sensitivity slide to net interest income for upward shift in the yield curve and downward shift in the yield curve.

Now these are -- I'll be careful with these because we've assumed parallel shifts and it's very complicated stuff within slides of steepening and shallowing and various other shapes, but at least it gives you a sense of the sensitivity. It tends to affect more of the after years but there will be a -- there's a steepening as we've seen and on any stage, it will continue to steepen and will have some benefit into the -- into this year as well.

I'll probably leave it at that, Alvaro. The other thing that may be helpful actually is from our margin disclosures. You'll be able to see the notional hedges that we run and the contribution that the gross fixed leg has, you'll get a sense of the all-in yield and you can make your own assumptions as to what that might refinance is and model that accordingly.

The final comment I'd say is we do expect balances to grow this year, interest earning balances to grow and they did grow last year as well. So NIM of course, is one part of the equation for net interest income and I know you guys know all this, but just for the fear of stating the obvious, you need to take a view on balances as well and there we do expect a decent growth in the mortgage business, and we like to see growth in the unsecured business. We haven't seen that yet. To the earlier question from Joe, I think that will really be predicated on where non-essential spend returns and how quickly that translates into revolving credit demand.

Costs, yeah. Structural sort of cost actions is a way of life for us and we don't call it restructuring, we don't put it below the line. It's something we do every single year. We've given you some comparisons in the past. We will do some more again in 2021, and we'll include it in our overall cost line and not trying to be clever about reporting things above and below. So you can see the full effect of that.

I think the good news is, given the diversification of the the top line particularly some of the strength we've seen in the CIB and we're optimistic about that as we go into 2021 that will give us the capacity to first of all, continue to invest in some of our consumer franchises. We really like those businesses. We'd like to diversify for example, our U.S. card portfolio. We're very excited about the U.K. wealth proposition. We like transaction banking. We're seeing position there and the diversification of top line does allow us, in addition to the efficiencies that we will naturally create and capacity we trade in our cost side every year to continue to invest.

I haven't given guidance by division, and I don't think we'll do that at this stage. It is again -- it''s an uncertain world and I think, it's difficult to give precise guidance because, look, we don't really know when economies are coming out of lockdown and what the economies are on the other side of lockdown. We're probably feeling more optimistic than we were when we were probably writing a lot of this. But it's a sort of a fast-moving picture, so probably more to come at the right time.

Alvaro Serrano -- Morgan Stanley -- Analyst

Yeah, thank you.

Tushar Morzaria -- Group Finance Director

Thanks, Alvaro. Can we have the next question please, operator?

Operator

Your next question comes from Benjamin Toms of RBC. Please go ahead, Benjamin.

Benjamin Toms -- RBC Capital Markets -- Analyst

Good morning. Thank you for taking my questions. The first is on the CIB. It has performed well and the market share has materially increased. Do you see yourselves continuing to take the same market share gains in the IB or is it a lot harder work to win share from here?

And then secondly, just on real estate optimization, which you've spoken about before, there's not much detail about that in the slides. Is that because it's a 2022 thing? Is now not the right time to go faster and harder on plant reductions, can you just give some more color around real estate optimization please? Thank you.

Jes Staley -- Group Chief Executive

Yeah, Ben, on the market share side, obviously, we have good momentum in the IB through every quarter of last year and across equities and macro and credit. So, yeah, we hope to continue to gain market share. And also, we do expect the size of the market to continue to grow and that supports the financial performance of that business.

In terms of branch closings, the consumer in the U.K. is definitely moving to interactions with Barclays through our digital channels. Our sales through the Internet and our payments business were up over 30% last year. And the usage of our mobile banking app for instance, also was growing at a very robust pace. So as that transition happens and our consumers engage with us digitally and we advance our digital offering perhaps, they could use less. And we're going to be very prudent in how we deal with branches. We still have over 700 in the U.K. but I think you gradually see that number go down as we have over the last couple of years. So yes, I mean there will be further branch closures.

Tushar Morzaria -- Group Finance Director

Thanks for your questions, Ben. Could we have the next question please, operator?

Operator

The next question comes from Rohith Chandra-Rajan from Bank of America. Please go ahead.

