Barclays Plc · LSE:BARC
Barclays — Q3 2021 Earnings Presentation
56 slides from Barclays's earnings presentation, Oct 20, 2021
Slide 1: Barclays PLC Q3 2021 Results
Barclays PLC Q3 2021 Results 21 October 2021
Slide 2: Jes Staley, Barclays Group Chief Executive
Jes Staley Barclays Group Chief Executive
Slide 3: Record Q321 YTD profit before tax driven by strong CIB performance and net impairment release
Record Q321 YTD profit before tax driven by strong CIB performance and net impairment release Diversified • Record Group PBT of £6.9bn, RoTE of 14.9% and EPS of 30.8p as Income strategy delivering economies recover from pandemic driven lockdowns £16.8bn Strong CIB • Best Q3 YTD Investment Banking fe
Slide 4: Diversified model underpins resilient performance through cycles
Diversified model underpins resilient performance through cycles Diversified by income type Diversified by customer and client Diversified by geography 6% 16% 14% 32% 35% Q321 YTD Q321 YTD H121 Group income Group income 52% Group income by type by customer1 by geography2 65% 22% 32% 11% 10% 5% 35% N
Slide 5: Environmental and Social stewardship central to our strategy
Environmental and Social stewardship central to our strategy • Plan to extend BlueTrackTM to other sectors, beginning with Cement and Metals (aluminium and steel) • At the centre of cross-industry initiatives for driving the transition to net zero Continuing to execute our - Net Zero Banking Allianc
Slide 6: Strong Q321 YTD profitability, increased capital distributions to shareholders
Strong Q321 YTD profitability, increased capital distributions to shareholders Q321 YTD metrics Group targets over the medium term Returns Returns Cost efficiency Group RoTE 14.9% Group RoTE >10% Cost efficiency Expect to deliver a RoTE Cost: income ratio <60% Cost: income ratio 64% above 10% in 202
Slide 7: Tushar Morzaria, Barclays Group Finance Director
Tushar Morzaria Barclays Group Finance Director
Slide 8: Q321 YTD Group highlights
Q321 YTD Group highlights • Income of £16.8bn, in line with prior year, despite a 9% depreciation of average USD against GBP Income Costs − BUK income increased 2% YoY, CC&P income reduced 6% YoY, and CIB income reduced 1% compared to a strong £16.8bn £10.7bn prior year period Q320 YTD: Q320 YTD: £1
Slide 9: Q321 Group highlights
Q321 Group highlights • Income of £5.5bn, up 5% YoY despite a 7% depreciation of average USD against GBP Income Costs − Improved income from BUK and CIB, partially offset by lower CC&P income £5.5bn £3.5bn • Costs flat YoY reflecting efficiency savings and favourable FX movements, partially offset b
Slide 10: Income: ongoing benefits from business diversification
Income: ongoing benefits from business diversification, with higher BUK and CIB income YoY more than offsetting lower CC&P income Group income +5% YoY (£m) 5,900 5,465 • Improved mortgage margins and increased balances 5,415 5,204 Barclays UK • Non-recurrence of prior year COVID-19 customer 4,941 1,
Slide 11: Unsecured lending subdued, mortgage growth continues, well positioned for rising rates
While unsecured lending remains subdued, mortgage balance growth continues and the Group is well positioned for rising rates Mortgages Group NII interest rate sensitivity 1.5 BUK: Mortgage 146.4 148.3 155.2 157.4 143.3 balances (£bn) 1.0 Dec-19 Sep-20 Dec-20 Jun-21 Sep-21 5Y GBP SONIA swap rate (%)
Slide 12: Costs: Q321 YTD increase driven by higher performance costs and structural cost actions
Costs: Q321 YTD increase driven by higher performance costs and structural cost actions, with flat base costs (£m) Q321 total costs flat YoY (£m) Q321 YTD total costs up 6% YoY (£m) 3,826 3,578 3,653 3,467 3,478 299 1,039 1,097 1,120 1,130 1,051 365 285 572 607 564 536 541 Q3 YTD 10,060 base 10,709
Slide 13: Evaluating planned structural cost actions for Q421
Evaluating planned structural cost actions for Q421 Structural cost actions (£m) • Q321 YTD structural cost actions of £392m, including the £266m real estate charge taken in Q221 to vacate a London office building by the end of 2022 − Q221 real estate charge expected to result in annual cost saving
