Barclays Plc · LSE:BARC
Barclays — Q3 2017 Earnings Presentation
45 slides from Barclays's earnings presentation, Oct 26, 2017
Slide 1: Barclays PLC Q3 2017 Financial Results
Barclays PLC Q3 2017 Financial Results 26 October 2017
Slide 2: Jes Staley, Group Chief Executive Officer
Jes Staley Barclays Group Chief Executive Officer
Slide 3: Tushar Morzaria, Group Finance Director
Tushar Morzaria Barclays Group Finance Director
Slide 4: Material & other items – Q317 and Q316
Material & other items – Q317 and Q316 Q317 Q316 Barclays Barclays Head Barclays Barclays Head Material items (£m) Group Group UK International Office UK International Office Income Own credit1 - - - - - - (264) (264) Litigation and conduct Charges for PPI - - - - (600) - - (600) Total - - - - (600)
Slide 5: Group Return on Tangible Equity of 5.1%
Group Return on Tangible Equity of 5.1% Three months ended (£m) Sep-17 Sep-16 % change Q317 performance metrics Income 5,173 5,446 (5%) • Income declined 5% to £5.2bn primarily driven by a 14% decline in Impairment (709) (789) 10% Barclays International, given weak market conditions – Operating expe
Slide 6: Barclays UK
Barclays UK Business performance Q317 performance metrics Three months ended (£m) Sep-17 Sep-16 % change • RoTE was 18.4% while PBT, excluding prior year PPI charges, was broadly in line – Personal Banking 926 970 (5%) • Income declined as continued deposit growth, repricing actions and increased –
Slide 7: Barclays International
Barclays International Business performance Q317 performance metrics Three months ended (£m) Sep-17 Sep-16 % change • Income decreased by 14% to £3.3bn driven by the CIB, which was impacted by a weak market environment – Corporate & Investment Bank (CIB) 2,280 2,795 (18%) • Impairment was impacted b
Slide 8: Barclays International: Corporate & Investment Bank
Barclays International: Corporate & Investment Bank Business performance Q317 performance metrics Three months ended (£m) Sep-17 Sep-16 % change • Income reduced 18% to £2.3bn driven by low market volatility against a record Q316 comparator2 Markets 977 1,408 (31%) • Costs decreased 11% to £1.7bn re
Slide 9: Barclays International: Consumer, Cards & Payments
Barclays International: Consumer, Cards & Payments Business performance Q317 performance metrics Three months ended (£m) Sep-17 Sep-16 % change • Income decreased by 2% reflecting repositioning of the US cards portfolio towards a lower risk mix Income 1,035 1,056 (2%) • Impairment was impacted by a
Slide 10: Head Office
Head Office Business performance Q317 performance metrics Head Office – Three months ended (£m) Sep-17 Sep-16 • Loss before tax decreased to £206m • Income increased by £195m due to the impact of the early adoption of the Income 6 (189) own credit provisions of IFRS 9, with own credit now recognised
Slide 11: Group 2017 cost guidance
Group 2017 cost guidance Group operating expenses1 (£bn) Quarterly Group FY17 operating expenses2 (£bn) Expect uptick in Q4 due to: FY17 Group Structural reform cost guidance programme spend £14.2-14.3bn Investment spend Bank Levy 19.5 >£410 3.6 15.0 3.4 3.5-3.63 3.3 FY13 FY16 FY17 Q117 Q217 Q317 Q4
Slide 12: Within our end-state CET1 ratio target range
Within our end-state CET1 ratio target range1 CET1 ratio progression in Q317 Pro-forma for BAGL regulatory deconsolidation 13.3% 23bps 8bps • CET1 ratio remained stable vs. Q217 at 13.1% 8bps • 23bps accretion from profits were offset by c.7bps − (8)bps due to dividends paid and foreseen 13.1% 13.1%
Slide 13: IFRS 9 guidance
IFRS 9 guidance Estimated IFRS 9 impact1 (based on 30 September 2017 numbers) Commentary / Assumptions TNAV2 CET1 • TNAV reduction estimated at 10-12p per share, based on increase in (£bn) (£bn) impairment stock, net of tax relief – effective 1 January 2018 Increase in impairment stock • Estimated C
Slide 14: Interest rate sensitivity
Interest rate sensitivity Illustrative sensitivity of Group NII to a 100bps parallel upward shift in interest rates1 Change in NII (£m) Commentary / Assumptions Key drivers Year 1 Year 2 Year 3 • The majority of the year 1 impact is driven by the respective higher and lower assumptions around pass-t
Slide 15: Jes Staley
Jes Staley Barclays Group Chief Executive Officer
Slide 16: Transatlantic consumer and wholesale bank
Transatlantic consumer and wholesale bank Barclays UK Barclays International UK consumer and business bank Diversified wholesale differentiated by scale and digital innovation and consumer bank Group Service Company Enabling world-class services for our customers and clients while driving efficiency
Slide 17: Path to Group RoTE of >10% in 2020