Rohith Chandra-Rajan -- Bank of America -- Analyst

Hi, thank you. Good morning. My first one, sorry, it's another follow up on the BUK NIM. The slide that you mentioned before on the structural hedge rate sensitivity would suggest something like that potentially GBP100 million uplift from the move-in rates that we've seen in recent weeks. So I just wanted to check whether that's roughly the right ballpark? And in that 240 guidance for BUK, what are you assuming in terms of cards, balances, I guess, on average through this year.

And then the second one was on CC&P, I guess there are obviously two parts of that business, so in your -- in reference to an earlier question, I think you suggested that the payments part of the business should sort of track spending trends. So is it fair to assume that the mix of the cards business probably means that, that lacks the broader trends in the U.S. -- in U.S. card balances given the sort of bit more exposure to travel and leisure?

Tushar Morzaria -- Group Finance Director

Yeah, thanks for your questions, Rohith. Why don't I take them. In terms of the structural hedge potential upside from the sort of recent steepening in the curve. I don't want to sort of quote too much around whether it should be GBP100 million. The reason I say that is, the slide you're referring to is sort of parallel shift rather than steepening and five-year rates and 10-year rates and all. So it's directionally positive but I'm reluctant to give you a sort of a precise number on that, but it's a positive and obviously you got that, Rohith.

The 240 basis points NIM guidance, we actually assumed U.K. card balances would be flat to maybe even down slightly. Now, if that's of the -- when we're making all of these projections the world moves so quickly that may be too cautious and maybe economies recover quicker and normal central spend picks up quicker, so we'll have to see. I mean, as you know, Rohith, it's a sort of a -- it's a two-fold thing that first of all, you've got to have the spend sort of in the right categories, the demand, if you like, and then the credit appetite as well. So we'll see how that goes. But we were rather cautious in our forecast expecting card balances to be flat to maybe even slightly down a little bit.

In the CCP segment. In terms of the U.S. card balances, yeah, I mean it will follow spend. So again in some ways, the good news about the U.S. market is people value these rewards and they are not just spending because they need unsecured credit, they tend to value these. It's a very slightly different dynamic and of course, the cost that we have are very much non-essential spend, travel, entertainment, hospitality, leisure, etc.

So if spending in those categories were to come back and the case be made that it ought to start coming back over the course of this year, then you will see some benefits flowing through probably in the second half of the year rather than the first half of the year. There is a timing sort of thing when sort of people start looking at travel and holidays and all that. By the time it ends up on your card balances, there's some sort of lag but probably it'd be a bit more quicker to see that recovery in the U.S., just the nature of the business in the U.S. and our partnerships in the U.S. relative to the U.K.

Rohith Chandra-Rajan -- Bank of America -- Analyst

Okay...

Jes Staley -- Group Chief Executive

If you see the payments business in the U.K., we've made a significant investment in the technology, which runs the merchant acquiring business and are starting to see that have an impact, particularly, as I said through Internet sales and what not. We're also connecting all of our applications that run our small business banking group with our merchant acquiring group and that will also have, I think an impact on the growth of our merchant acquiring business, particularly in the small business space where it's -- which is where the profitability really lies.

Rohith Chandra-Rajan -- Bank of America -- Analyst

Thank you. Can I just clarify on the U.K. cards balances. When you say flat to down year-on-year, are you talking about the year-end position? I presume you're talking about the year-end position rather than?

Tushar Morzaria -- Group Finance Director

Yeah, yeah.

Rohith Chandra-Rajan -- Bank of America -- Analyst

Full year.

Jes Staley -- Group Chief Executive

So by the time you get to point-to-point 31st December, 31st September we thought to be flat and maybe marginally down and hope that we get it. We shall see.

Rohith Chandra-Rajan -- Bank of America -- Analyst

Thank you very much.

Tushar Morzaria -- Group Finance Director

Thanks, Rohith. Can we have the next question please, operator?

Operator

Sure. The next question comes from Ed Firth of KBW. Your line is now open.

Edward Firth -- Keefe, Bruyette & Woods -- Analyst

Good morning, everybody. Just a quick question on the capital headwinds. The two areas that I was just wondering, one is proceeds. I think in the past you talked about GBP5 billion or something at the half year was a sort of proceeds to the orders of magnitude number, was that -- if I remember wrongly, that was the first one.

And then secondly, you highlighted in your words regulatory forbearance that would be coming back this year. Could you just remind me, roughly what we're talking about in terms of numbers for that as well? Thanks.