Slide 14: Cost guidance unchanged, FY21 base costs c.£12bn
Cost guidance unchanged, with FY21 base costs expected to be broadly in line with FY20 at c.£12bn FY20 to FY21 costs outlook (£m) 13,886 Structural cost actions Key drivers of base costs2 368 Performance costs 1,504 • Business demand-led • Strategic investments • Technology • FX benefit (assuming gr
Slide 15: Impairment: Q321 charge of £120m
Impairment: Q321 charge of £120m, reflecting lower unsecured lending balances and a net release in the CIB Impairment (£m) Drivers of impairment charge Impairment charge of £137m, down 41% YoY reflecting an improved macroeconomic outlook, and lower unsecured lending BUK balances and delinquencies −
Slide 16: Retaining management adjustment due to economic uncertainty
Retaining management adjustment due to economic uncertainty Baseline macroeconomic variables (MEVs) MEVs used in Q221 results Q321 MEVs Change in MEVs • Q321 baseline UK and US MEVs have improved from Q221, including unemployment forecasts in both the 2021 2022 2023 2021 2022 2023 2021 2022 2023 UK
Slide 17: Q321 Barclays UK
Q321 Barclays UK RoTE of 12.7%, with FY21 NIM expected to be c.250bps • Income increased 6% YoY primarily driven by Q320 Q420 Q121 Q221 Q321 improved mortgage margins and increased balances, 1,550 1,626 1,576 1,623 1,638 Income Costs and non-recurrence of prior year COVID-19 customer Total 270 309 2
Slide 18: Q321 Barclays International
Q321 Barclays International RoTE of 15.9% reflecting improved profitability including the benefit from a net impairment release • Income increased 4% YoY Income Costs − Balanced income profile across businesses and 21% Global £3.9bn £2.3bn geographies Markets Q320: £3.8bn Q320: £2.3bn • 7% depreciat
Slide 19: Q321 Barclays International: Corporate & Investment Bank
Q321 Barclays International: Corporate & Investment Bank RoTE of 16.6%, with improved profitability driven by strong income performance and a net impairment release • CIB income increased 8% YoY including the impact of 7% Q320 Q321 Q320 Q321 depreciation of average USD vs. GBP GBP basis USD basis4 I
Slide 20: Q321 Barclays International: Consumer, Cards & Payments
Q321 Barclays International: Consumer, Cards & Payments RoTE of 10.5% incorporating investment for growth in the US cards portfolio • Income decreased 8% YoY reflecting: Q320 Q321 Income Costs − Unified Payments income increased 24% YoY driven 876 -8% 808 £0.8bn £0.6bn by higher turnover2 following
Slide 21: Q321 Head Office
Q321 Head Office Q320 Q420 Q121 Q221 Q321 • Q321 negative income of £110m including: − Hedge accounting losses (75) (27) (110) Income (127) (171) − Funding costs on legacy capital (£m) instruments − Negative treasury items (92) (80) (114) − Partially offset by Absa Group Ltd Costs (264) dividend (£m
Slide 22: CET1 ratio increased to 15.4% driven by profits
CET1 ratio increased to 15.4% driven by profits CET1 ratio was 420bps above the MDA hurdle of 11.2% as at Sep-21 QoQ CET1 ratio1 movements 16bps 8bps 10bps 11bps 54bps 15.5% 15.4% 15.3% 15.3% 15.4% 15.1% 15.1% Jun-21 Profit after tax Share Dividend Pension contributions Other movements Sep-21 buybac
Slide 23: CET1 ratio target range continues to be 13-14%
CET1 ratio target range continues to be 13-14%, but expect to remain above that in 2021 CET1 ratio flightpath c.40bps c.15bps c.20bps 13-14% 15.4% c.14.7% 1 2 Sep-21 Reversal of software Amortisation of SA-CCR Rebased CET1 ratio Organic Other headwinds Capital CET1 target range intangibles benefit I
Slide 24: High quality and robust liquidity and funding positions
High quality and robust liquidity and funding positions Liquidity coverage ratio (LCR) Loan: deposit ratio2 Loans3 (£bn) Deposits3 (£bn) LDR 82% 160% 162% 162% 161% 71% 70% 69% Minimum requirement: 100% 481 501 510 31-Dec-19 31-Dec-20 30-Jun-21 30-Sep-21 416 339 343 349 353 Liquidity 211 266 291 293
Slide 25: Outlook: Barclays continues to benefit from diversification
Outlook: Barclays continues to benefit from diversification Returns • Expect to deliver a RoTE above 10% in 2021 Impairment • The impairment run rate is expected to remain below historical levels in coming quarters • Excluding structural cost actions and performance costs, FY21 costs are expected to