Path to Group RoTE of >10% in 2020 Group RoTE targets1 Improved cost efficiency Creating capacity for investment, while delivering >10% cost targets and cost: income ratio of below 60% >9% 7.1%2 Redeployment of capital At capital end-state level, now dynamically redeploying capital to improve return
Slide 18: Cost efficiencies and investment underpinning RoTE targets
Cost efficiencies and investment underpinning RoTE targets Cost savings by 2019 creating… …capacity for investment… …underpinning 2019 and 2020 RoTE targets Group operating costs1 £14.2-14.3bn c.£1bn announced at H117 £13.6-13.9bn • Driving structural cost savings • Targeting investment to drive inc
Slide 19: Key Group Service Company efficiency savings initiatives
Meaningful efficiency savings initiatives c.£1bn cost • Costs from Non-Core, structural reform savings programme and compensation deferrals announced changes expected to be eliminated by 2019 at H117 • Transition to the cloud • Reducing applications by 30% and Barclays Technology data centres to 4 g
Slide 20: Reconfiguring the cost base towards driving growth
Reconfiguring the cost base towards driving growth Illustrative evolution of the cost base1 Investment in attractive growth opportunities • Improving mix of spend as restructuring, regulatory change and conduct related costs reduce over time • Creating capacity to focus on more profitable initiative
Slide 21: Consumer businesses – income growth opportunities
Consumer businesses – income growth opportunities Barclays UK Barclaycard US2 CC&P • Significant opportunity with existing 24m customers in the UK • US credit card market projected to grow by 5% CAGR to 2020 • Identify priority customer segments for growth • 9th ranked US issuer by receivables and 7
Slide 22: Wholesale businesses – income growth opportunities
Wholesale businesses – income growth opportunities Integrated Corporate Payments Franchise Banking and Corporate Banking Corporate Payments CIB Corporate Banking CIB Full suite of corporate treasury services products, • Optimise returns on balance sheet lending through including payments and FX real
Slide 23: Markets – income growth opportunities
Markets – income growth opportunities Markets CIB Barclays actions Market • Detailed plans to drive income growth RWA Leverage Products Normalised Technology and services reallocation balance sheet volatility – Redeployment of CIB loan book RWAs to optimise returns – Leverage capacity to be deployed
Slide 24: Group financial targets
Group financial targets Group Return on >9% in 2019 Tangible Equity (RoTE)1 >10% in 2020 Based on: 150-200 bps Group costs1 Targeting CET1 ratio above regulatory £13.6-13.9bn cost: income c.13% minimum level ratio below 60% in 2019 Capital management framework update with FY17 results in February 20
Slide 25: Barclays PLC Q3 2017 Financial Results
Barclays PLC Q3 2017 Financial Results 26 October 2017
Slide 26: Appendix
Appendix
Slide 27: Material & other items – Q117 to Q317
Material & other items – Q117 to Q317 Q317 Q217 Q117 Barclays Barclays Head Barclays Barclays Head Barclays Barclays Head Material items (£m) Group Group Group UK Intl Office UK Intl Office UK Intl Office Discontinued operation – Africa Banking Impairment of Barclays’ holding in BAGL - - - - - - - (
Slide 28: Non-Core: RWA reallocation and guidance from H117
Non-Core: RWA reallocation and guidance from H117 Allocated to Balance sheet – 30 June 17 Non-Core RWAs1 Barclays UK Barclays International2 Head Office Pre reallocation RWAs (£bn) 23 ESHLA 4 3 1 Legacy derivatives 7 7 Italian Mortgages 3 3 Residual businesses/offices 5 1 4 Op Risk/DTA 4 4 Reallocat
Slide 29: Income and margins – Q317
Income and margins – Q317 NII (£m) – Three months ended Sep-17 Sep-16 % change Q317 performance metrics – Barclays UK 1,501 1,569 (4%) • Combined Barclays UK and Barclays international1 NIM decreased 30bps to 361bps – Barclays International1 1,070 1,149 (7%) – Barclays UK NIM declined to 328bps, inc
Slide 30: Barclays UK: Growth in L&A and deposits, NIM in line with guidance
Barclays UK: Growth in L&A and deposits, NIM in line with guidance Income (£m) – Three months ended Sep-17 Sep-16 % change Q317 performance metrics Net interest income (NII) 1,501 1,569 (4%) • NIM decreased 44bps to 328bps including integration of the ESHLA portfolio Net interest margin (NIM) 3.28%
Slide 31: Barclays UK: Significant opportunity with our 24 million customers
Barclays UK: Significant opportunity with our 24 million customers by leveraging digital and data Significant growth in digital banking – year-on-year Leading in digital offerings for Business Banking Barclays UK’s 1st 1st UK bank Mobile 6.4m +20% major banking service to have a digital business Ban