Tushar Morzaria -- Group Finance Director

Yeah, so on the second part of your question, regulatory forbearance, a good example is PVA, which was sort of granted in the, I think it might be in the first quarter of last year and reversal on 1st of January. So that's one example. I think software capitalization, I'll probably put it as a similar example where PRI is being quite straightforward in saying all along that they never considered it to be good capital, so they'll no doubt reverse it. It looks like they'll do that during 2021.

So those are probably the two clear examples that come to mind. I think, all in all I'd still sort of come back to the broader point that I just wanted to be -- help you with the modeling. There are headwinds out there but we're still well above our stated sort of guidance in terms of target ratio and we expect to be generating capital -- net capital over the course of the year. So just in the round, we're still pretty comfortable with everything.

Edward Firth -- Keefe, Bruyette & Woods -- Analyst

And it's supposed to kind of taking numbers up, if I remember that correctly. I'm not saying that I want to put my model or anything, but just to get a sense of...

Tushar Morzaria -- Group Finance Director

Yeah.

Edward Firth -- Keefe, Bruyette & Woods -- Analyst

The pro-cyclicality...

Tushar Morzaria -- Group Finance Director

Yeah. We called out the -- the number we called out was GBP10 billion of pro-cyclicality that we have seen in 2020. If I can get the IR to sort of just point you to the right direction that the table the RWA table probably you can sort of just entangle that and it's going to get to that number. And what it will be for this coming year, frankly, that's a tough one to forecast. It's actually surprised us on the downside a lot. I've guided to this all the procyclicality kind of coming in Q2, Q3 and Q4, I guess, I'm going to stop guiding at some point because it haven't happened yet. But if you believe sort of conventional thinking that at some point the stress in the economy results in default you ought to see some procyclicality, but it hasn't happened yet and it's not happening in the near-term play that way.

Edward Firth -- Keefe, Bruyette & Woods -- Analyst

Sure. Okay, thanks so much.

Tushar Morzaria -- Group Finance Director

Okay. Thanks, Ed. Yeah, next question please, Operator.

Operator

The next question on the line comes from Jason Napier of UBS, please go ahead.

Jason Napier -- UBS -- Analyst

Good morning. Thank you for taking my questions. The first one I guess for Tushar, just coming back on the commentary around cost. You've retained your sort of medium term 60% cost income objective. And I guess where consensus is now is that costs are going to be broadly flat this year with revenues down 5%. I would have thought that coming into 2021 would probably a higher headcount than planned and those strategic costs for last year and COVID costs in the base -- better than flat would have been consistent with what Joseph said in the past about delivering a sort of a stable cost income ratio in CIB over time.

I just want to -- whether you might give a bit more concrete guidance on the direction of travel for cost in aggregate? It doesn't seem sensible unless there was an awful lot of investment that didn't happen last year, as a consequence of COVID, not to have better flex in costs if revenues are going to be down as consensus expects. So that's the first one. And then secondly, as you already highlighted the risk overlays that you've had to apply throughout the last -- through the second half of last year manner and everyone continues to be positively surprised on the letter and probably movement into Stage 3. I just wonder -- the coverage levels, you've got a huge and driving still, how confident are we given how long this has been going on, perhaps that the stage splits arrived?

If we can be sure that Stage 2 is as big as it ought to be then perhaps we can think about what provision releases might be sensible into the second half? Do you have a good handle on which of your customers are recipients of further aid and so on, because clearly, the payment holidays are almost all gone now and yet things continue to proceed really very strongly from a credit perspective. So I guess if you could just talk to confidence around staging splits and coverage, that would be helpful.

Tushar Morzaria -- Group Finance Director

Yeah, I'll take them in reverse order, Jason. So on terms of staging splits, on many of our customers -- they do have current account relationships with us. Of course, for those customers we have a lot of insight, as to the -- for the specific situation and have a sort of high conviction on sort of staging. Of course, there is a -- it's an open market product that we have in our unsecured books, so you don't have to be a current account customer to have a credit card with us. And if you're not, obviously, we have less visibility in your specific sort of circumstances.

I would say though, I think at the end of the day, we don't have any historical sort of data to calibrate this too either. So we are being -- I think in our words, appropriately cautious, and you can see that in-- the words you used, the risk overlay. If it turns into a relatively smooth adjustment, and I think the real unknown here is of course the involvement of governments in the fiscal response and what will happen here is Think Tank, though I think announced their report this week where they're talking about staging out furloughs and things like that to kind of make a smoother transition as possible. If that were to be the case then unemployment levels really don't go anywhere near where our mets are currently being modeled then there's a case to say we may be over provided. We'll know in good time, but we've tried to be as transparent and as open as we can.