Slide 26: Appendix
Appendix
Slide 27: Barclays investment proposition
Barclays investment proposition Our scale, geographic reach and diversification make us a universal bank 1 2 3 4 Resilience through Strong balance sheet Growth opportunities Sustainable impact diversification supporting returns We are a British universal bank Our diversified model offers us We under
Slide 28: Environmental: continuing to execute on our strategy
Environmental: continuing to execute on our strategy Empowering clients across the Engaging in industry-wide initiatives Managing our operational footprint corporate spectrum on their and driving thought leadership transition to a low carbon economy • In 2020, we achieved carbon neutrality for our •
Slide 29: Social: initiatives supporting our colleagues and our communities
Social: initiatives supporting our colleagues and our communities Supporting our colleagues Investing in our communities Promoting Diversity & Inclusion Support through the COVID-19 pandemic Support through the COVID-19 pandemic Committed to the Race at Work agenda • Comprehensive support for collea
Slide 30: Governance: a purpose-driven organisation
Governance: a purpose-driven organisation Our Purpose, Values and Mindset are How climate is embedded in our Cyber and Digital Trust central to how we run our business governance structure Reason Barclays exists; the societal role we fill Governance Structure Keeping Barclays safe secure and always
Slide 31: Barclays continues to support client activity in capital markets
Barclays continues to support client activity in capital markets Global equity market capitalisation1 and bonds Q321 YTD Global Markets and Investment Banking fee outstanding2 has increased 53% since 2018 income has increased 33% since 2019 +53% £8.2bn £8.1bn +33% $188tn Global vs. 2018 vs. Q319 $17
Slide 32: Ongoing consumer spending recovery during Q321
Ongoing consumer spending recovery during Q321 driven by lockdown easing while mortgage activity remained robust Cards spending Merchant acquiring turnover Mortgage applications Change in monthly spend vs. 20191 (%) Change in monthly turnover vs. 20192 (%) Mortgage application values (£bn) 15% 26% 1
Slide 33: Payments income growth opportunity of c.£900m over three years
Payments income growth opportunity of c.£900m over three years CAGR income Q320 YTD Q321 YTD growth ambition FY20-FY23 (£m) Total payments 1,208 1,412 +17% (+c.£900m) FY20: £1.7bn c.20% Unified Payments1 3082 332 +8% (+c.£300m) Q321 YTD FY20: £406m2 £15.4bn Group £1.4bn income Barclays Cubed: Next-
Slide 34: Structural hedge
Structural hedge Structural hedge program update Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 • The Group’s combined gross equity and product structural hedge contribution was £353m in Q321 (Q221: £341m) Hedge notional • The combined structural hedge notional as at Sep-21 was £224bn, an (
Slide 35: Interest rate sensitivity
Interest rate sensitivity Illustrative sensitivity of Group NII to a parallel shift in interest rate curves1 • This analysis assumes an instantaneous parallel shift in interest rate curves Impact of parallel shifts Year 1 Year 2 Year 3 • c.60% of the Group income benefit from the illustrative 25bps
Slide 36: Sep-21 coverage ratios in unsecured and wholesale loans remain above pre-pandemic levels
Sep-21 coverage ratios in unsecured and wholesale loans remain above pre-pandemic levels given ongoing uncertainty Credit cards, unsecured loans and other retail lending Wholesale loans Gross exposure (£bn) Impairment allowance (£bn) Coverage ratio Gross exposure (£bn) Impairment allowance (£bn) Cov
Slide 37: Sep-21 UK and US cards coverage ratios above pre-pandemic levels
Sep-21 UK and US cards coverage ratios still meaningfully above pre-pandemic levels UK cards US cards Gross exposure (£bn) Impairment allowance (£bn) Coverage ratio Gross exposure (£bn) Impairment allowance (£bn) Coverage ratio 16.5 10.5% 14.2% 14.8% 22.5 9.1% 12.4% 11.5% 1.7 0.8 1.5 1.5 1.4 2.8 17.