Slide 32: Stable underlying trends reflect prudent approach to credit risk management
Stable underlying trends reflect prudent approach to credit risk management Retail CRL % of Gross L&A Prudent risk management • Remain well-positioned, having maintained a consistently Dec-16 Sep-17 CRL coverage prudent risk appetite since the financial crisis • In US cards, the increasing arrears o
Slide 33: Stable underlying impairment trends in UK cards and US cards
Stable underlying impairment trends in UK cards and active management of US cards portfolio Q317 UK cards balance mix UK cards interest earning lending (IEL), as % of balances1 0% balance transfers 80% 0% balance transfers are c.25% c.25% • c.90% has a duration of <24 months 70% Barclaycard UK • Maj
Slide 34: Tangible Net Asset Value movements
Tangible Net Asset Value movements TNAV (pence per share) – Jun-17 to Sep-17 Q317 highlights • TNAV decreased to 281p as at Sep-17 • 3p generated from profit after tax was more than offset by - 4p decrease due to movements in the currency translation reserve as GBP strengthened against USD 1 - 2p de
Slide 35: Strong CET1 and leverage ratio position
Strong CET1 and leverage ratio position Fully loaded CET1 ratio • CET1 ratio remained stable in the quarter at 13.1% largely driven by: 400bps – 23bps from profit generation, more than offset by – (8)bps increase in the excess of expected loss over impairment related to business and corporate bankin
Slide 36: Managing evolving future minimum CET1 levels
Managing evolving future minimum CET1 levels Illustrative evolution of minimum CET1 requirements and buffers Minimum CRD IV CET1 requirement Countercyclical buffer (CCyB) • End-state CET1 ratio expectation of around 13%: 2017 Pillar 2A CET1 requirement CRDIV Mandatory distribution restrictions (MDR)
Slide 37: Managing capital position above mandatory distribution restrictions
Managing capital position above mandatory distribution restrictions and stress test hurdles Barclays’ expected MDA thresholds and systemic reference points for 2017 BoE stress test Minimum CRD IV CET1 requirement Distribution restrictions and management 2017 Pillar 2A CET1 requirement • Maintaining
Slide 38: 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 structure Well managed and balanced total capital structure • Transitional total capital ratio increased to 21.3% (Jun-17: 20.7%), while 21.3% the fully loaded total capital ratio increased t
Slide 39: Progressing well on MREL issuance
Progressing well on MREL issuance HoldCo MREL position and requirement including requisite buffers Well advanced on HoldCo issuance plan 28.9% Issuance plan – currently expect average issuance of c.£8bn p.a. from 20182,3 CCyB: 0.5% • We have now issued £11.0bn4 equivalent of MREL year-to-date, and C
Slide 40: High level of liquidity and conservative funding profile
High level of liquidity and conservative funding profile LCR continues to remain in prudential surplus Conservative and stable funding profile (£bn – excludes BAGL) Customer deposits Sub. Debt1 Secured term funding 157% Short-term debt and other deposits Unsecured term funding 149% £522bn £508bn £49
Slide 41: Simplifying our business divisions for structural reform
Simplifying our business divisions for structural reform Barclays PLC Barclays PLC1 Barclays UK Barclays International Head Office1 UK consumer and business bank differentiated Diversified wholesale Incorporates by scale and digital innovation and consumer bank re-integrated Non-Core assets Division
Slide 42: Progress on Group legal structure
Progress on Group legal structure Barclays PLC Barclays International Barclays UK constructs and Head Office1 Divisional UK consumer and business bank Diversified wholesale differentiated by scale and digital innovation and consumer bank Group Service Company2 Future legal entity constructs • Provid
Slide 43: Structural reform plan remains on track
Structural reform plan remains on track achieving critical milestones as planned H2 2017 Group Service Company setup H1 2018 Legal entity separation Milestones completed Milestones completed Legal entity repositioned and rated Barclays UK and Barclays International established as operating divis
Slide 44: Ratings are a key strategic priority
Ratings are a key strategic priority Current Senior Long and Future ratings expectations of Barclays UK and Fitch Standard & Poor’s Moody's Short Term ratings Barclays Bank PLC • Rating agencies have made various statements on their expectation of ratings post ring-fencing − Fitch has assigned an ex
Slide 45: 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