I mean, the other thing I think that's in there as well, that is again, a very hard thing for the models to pick up is lot of savings, so consumers are in -- you may have higher unemployment levels, but you've got a lot of cash sitting in deposit accounts and that may lessen the stress and balances have fallen as well. So look, I think this has all surprised us as to sort of, when I look at those sort of Q3, Q4 and even into Q1, how benign credit is looking so I think it's surprising all of us, but we'll be on the other side of the lockdown. It feels like soon enough, and we'll know for sure.

On costs, yeah, I think our statement is that we -- the cost income ratio is an objective for us and it's something that we manage a sort of not trying to rush to get to any one particular year, we try and manage the company for the medium term. And so, it is important that we continue to invest and cost-income ratio is as much a function of income as it is cost and we have some areas of growth on the top line that we are very excited about. You've seen that in the CIB. I think in terms of market share pickup there, there is potentially more to come.

We're doing really well in some of our electronic trading capability, is doing really well in securitized products with a relatively small product set for us, but growing extremely quickly. In equities as well as you've seen in probably the last six months of the year, probably outperformance in our equities trading line, which is -- which has been quite interesting for us. So, equity capital markets is another really interesting area for us in building out that franchise that's doing really well at the moment.

And in the consumer businesses, we'd like to diversify our cost portfolio, AARP, the American retirees portfolios coming online this year, just talked about some of the investments we're making into our payments business. So I think it's important for us to continue to invest and focus on the top line as well. And with the way we're able to do that is because we can generate capacity to our ongoing efficiencies, during the course of the year, like last year in a year like this year to sort of fund that without expenses sort of finding -- in a way that doesn't make sense, but that's how we think about it. And ultimately to get to a -- the right sort of shape of the company, we've got to think about the top line as -- and not just the cost line, when we look at cost income ratio -- but that's including where you want to sell that.

Let me just add another line of growth that I think we'll start to articulate more explicitly relates to our point-of-sale financing. We have a terrific partnership with Amazon in Germany that's our second largest market. They have 40 million consumers that regularly use Amazon online. We have a great partnership with Apple in the U.K. We fund all of the iPhones and tablet sales on installment basis. And those are just two examples, but we are rolling out our point-of-sale financing as we've -- as we build out the payments stage. Thanks for your question, Jason.

Jason Napier -- UBS -- Analyst

Thanks very much. Thank you.

Tushar Morzaria -- Group Finance Director

Can we have the next question please, Operator?

Operator

Your next question is from Guy Stebbings of Exane BNP Paribas. Please go ahead.

Guy Stebbing -- Exane BNP Paribas -- Analyst

Good morning, thanks for taking the questions. First, I just wanted to come back to costs and then I had a question sort of longer term consumer bonds outlook. So on cost, just focusing firstly on the CIB, costs were broadly flat this year despite the very strong revenue performance. And I know in the past you've talked about your cost base being less variable on the CIB then some U.S. peers, but even so one might have expected a higher cost.

If consensus is right for 2021 and CIB revenues are marginal in 2020 -- in 2021 on 2020. I appreciate that might not be your view, but if that was the case, should we expect a reasonable drop in costs, especially given some of the FX movements as well. And I appreciate it's hard to guide on cost income this year given the uncertainties on top line, but to the previous questions on sort of efficiency gains, perhaps structural cost charges are flat or down this year on last year, perhaps the levy should be lower. I mean I think the absolute cost base should be near 13.5% or perhaps lower in 2021 in consensus somewhat higher.

And then the second question was just on consumer balances longer term. I mean, we've seen your UK consumer balance has declined over 30% since the start of 2020, they're still declining, and not the similar situation in the U.S. And as we look further ahead, just to get your views on how many years does it take to recover those balances which of central assumption be the -- be just model low mid single-digit as the recovery takes hold per year, which would take 10 years to get back to that balances or given the very unique nature of this crisis, could rebound much sooner than that? Thanks.