Slide 38: Retail portfolios in the UK and US continue to be appropriately positioned
Retail portfolios in the UK and US continue to be appropriately positioned 155.2 • Arrears levels at multi-year lows 148.3 145.1 • Mortgage balance growth predominantly achieved in lower UK mortgage 68.4% 67.6% 68.7% UK LTV segments balance mortgages • 51.3% average (balance weighted) LTV of mortgag
Slide 39: YTD and QoQ TNAV movements
YTD and QoQ TNAV movements YTD TNAV movements (pence per share) 3 3 10 31 3 269 287 Dec-20 Earnings Dividends paid Repurchase of shares Cash flow hedge reserve Other movements Sep-21 QoQ TNAV movements (pence per share) 8 2 1 3 4 281 287 Jun-21 Earnings Dividends paid Repurchase of shares Currency C
Slide 40: RWAs remained broadly stable YTD and QoQ
RWAs remained broadly stable YTD and QoQ YTD RWA movements (£bn) 3.1 4.3 0.4 0.9 1.4 308.8 308.4 307.6 307.5 307.5 306.2 306.2 1 Dec-20 Credit risk Counterparty credit risk Market risk FX Other Sep-21 excl. disposals QoQ RWA movements (£bn) 2.1 3.4 0.1 1.1 1.3 307.5 307.4 307.5 306.4 306.4 306.2 306
Slide 41: Continue to target appropriate headroom above the MDA hurdle
Continue to target appropriate headroom above the MDA hurdle Illustrative evolution of minimum CET1 requirements and buffers • Barclays intends to manage its CET1 ratio in the range of 13-14% over the planning cycle, and Dec-201: Sep-211: Target: continues to target an appropriate headroom over 15.1
Slide 42: IFRS 9 transitional relief of c.40bps as at Sep-21
IFRS 9 transitional relief of c.40bps as at Sep-21 Constructive regulatory action in Q220 gave greater relief Appropriately positioned CET1 ratio for Stage 1 and 2 impairments in the event of stage migration • 100% transitional relief for modified impairment post Dec-19 applied until end-2021 • Tran
Slide 43: Pension deficit reduction contributions
Pension deficit reduction contributions CET1 ratio headwinds from pension reduction contributions fully incorporated into prudent capital plan and CET1 target • As at 30 June 2021, the Group’s IAS 19 pension surplus across all schemes was £2.4bn (December 2020: £1.5bn). The UK Retirement Fund (UKRF)
Slide 44: Group leverage position appropriately managed
Group leverage position appropriately managed Minimum leverage requirements and buffers under the UK regime • Headroom to minimum leverage requirement of 130bps in Q321, while the RWA-based CET1 ratio remains our primary regulatory constraint Dec-201: Sep-211: • Following the BoE’s Financial Policy
Slide 45: Capital structure well established
Capital structure well established Expect to hold prudent headroom above AT1 and Tier 2 minimums Illustrative evolution of regulatory capital structure Well managed and balanced total capital structure ≥ 16.8% • BBPLC issued capital instruments are to be included as MREL until 1 January 22.9% 20222,
Slide 46: Financial results tables
Financial results tables
Slide 47: Q321 YTD notable items
