Barclays Plc · LSE:BARC
Barclays — Q2 2016 Earnings Presentation
57 slides from Barclays's earnings presentation, Jul 29, 2016
Slide 1: Barclays PLC H1/Q2 2016 Financial Results
Barclays PLC H1/Q2 2016 Financial Results 29 July 2016
Slide 2: Jes Staley, Group Chief Executive Officer
Jes Staley Barclays Group Chief Executive Officer
Slide 3: Our strategy is on track and is showing encouraging progress
Transatlantic Consumer, Corporate & Investment Bank Our strategy is on track and is showing encouraging progress Strong Core returns Double digit Core RoTE 11.0% RoTE1 New cost guidance for 2017 £400m-£500m2 Non-Core closure Continued momentum, on track to close in 2017 c.£20bn RWAs c.10bps Sell dow
Slide 4: Resilience from prudent risk management and diversification
Resilience from prudent risk management and diversification Diversified income by business – H1161 Lower volatility LLR vs. other major UK banks2 4% Average 1995-2015 Personal Banking 21% 18% Barclaycard Consumer UK 8% WEBB 3% Markets 7% 22% Banking 24% Consumer, Cards & Payments 2% Well balanced bu
Slide 5: Our strategy remains unchanged and is on track
Our strategy remains unchanged and is on track Since EU Referendum 23rd June Helped start c.2,0001 £100m fund for new businesses lending to farmers • In a more uncertain environment our Barclays customers and clients are still looking to us UK for advice, financing and partnership Residential mortga
Slide 6: Tushar Morzaria, Group Finance Director
Tushar Morzaria Barclays Group Finance Director
Slide 7: Financial highlights – Q216
Financial highlights – Q216 Double digit Core returns: Underlying Core RoTE of 11.0%, driven by Barclays UK RoTE of 18.4% and Barclays Corporate & International RoTE of 11.9%1 Robust capital ratios: CET1 ratio of 11.6% – on track to meet end-state capital requirements, providing additional capital f
Slide 8: Statutory Group financials – Q216
Statutory Group financials – Q216 Three months ended (£m) Jun-16 Jun-15 % change Diversified Consumer, Corporate & Investment Bank Income 5,972 6,461 (8%) Q216 Core income by business1 Impairment (488) (393) (24%) – Operating expenses (3,425) (3,557) 4% – Litigation and conduct (447) (927) 52% Total
Slide 9: Core: Underlying Return on Tangible Equity of 11.0%
Core: Underlying Return on Tangible Equity of 11.0% Business performance excluding notable items Profit/(loss) before tax (£m) Jun-16 Jun-15 % change Three months ended (£m) Jun-16 Jun-15 % change – Barclays UK 625 668 (6%) Income 5,409 5,441 (1%) – Barclays Corporate & International 1,262 1,374 (8%
Slide 10: Generating a consistently strong Core RoTE on an increasing tangible equity base
Generating a consistently strong Core RoTE on an increasing tangible equity base Core return on average tangible equity (excluding notable items) 10.7% 13.4% 14.0% 9.8% 11.2% 11.3% 10.7% 11.0% Barclays UK 18.4% Barclays Corporate & International 11.9% 7.1% 6.3% – Corporate & Investment Bank 9.5% – C
Slide 11: Barclays UK: Return on Tangible Equity of 18.4%
Barclays UK: Return on Tangible Equity of 18.4% Business performance excluding notable items Q216 Performance metrics Three months ended (£m) Jun-16 Jun-15 % change • Robust RoTE of 18.4% as PBT declined slightly to £625m • Income was broadly in line at £1.8bn with NIM of 3.56% Income 1,792 1,804 (1
Slide 12: Barclays UK: Digital is Barclays' biggest branch
Barclays UK: Digital is Barclays’ biggest branch Personal Banking Q216 2015 2014 2013 Digitally active customers 5.3m 6.3m 6.9m 7.2m Barclays Mobile Banking (BMB) customers 2.3m 3.7m 4.8m 5.2m Payments and transfers (monthly) £13.3bn £16.1bn £19.0bn £23.0bn Unsecured lending completed digitally end-
Slide 13: Barclays Corporate & International: RoTE of 11.9%