Tushar Morzaria -- Group Finance Director

Yeah. Why don't I have a stab at both of them. Costs in the CIB, look, there is -- of course the reflects there in terms of the just the bonus pool and we've made that given the sort of framework that we're operating in the bonus cap framework and I guess still for us in the U.K. as flexible as we can, we made some changes. I think when I was just first arrived just to give us that. So there is some flex there and we'll be judicious about the pace of investments and all that. But I'll go back to your earlier comment, right? We probably do have a different view of the income outlook than you may have and not you specifically, but that others in general may have. And I think the investment that we've been putting into the CIB being rewarding us quite well and so we'll continue to balance that appropriately.

In terms of the consumer balances, I can't imagine it's going to take that long to recover. I think we're living in very sort of a weird -- sort of contraction that's being very dramatic. I don't think you'll see a sort of steady sort of multi-decade buildup as we've seen in the past. I think, the other thing, as Jes mentioned, unsecured balances, cards are important, but point-of-sale financing, the customer behavior is changing, particularly younger customers much more into the sort of instalment financing at the point of purchase.

It's a great business for us and Jes mentioned the Apple partnership in the U.K. We've got a tie-up with Amazon in Germany and there's various other things that we'll talk about the right time. So I think it will be a more rapid recovery than that. It will be it -- you've got to see an economy that sort of back to a more quite to normal level, whatever that is these days now and you'll see a relatively quick recovery.

Jes Staley -- Group Chief Executive

I think when they reversed the lock-down and all the shops and restaurants and stores across United Kingdom opened up, I think the spring back and spend is going to be to the upside. So I would echo what Tushar said that this is not going to be a sort of low single-digit grind it out over decade. I think the response to the pandemic being over, given how aggressive the fiscal and monetary policy has been is going to be -- it's going to be strong and we will fill it in our numbers.

Again, I go back as well. For the last decade, both our consumer businesses in the U.K. and in the U.S. were generating consistently mid-teens to high-teens returns on capital. I think that is more a reflection of the fundamental strength of those two businesses than what's happening in a once-in-a-century pandemic. And going back to the cost-income ratio, what -- we get any sort of recovery toward those businesses look like in 2018 and 2019 and we hit our financial targets.

Tushar Morzaria -- Group Finance Director

Thanks for your question, Guy.

Guy Stebbing -- Exane BNP Paribas -- Analyst

Thank you.

Tushar Morzaria -- Group Finance Director

Could we have the next question please. Operator?

Operator

The next question comes from Robin Down of HSBC. Please proceed with your question.

Robin Down -- HSBC

Hi, yeah. I just wanted to come back on the impairment side. I'm a bit confused if you like as to what you've done because you've increased the macro or you've moved the macro assumptions more positively since Q3. And then, you've also changed the weightings of the scenarios toward the sort of upside scenarios away from the downside scenarios and yet at the same time, you've applied a billion pounds for the amount of overlay.

It just feels somewhat inconsistent. I just feel that we're not going to get the answer to this. But are there any particular trigger points that you're looking at, because I can't help but feel as we kind of run out of -- come out of lock-down running through this year. But we should be looking for that releases to come through at some point in the second half? So that was just one question. Is there any kind of particular trigger that you're looking at in terms of that, because I can't really see why you put the extra billion in the side?

And then, second question on the structural costs. I apologize if this was asked earlier on, but any kind of view as to what those look like in 2021 and what the payback might be from them? Thank you.

Tushar Morzaria -- Group Finance Director

Yeah. So Robin, on the first question on impairments, see it's a more technical point the weightings on the scenario. Actually, it's a function of GDP. Actually, so the way -- the way these models work is they will take economic outlook and a baseline economic outlook and then project scenario on either side of that to walk through down and these are model driven weighting. So it's just a function of the model. That model is based on historical data and how economies and the sort of confidence level of different projections of baseline to actual is worked out, but that's purely just mathematics, if you like behind the scene.

The PMA, what that indicates is that it's a view of trying to -- the challenge we have at the moment is the way the models or risk and work calibrated of previous sort of business cycles. Previous business cycles, you never had such a rapid expansion and contraction in economic data. And so, what you tend to have is the model just exaggerates those moves. So when unemployment starts growing, it massively overshoots. And when unemployment sort of stops and start holding, it just thinks the recession is over and it just releases everything immediately. And I think we'd all probably say at the moment that it's just hard to know for certain how the economy will adapt to a sort of post lockdown world.