Q321 YTD notable items Nine months ended (£m) Sep-21 Sep-20 Income Valuation loss on Barclays’ preference shares in Visa Inc. - (101) Consumer, Cards and Payments Costs Structural cost actions - real estate review (266) - Head Office Other structural cost actions (126) (107) Group COVID-19 Community
Slide 48: Q321 YTD split of payments income by division
Q321 YTD split of payments income by division Sep-21 Sep-20 % change Nine months ended (£m) BUK CIB CC&P Total BUK CIB CC&P Total BUK CIB CC&P Total 1 Unified Payments - - 332 332 - - 308 308 - - 8% 8% 2 Barclays Cubed / Wholesale payment fees 273 192 - 465 173 178 - 351 58% 8% - 33% Interchange and
Slide 49: Q321 Group
Q321 Group Three months ended (£m) Sep-21 Sep-20 % change Income 5,465 5,204 +5% Impairment charges (120) (608) +80% – Operating expenses (3,446) (3,391) -2% – Litigation and conduct (32) (76) +58% Total operating expenses (3,478) (3,467) Other net income 94 18 Profit before tax 1,961 1,147 +71% Tax
Slide 50: Q321 Barclays UK
Q321 Barclays UK Three months ended (£m) Sep-21 Sep-20 % change – Personal Banking 990 833 +19% – Barclaycard Consumer UK 293 362 -19% – Business Banking 355 355 Income 1,638 1,550 +6% – Personal Banking (30) (48) +38% – Barclaycard Consumer UK (108) (106) -2% – Business Banking 1 (79) Impairment ch
Slide 51: Q321 Barclays International
Q321 Barclays International Three months ended (£m) Sep-21 Sep-20 % change Income 3,937 3,781 +4% Impairment releases / (charges) 18 (370) – Operating expenses (2,310) (2,227) -4% – Litigation and conduct (3) (28) +89% Total operating expenses (2,313) (2,255) -3% Other net income 15 9 +67% Profit be
Slide 52: Q321 Barclays International: Corporate & Investment Bank
Q321 Barclays International: Corporate & Investment Bank Three months ended (£m) Sep-21 Sep-20 % change – FICC 803 1,000 -20% – Equities 757 691 +10% Global Markets 1,560 1,691 -8% – Advisory 253 90 +181% – Equity capital markets 186 122 +52% – Debt capital markets 532 398 +34% Investment Banking fe
Slide 53: Q321 Barclays International: Consumer, Cards & Payments
Q321 Barclays International: Consumer, Cards & Payments Three months ended (£m) Sep-21 Sep-20 % change Total Income 808 876 -8% Impairment charges (110) (183) +40% – Operating expenses (563) (511) -10% – Litigation and conduct (1) (25) +96% Total operating expenses (564) (536) -5% Other net income 1
Slide 54: Q321 Head Office
Q321 Head Office Three months ended (£m) Sep-21 Sep-20 % change Income (110) (127) +13% Impairment charges (1) (5) +80% – Operating expenses (95) (69) -38% – Litigation and conduct (19) (23) +16% Total operating expenses (114) (92) -24% Other net income 78 10 Loss before tax (147) (214) +31% Attribu
Slide 55: Exchange rates and share count information
Exchange rates and share count information QoQ % YoY % Exchange rates Sep-21 Jun-21 Sep-20 change change Period end - USD/GBP 1.35 1.38 1.29 -2% +5% YTD average - USD/GBP 1.39 1.39 1.27 +9% 3 month average - USD/GBP 1.38 1.40 1.29 -1% +7% Period end - EUR/GBP 1.16 1.17 1.10 -1% +5% YTD average - EUR
Slide 56: Disclaimer
Disclaimer Important Notice The terms Barclays or Group refer to Barclays PLC together with its subsidiaries. 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 bu