Barclays Corporate & International: RoTE of 11.9% Business performance excluding notable items Q216 Performance metrics Three months ended (£m) Jun-16 Jun-15 % change • RoTE of 11.9% demonstrated diversification benefit from consumer and wholesale banking mix – Corporate & Investment Bank 2,611 2,77
Slide 14: Corporate & Investment Bank: RoTE of 9.5%
Corporate & Investment Bank: RoTE of 9.5% Business performance excluding notable items Q216 Performance metrics Three months ended (£m) Jun-16 Jun-15 % change • Resilient performance in challenging conditions generated RoTE of 9.5% • Income was 1% higher than Q116 led by a 29% increase in Banking fe
Slide 15: Consumer, Cards & Payments: RoTE of 26.3%
Consumer, Cards & Payments: RoTE of 26.3% Business performance excluding notable items Q216 Performance metrics Three months ended (£m) Jun-16 Jun-15 % change • PBT increased 41% to £353m, generating RoTE of 26.3% Income 964 836 15% • Continued growth in Barclaycard US, Germany and Merchant Impairme
Slide 16: Non-Core: Continued good rundown momentum
Non-Core: Continued good rundown momentum Business performance excluding notable items Q216 Performance metrics Three months ended (£m) Jun-16 Mar-16 Jun-15 • Negative income of £344m was largely driven by a one-off loss of £182m due to the restructuring of the ESHLA Lender Option Borrower – Busines
Slide 17: Priority is to close Non-Core in 2017
Priority is to close Non-Core in 2017 • Continued good execution of the Non-Core rundown while preserving capital − RWA reduction of £4bn in Q216 − Strong pipeline of business disposals and confidence in derivatives rundown • Priority remains to close Non-Core with c.£20bn of RWAs in 2017 with minim
Slide 18: New Non-Core cost guidance for 2017
New Non-Core cost guidance for 2017 Costs (£m) Cost guidance • Non-Core top-up on 1 March added c.£600m of £1bn additional cost annualised costs associated with 1 March top-up − Majority expected to be removed in 2016 New 2017 • Additional c.£400m one-time restructuring cost cost guidance: for 2016
Slide 19: Non-Core income guidance
Non-Core income guidance Income (£m) Income guidance • Income from Non-Core top-up on 1 March FY16 FY14 FY15 H116 FY16 FY17 FY18 expected to be eroded by end-2016 as business FY14 FY15 H116 Guidance FY17 FY18 Guidance sales complete • Guiding to negative income run-rate of £800m to Non-Core closed B
Slide 20: Prudent and well managed risk appetite
Prudent and well managed risk appetite Bank of England stress tests – CET1 ratio drawdown1 (bps) Evidence of conservative risk profile 2014 • Maintained a consistently prudent risk appetite into and BoE Stress Test assumptions 2014 since the 2008 financial crisis (peak stress) 480 − Remain conservat
Slide 21: Asset quality trends remain favourable
Asset quality trends remain favourable Impairment charge and CRLs tracking downwards… £m 5.1% • Impairment charges have consistently 6,000 0.06 5,000 4.4% 0.05 CRL as % of 3.2% Gross L&A 4,000 2.8% 0.04 declined since 2010 3,000 5,672 2.0% 1.8% 0.03 1.4% P&L charge 2,000 3,802 3,340 3,071 0.02 • Cre
Slide 22: Continued focus on cost discipline and efficiency
Continued focus on cost discipline and efficiency Group cost progression and Core guidance (£bn) Total operating expenses, excluding conduct and litigation, and other notable items Group Core Non-Core <60% Africa Banking treated as Group cost: income a discontinued operation2 ratio in a reasonable t
Slide 23: Maintaining a robust liquidity position and well diversified funding profile
Maintaining a robust liquidity position and well diversified funding profile High quality liquidity pool (excluding BAGL) (£bn) Maintained a robust liquidity position LCR1 • Group liquidity pool at £149bn, an increase on Q1, providing a surplus to 124% 133% 129% 124% internal and external minimum re