I think we're close to that point. The early signs are that credit looks incredibly benign and governments are looking to do that best to smooth the transition. Would that to be the case, then, we probably won't see the levels of unemployment, that sort of the models are working off and we may be able to provide it. But we'll know in good time. We've tried to be somewhat transparent about these and how the models are currently working and what we're having to do to try and counteract the exaggerated moves the models might have.

On costs, we haven't called out a specific sort of structural cost actions for 2021. We just do this every year. If there's anything sort of meaningful and important, then we'll call it out as we go along, but nothing to say specifically at the moment.

And going back to the impairment, when the crisis began, we wanted with the financial resiliency that the bank was showing and the level of capital that the bank was accumulating, we wanted to be prudent and in the impairment line and obviously got our impairment reserves to GBP9.4 billion, which given the size of our balance sheet is very strong position to have.

And then, I think all of us are positively surprised by the degree of the government, both here and in the U.S. and in Europe and the response to try to maintain the economic damage being caused by the pandemic and that is encouraging. And if we are coming to mass vaccine roll-out that we've seen in the U.K., that's going to make the credit picture much brighter for us.

Robin Down -- HSBC

If I just come back and I appreciate fully that you want to be prudent. And I think if we were all in charge of Barclays, we'd be doing the same thing. But the reality is if the economic sort of outlook as you forecast and we forecast and consensus forecasts, it just feels like you've just sorted away another billion pounds that you didn't need?

Tushar Morzaria -- Group Finance Director

Well, Robin, I mean, we're trying to do what we think is the right level of provisioning for -- we think we have it right. But it can certainly might the case that credit will turn-out better than is forecast, and I'll leave that to other's judgment. We think we've got it right. But look, we're all looking at crystal ball that we've never had experienced before.

Jes Staley -- Group Chief Executive

And you saw all the -- almost all the U.S. banks released in the fourth quarter and that's not because they got it wrong in the first quarter of last year. It's just they're reflecting what they're seeing on the ground.

Robin Down -- HSBC

Yeah. Okay, great, thank you.

Tushar Morzaria -- Group Finance Director

Thanks, Robin. Could we have the next question please, Operator?

Operator

The next question is from Chris Cant of Autonomous. Your line is now open.

Chris Cant -- Autonomous Research

Good morning. Thank you for taking my questions. I had a bit of a couple of on costs, and then one on FX too. So the 60% cost-income ratio target has been a medium-term target for a while now. What's the time frame to hitting that?

And in terms of the mix of the business, how do you see the shape of the group in terms of profit splits going forward, when you're thinking about that 60% cost-income ratio, because if I look at controllable cost and income, so parking, litigation conduct in the lobby in 2019, two consumer divisions generated GBP5.5 billion of pre-provision profit and the CIB was GBP3.3 billion and for 2020 those numbers were basically flipped on the head, and it's now GBP3.4 billion for the consumer-facing businesses and GBP5.8 billion from the CIB.

From your commentary, it doesn't sound great in terms of the consumer outlook. And so, what are you assuming there in terms of longer-term structure of the group, because the CIB cost income ratio in 2020 was at the very low-end of the industry, 55% for the full year. I think it was, so the -- is that actually sustainable? You've never delivered that in the CIB in any previous year, it would seem necessary to assume that you can maintain that cost-income ratio to be able to get the group the low 60% if the mix of the business is now so skewed toward the CIB.

And then in terms of FX, you've talked in the past about 40% of revenues being in dollars that was back in 2019, I think, get that remark. What was that number in 2020 please, given the skew toward the CIB? And related to that, how much of your cost base is in dollars? I'm just trying to think about the FX headwinds you're facing for 2021, which looks like it's going to be about 7% to 8% year-over-year dollar headwind. Thank you.

Tushar Morzaria -- Group Finance Director

Thanks, Chris. Why don't I take them. Look we -- the 60% cost-income objective is something we've had, as you say, some time -- I think that we were getting toward that sort of zone in 2019, in fact we were million miles away in 2020, but obviously 2020 was a year that none of us forecasted to be what it was. And we feel we have the diversification in the company and we've obviously seen a fairly sharp decline in the consumer-facing businesses in a big tick up in wholesale that no doubt we would expect to see an improvement in the consumer-facing businesses as economies recover and we'd like to continue to think that we can consolidate. I mean, continue to improve even the contribution that our wholesale businesses have.