Slide 24: Strong CET1 ratio progression
Strong CET1 ratio progression Fully Loaded CET1 ratio1 Organic capital accretion 250bps >100bps BAGL selldown and Non-Core disposals2 Conduct & litigation 11.4% 11.6% 10.3% 9.1% Dec-13 Dec-14 Dec-15 Jun-16 • CET1 ratio of 11.6% at 30 June, an improvement of 250bps since December 2013 despite absorbi
Slide 25: Confidence on capital trajectory allows flexibility to pursue RoTE accretive actions
Confidence on capital trajectory allows flexibility to pursue RoTE accretive actions Current expected capital requirements1 Future CET1 ratio target Current Management buffer 1-1.5% • Managing capital position for 100-150bps expected regulatory Stress buffer2 management buffer above future regulator
Slide 26: Conclusion
Conclusion Core business delivering double digit returns on a materially higher equity base Non-Core closure on track – provided clarity on 2017 costs Continued focus on costs in Core and Non-Core, progressing towards Group cost: income ratio target of <60% Resilience from very high asset quality ac
Slide 27: Barclays PLC Q2 2016 Financial Results
Barclays PLC Q2 2016 Financial Results 29 July 2016
Slide 28: Appendices
Appendices
Slide 29: Transatlantic Consumer, Corporate & Investment Bank
Transatlantic Consumer, Corporate & Investment Bank Africa Barclays UK Barclays Corporate & International Non-Core Banking UK consumer and business bank Diversified transatlantic differentiated by scale and digital innovation wholesale and consumer bank Personal Banking Expect to close Aim to achiev
Slide 30: Statutory Group financials – H116
Statutory Group financials – H116 Six months ended (£m) Jun-16 Jun-15 % change Core – Six months ended (£m) Jun-16 Jun-15 % change Income 11,013 12,111 (9%) Income 11,599 11,646 - Impairment (931) (779) (20%) Impairment (876) (718) (22%) – Operating expenses (7,172) (6,624) (8%) – Operating expenses
Slide 31: Group financials excluding notable items – Q216
Group financials excluding notable items – Q216 Performance excluding notable items Diversified Consumer, Corporate & Investment Bank Three months ended (£m) Jun-16 Jun-15 % change Q216 Core income by business1 excluding notable items Income 5,065 5,683 (11%) Impairment (488) (393) (24%) – Operating
Slide 32: Core income and margins – Q216
Core income and margins – Q216 Income1 (£m) – Three months ended Jun-16 Jun-15 % change • Barclays UK net interest income remained broadly stable at £1.5bn − NIM also relatively stable in recent quarters, as deposit repricing – Barclays UK 1,476 1,479 - initiatives offset continued mortgage margin p
Slide 33: Business level analysis of Barclays UK and Barclays Corporate & International
Business level analysis of Barclays UK and Barclays Corporate & International Barclays UK – Q216 Barclays Corporate & International – Q216 Income by business (£m) 1 Impairment by business (£m) Income by business (£m) 1 7 390 44 939 939 463 964 169 1,287 Loans and advances to customers by business (£
Slide 34: Head Office and Africa Banking summary financials
Head Office and Africa Banking summary financials Business performance excluding notable items Africa Banking – Three months ended (£m) Jun-16 Jun-15 % change Income 879 870 1% Head Office –Three months ended (£m) Jun-16 Jun-15 Impairment (133) (103) (29%) Income 42 30 Total operating expenses (543)
Slide 35: Continued Non-Core rundown momentum
Continued Non-Core rundown momentum RWAs by type (£bn) Leverage exposure by type (£bn) (47%) (58%) 316 89 23 50 22 54 47 127 149 33 11 12 134 10 11 25 22 22 19 c.20 70 24 116 66 11 8 9 10 10 42 35 Dec-14 Dec-15 Jun-16 2017 Dec-14 Dec-15 Jun-16 Guidance Operational risk 1 Securities & loans Derivativ