With that mix in mind, we still believe we have a path to a 60% cost-income target. It's very hard to be precise on -- and it can only work if you've got this percentage in consumer, this percentage in wholesale, you have to manage it on a sort of a variety of outcomes and we believe we can do that. We cant give you a year on it, obviously this is a -- it's a very uncertain world we live in. So I think it's very difficult to forecast with any degree of precision at the moment, but we still feel that's an achievable objective for the company in a reasonable timeframe where we -- we won't give you the sort of the precise time frame, at this point in time.

In terms of the foreign exchange, yeah, you're right that we called out approaching something like 40% of our income was in dollars two years back or so. It's been a mixed bag we see of course, the investment banks done real well and our cards business in the U.S., of course has come off as balances have come down, so there are sort of pluses and minuses there. It's fair to say, a stronger pound is a headwind for us because we are profitable in dollars, and that is just who we are. So we don't give a sort of a cost breakout -- dollars because we obviously have folks in India, we have folks in also the different parts of the world, so it's not quite as straightforward as that. But yeah, it's a headwind. The other sort of -- I guess if you're going to model the effect across all lines quite impairment as well, I guess -- won't to be a tailwind in the -- mostly the consumer cards and payments a lot of that's U.S. card driven and even on the investment banking sort of credit portfolio component of our credit book. So, it's very dollar denominated as well. So, but net-net, it's a headwind.

Jes Staley -- Group Chief Executive

We're going to keep the diversified model, Chris. And again, the pandemic will get behind us and the consumer business will start to grow again. Again we'd like to keep that balance between the Investment Bank and consumer businesses. And in a normal economy I think the 60% cost-income ratio is -- it is very achievable given that we delivered 63% in a very abnormal economy.

Chris Cant -- Autonomous Research

If I could just follow-up on the FX point please. I mean could you help us out with that? This does feel like quite a big effect for you, year-over-year. You're not willing to comment on the outlook for CIB revenues, you don't want to comment on Group level cost. It would be really helpful if you could give us some some breakdowns in terms of allowing us to get a sense of the currency effect. I mean, is it is more than 40% of revenues in 2020 in dollars? I suspect it is. And I guess, the percentage of costs is higher than the percentage of revenue, given that your U.K. domiciled bank with a group center cost base, which is going to be, presumably more in sterling. I mean, am I on the right lines there, is it sort of 45% revenue, 50% cost, something like that?

Tushar Morzaria -- Group Finance Director

Chris, I'm not going to add comment on your numbers. We haven't disclosed that, I don't like disclosing stuff like that on the fly on a call like this, but suffice to say that we are profitable in dollars, and a stronger pound is a headwind, but I'm not going to give you any more color than that. Maybe in the future we'll maybe breakout the geographic splits or something like that, that forward side environment.

Chris Cant -- Autonomous Research

Thank you.

Tushar Morzaria -- Group Finance Director

Can we have the next question please. Operator?

Operator

The next question comes from Rob Noble of Deutsche Bank. Please go ahead, Rob.

Rob Noble -- Deutsche Bank -- Analyst

Morning, all, thanks for taking my questions. Most of them have been answered, so just one, quick one. You highlighted, it will be tough to grow income in CCP. Do you think you can grow non-interest income in U.K. this year? And how is the lockdown experience in January, February in terms of spending more interesting income than compared to last year? Thanks.

Tushar Morzaria -- Group Finance Director

Yeah, I mean real brief, Rob, Ron sorry. We'd like to think so. I mean, again, it's a little bit of a call on economic activity, but we'd like to think so. I mean, focusing on some of our fee-generating opportunities is important to us, we're giving you some of the ideas where that is somewhere in the world to payments somewhere in the world of -- some of the wealth activities that we have. So, yeah, I think we -- it's a priority for us. Yeah, and depending on if we've got the right economic circumstances there is possibility, we could do that. Yes.

Rob Noble -- Deutsche Bank -- Analyst

Thank you.

Jes Staley -- Group Chief Executive

Thanks, Ron. Can we have the, I think we only got one question left on the queue. So I we'll just take the last question, please, operator?

Operator

This final question we have time for today comes from Martin Leitgeb of Goldman Sachs. Please go ahead.