Slide 36: Stable CRLs in proportion to gross L&A reflecting prudent approach to credit risk
Stable CRLs in proportion to gross L&A reflecting Barclays prudent approach to credit risk management Strong coverage of Group Credit Risk Loans (CRLs) and Retail CRL % of Gross L&A stable Loan Loss Rate (LLR) Dec-15 Jun-16 CRLs % of Gross L&A Loan loss rate 66% 63% CRL coverage 8.1% 7.4% 1.8% 1.4%
Slide 37: UK Mortgages – High quality, conservative portfolio
UK Mortgages – High quality, conservative portfolio BoE Stress Tests UK Mortgage Cumulative Impairment Charge Rates1 Key Messages 2014 2015 • High quality, conservative £127bn mortgage portfolio 4% − Average LTV3 of 47% 3% − >90 day arrears of 0.2% − UK mortgage LLR remains negligible 2% • Consisten
Slide 38: UK and US Cards – Seasoned, diversified and resilient portfolios
UK and US Cards – Seasoned, diversified and resilient portfolios Breakdown by Delinquency Bucket – UK Key Messages 30% Early Delinquency Late Delinquency • History of strong and improving delinquency trends across both portfolios • Portfolios have been built to be resilient; credit criteria is regul
Slide 39: UK Commercial Real Estate – Stable and limited exposure
UK Commercial Real Estate – Stable and limited exposure BoE Stress Tests UK CRE Cumulative Impairment Charge Rates1 Key messages 18% 2014 2015 • Stable and limited exposure to UK Commercial Real Estate with strict adherence to conservative underwriting criteria over time 15% − Total UK CRE exposure
Slide 40: RoTE by business
RoTE by business Return on average tangible equity (%)1 Q215 Q216 26.3% 23.4% 19.9% 18.4% 14.0% 12.6% 11.0% 9.5% 9.1% 2.5% Barclays UK Corporate & Investment Bank Consumer, Cards & Payments Core 2 Group Average allocated tangible equity (£bn) 47.2 48.3 40.4 35.9 21.7 21.3 9.4 9.0 3.0 3.5 Barclays UK
Slide 41: Tangible Net Asset Value
Tangible Net Asset Value TNAV (pence per share) – Mar-16 to Jun-16 Q216 highlights 3 TNAV per share increased 3p in the quarter to 289p 5 • £0.7bn profits generated contributed 3p per share 2 • Payment of the FY15 dividend of 3.5p reduced 9 3 3 289 TNAV by 3p 286 2 • Redemption of preference shares
Slide 42: Movement in Common Equity Tier 1 capital
Movement in Common Equity Tier 1 capital 0.2 0.5 42.4 0.2 0.8 0.5 40.9 2 Mar-16 Profit for Dividends Other Net impact of Minority interests Jun 16 the period 1 paid and qualifying retirement foreseen reserves benefits Q216 CET1 capital movement (£bn) – positives Q216 CET1 capital movement (£bn) – ne
Slide 43: Capital allocation balanced and diversified across the Group
Capital allocation balanced and diversified across the Group Group RWAs (£bn) by division – Jun-16 Group RWAs (£bn) by product – Jun-16 £366bn £366bn 47 Non-Core: 13% Operational Risk2 431 Head Office: 12% Non-Core Includes Head Office1 Africa Banking RWAs 67 Barclays UK: 18% WEBB3 Mortgages Persona
Slide 44: Continued strong leverage position
Continued strong leverage position Leverage exposure1 (£bn) Highlights L&A and other assets2 Derivatives Q216 SFTs Undrawn commitments • Decrease in leverage ratio to 4.2% primarily driven by an increase in Leverage ratio1 leverage exposure, offsetting the £1.6bn increase in Tier 1 capital 4.5% • Th
Slide 45: Level 3 assets
Level 3 assets As at Dec-15 As at Jun-16 140 86 4,947 1,022 4,822 458 11,013 5,418 Total: 17,758 Total: £37bn 6,771 £31bn 7,330 7,424 Financial assets designated at fair value Derivative financial instruments Available for sale investments Assets included in disposal groups classified as held for sa
Slide 46: Fixed Income Investor Call Presentation
Fixed Income Investor Call Presentation
Slide 47: Strong CET1 and leverage ratio progression
Strong CET1and leverage ratio progression Fully Loaded CET1 ratio1 442 402 • CET1 ratio of 11.6% as at 30 June 2016, an improvement of 358 363 366 c.250bps since December 2013 despite absorbing conduct and RWAs litigation charges of c.160bps (£bn) Organic capital accretion • The 30bps Q2 increase wa
Slide 48: Managing evolving future minimum CET1 levels
Managing evolving future minimum CET1 levels Illustrative evolution of minimum CET1 requirements and buffers1 Minimum CRD IV CET1 requirement Mandatory distribution restrictions hurdle3 CET1 minimum levels and internal management buffer 2016 Pillar 2A CET1 requirement2 BoE stress test systemic refer
Slide 49: Managing capital position for regulatory minimum levels and stress testing
Managing capital position for regulatory minimum levels and stress testing Barclays’ expected systemic reference points for 2016 BoE stress test1,4 Minimum CRD IV CET1 requirement Mandatory distribution restrictions hurdle3 Future CET1 ratio1 = 2016 Pillar 2A CET1 requirement2 BoE stress test system
Slide 50: Evolving CRD IV capital structure transitioning to HoldCo over time
Evolving CRD IV capital structure transitioning to HoldCo over time Illustrative evolution of CRD IV capital structure1 Well managed and balanced total capital structure 18.7% • Transitional and fully-loaded total capital ratios increased by 50 and 40bps Total capital ratio ≥17% respectively to 18.7
Slide 51: Illustrative MREL/TLAC requirements
Illustrative MREL/TLAC requirements Illustrative MREL/TLAC needs to meet future requirements1 c.£6bn p.a. / • Proactive refinancing from HoldCo and liability management exercises executed to date position us well for future requirements £33bn in aggregate • While our full MREL requirement might appl
Slide 52: TLAC and MREL requirement expectations
TLAC and MREL requirement expectations Pillar 1 TLAC minimum requirements and illustrative MREL expectations1 Pillar 1 requirements2 2016 Pillar 2A requirement3 Assumed CRD IV combined buffer requirement BoE Recapitalisation amount TLAC MREL1 H116 PRA c.4.5% c.4.5% Transitional total c.4.5% Recapita
Slide 53: Continued progress on transition to HoldCo capital and funding model
Continued progress on transition to HoldCo capital and funding model PRA transitional regulatory capital Outstanding term vanilla senior unsecured debt (£bn) Dec-15 Jun-16 (£bn) Dec-15 Jun-16 PRA transitional Common Equity Tier 1 capital 40.7 42.4 Barclays PLC (HoldCo) term vanilla senior unsecured
Slide 54: Barclays PLC parent company accounts
Barclays PLC parent company accounts Barclays PLC parent company balance sheet Key notes Balance sheet • Barclays PLC is the holding company of the Barclays Group As at As at • The HoldCo’s primary assets currently are its investments in, and loans and 31 Dec-15 30 Jun-16 advances made to, its sole
Slide 55: Progress on Group legal structure
Progress on Group legal structure Barclays PLC1 Barclays UK Likely to be Barclays Corporate & International constructs Divisional transferred under UK consumer and business bank Barclays PLC Diversified transatlantic wholesale differentiated by scale and digital innovation2 in the future and consume
Slide 56: Ratings a key strategic priority
Ratings a key strategic priority Senior Long Term/ • Barclays is committed to maintaining strong investment Standard & Poor’s Moody's Fitch Short Term ratings grade ratings • Pre-referendum, all 3 rating agencies affirmed Barclays ratings during H116 with stable outlooks Barclays PLC BBB Baa3 A Rati
Slide 57: Disclaimer
Disclaimer Important Notice The information, statements and opinions contained in this presentation do not constitute a public offer under any applicable legislation, an offer to sell or solicitation of any offer to buy any securities or financial instruments, or any advice or recommendation with re