Martin Leitgeb -- Goldman Sachs -- Analyst

Yes. Good morning. Firstly, could I ask on your market share ambitions in Barclays UK and just related to cards and mortgages. And on cards Barclays UK, card balances were down more than that of peers and more than that of the system in 2020. And in coalition with 2016 there has been the emphasizing of card growth in the U.K. as Barclays UK. How should we think going forward? Should we think the kind of market share in credit cards to stay roughly stable or should that increase or decrease from here given appetite and opportunity?

And related to that, similar question for mortgages. It seems like you're growing -- your flow share is slightly ahead of the stock share in the U.K. I know they are comparatively high excess deposit base now within Barclays UK, does that give grounds to maybe faster growth and then share gains in mortgages going forward?

And second question, if I may more broader just that -- on the regulatory framework in the U.K. in post Brexit. How should we think on a kind of a medium term basis, the regulatory frameworks to have more, and we have seen software intangible treatment being slightly tougher compared to some of the other regulators, is that the direction of travel or could they equally be items and elements where the regulatory framework could makes it easier from a Barclays perspective? So I don't know ring-fencing, was there anything other way around if anything you wish for which would change in terms of regulatory framework going forward? Thank you.

Tushar Morzaria -- Group Finance Director

Yes. Thanks, Martin. I think in terms of market share of our consumer business cards and mortgages, cards, we still have said quite openly that actually this is going back a long way, but from the time as the Brexit referendum that we were taking a very cautious approach in U.K. credit. So we're probably a little bit early, but glad we were cautious sort of leading up to a pandemic, which of course, none of us forecasted, probably just turning to a better net P&L outlook for us because like vintage lending is where you typically take most of the pain. I think from this point on, now we're on a different part of the cycle. I think you'd expect us to do anything possibly even lean into risk, as you sort of go into an upswing. So I certainly wouldn't expect our market share to diminish for anything, but I think we'll be focused on increasing, again. Mortgages is likewise we are running our natural stock of mortgages, we're running well above that at the moment. And I think that's something we would be minded continue to do, as long as the return to that we're very focused on the risk reward balance at the moment. I think it's a very attractive business from our vantage point.

So we would like to increase market share probably in both, but for probably slightly different reasons. Mortgages we're probably already doing that. And I think for unsecured credit, I think we're at a point in the cycle where we'd want to be leaning into that. And again, I just mentioned in the past, it's not just cards, unsecured credit can take different forms -- different forms of lending. So we would look at that in the round as well.

Jes Staley -- Group Chief Executive

I'd also add that if you look at the challenger banks and the digital banks, they clearly have headwinds and challenges. And I think that will always make our market share more dependable. And I think you'll see that that happening over the next couple of years.

Tushar Morzaria -- Group Finance Director

Thanks for your question, Martin. And I think that's all we have at the moment.

Martin Leitgeb -- Goldman Sachs -- Analyst

On regulation?

Jes Staley -- Group Chief Executive

Oh, sorry. Okay. Real brief on regulation. I'm not sure there's much insight I can give you on that Martin. The PRA were very involved in I think influencing the European rule book. So I think there a lot of what they would want to see probably made into the rule book and the bits that they probably didn't agree with. For example software capitalization, they've been pretty open and straightforward about. So I'm sure things will evolve over time. And I think they're a very sophisticated, very-- extremely responsible and balanced regulator and I expect they'll be continuing that. But yeah, I don't have any sort of greater insights to any big changes that they will do or not do. I'm not sure, I've got anything to comment on that.

Okay. With that, I thank you all everybody. I'm sure we'll get a chance to speak to some of you over the videos I guess in the days to come.

With that, we'll see you later.

Operator

[Operator Closing remarks]

Duration: 91 minutes

Call participants:

Jes Staley -- Group Chief Executive

Tushar Morzaria -- Group Finance Director

Joseph Dickerson -- Jefferies & Company -- Analyst

Jonathan Pierce -- Numis Securities Limited -- Analyst

Jon Peace -- Credit Suisse -- Analyst

Alvaro Serrano -- Morgan Stanley -- Analyst

Benjamin Toms -- RBC Capital Markets -- Analyst

Rohith Chandra-Rajan -- Bank of America -- Analyst

Edward Firth -- Keefe, Bruyette & Woods -- Analyst

Jason Napier -- UBS -- Analyst

Guy Stebbing -- Exane BNP Paribas -- Analyst

Robin Down -- HSBC

Chris Cant -- Autonomous Research

Rob Noble -- Deutsche Bank -- Analyst

Martin Leitgeb -- Goldman Sachs -- Analyst

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