Barclays Plc · LSE:BARC
Barclays — Debt Investor Presentation (July 2020)
40 slides from Barclays's debt investor presentation, Jul 29, 2020
Slide 1: Fixed Income Investor Call H1 2020 Results Announcement
Barclays PLC Fixed Income Investor Call H1 2020 Results Announcement 29 July 2020
Slide 2: Tushar Morzaria, Group Finance Director
Tushar Morzaria Barclays Group Finance Director
Slide 3: H120 Group highlights
H120 Group highlights Despite the impacts of the pandemic, Barclays delivered H120 Group PBT of £1.3bn • Pre-provision profits increased 27% to £5.0bn, highlighting the benefits of Barclays’ diversified Financial performance `` business model Income • Income increased 8%, reflecting a 31% increase i
Slide 4: Q220 impairment charge driven by updated economic forecasts
Q220 impairment charge driven by updated economic forecasts and expectation of a slower recovery Components of Q220 impairment charge (£m) 1,013 1,623 186 424 Pre-COVID 19 Single name wholesale Impact of updated COVID-19 Q220 scenario loan charges scenarios and weights, including impairment benefit
Slide 5: Q220 impairment coverage ratios
Q220 impairment coverage ratios Increased impairment coverage across all portfolios with the stage 2 unsecured coverage ratio of 23.1% Wholesale loans Credit cards, unsecured loans and other retail lending Gross exposure (£m) Impairment allowance (£m) Coverage ratio Gross exposure (£m) Impairment al
Slide 6: Kathryn McLeland, Group Treasurer
Kathryn McLeland Group Treasurer
Slide 7: H120 highlights
H120 highlights Strong balance sheet evidenced across key metrics, providing ability to support clients Key principles Key metrics Prudently managing the Group’s capital position; Capital CET1 ratio of 14.2%, with a 300bps buffer to MDA Strong progress towards meeting MREL requirement; Funding HoldC
Slide 8: Q220 CET1 ratio increased to 14.2%
Q220 CET1 ratio1 increased to 14.2% Reflecting resilient profits, regulatory changes and reduced RWAs 9bps CET1 ratio of 14.2% reflecting: 5bps 13bps 10bps • 60bps of profit after tax, excluding 38bps impairment charges2 51bps 35bps • 35bps of post-tax IFRS 9 transitional 60bps relief 14.1% 14.2% 14
Slide 9: RWAs decreased over Q220
RWAs decreased over Q220 RWAs reduced as anticipated procyclical RWA inflation was more than offset by management actions and lower loan demand Total RWAs (£bn) • Anticipated procyclicality in RWAs only partially materialised in the quarter, with a c.£5bn increase in credit risk RWAs from Mar-20 325
Slide 10: Increase in IFRS 9 transitional relief, now at c.75bps
Increase in IFRS 9 transitional relief, now at c.75bps Impairment migration to stage 3 would lead to capital impact as it is not eligible for transitional relief Constructive regulatory action gives greater relief Prudently positioned CET1 ratio for stage 1 and 2 impairments in the event of stage mi
Slide 11: Manage CET1 ratio with appropriate headroom above MDA
Continue to manage CET1 ratio1 with appropriate headroom above MDA through the stress Illustrative evolution of minimum CET1 requirements and buffers • Barclays intends to manage its capital position to Mar-20: Jun-20: enable it to support customers whilst maintaining MDA 13.1% 14.2% appropriate hea
Slide 12: Well positioned to navigate headwinds to capital
Well positioned to navigate headwinds to capital Drivers of CET1 ratio movements • Profit generation RWA procyclicality • Management actions Migration of impairment into Stage 3 • Regulatory support Constructive regulatory action supporting our capital position, many Expected timeline in place for t
Slide 13: Managing evolving future Group minimum leverage requirements
Managing evolving future Group minimum leverage requirements Minimum leverage requirements and buffers under the UK regime • Headroom to minimum leverage requirement increased to above 140bps in Q2, while the RWA Mar-201: Jun-201: based CET1 ratio remains our primary regulatory UK Spot: 4.5% UK Spot
Slide 14: Strong legal entity capital and liquidity positions
Strong legal entity capital and liquidity positions Continue to manage legal entity capital ratios with appropriate headroom to requirements Barclays PLC Accounting and regulated sub-group Accounting sub-group Barclays Bank UK PLC sub-group Barclays Bank PLC sub-group Barclays Bank UK PLC (solus) Ba
Slide 15: 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 • BBPLC issued capital instruments are expected to be included as 21.7% ≥16.8% MREL, until 1 Janua
Slide 16: Successfully transitioning to a HoldCo funding model
Successfully transitioning to a HoldCo funding model Continue to expect £7-8bn of MREL issuance in 2020 HoldCo MREL position and expected requirement Well advanced on 2022 HoldCo issuance plan 32.4% • Continue to expect £7-8bn of MREL issuance for 2020 across Senior, 29.7% Tier 2 and AT1 CCyB: 0.0%
Slide 17: High quality liquidity position
High quality liquidity position Prudently positioned liquidity pool and LDR Highly liquid, comfortably exceeding minimum requirements Conservative loan: deposit ratio2 L&A3 (£bn) Deposits3 (£bn) LDR Liquidity Coverage Ratio (LCR) 83% 82% 79% 76% 186% 169% 160% 154% 155% Minimum requirement: 416 471
Slide 18: Interest rate sensitivity
Interest rate sensitivity Illustrative sensitivity of Group NII to a 10bps and 25bps parallel downward shifts in interest rates1 Change in NII based on illustrative scenario (£m) Commentary/assumptions • This analysis is based on the modelled performance of the 10bps downward parallel shift in inter
Slide 19: Strategic priority to maintain strong ratings
Strategic priority to maintain strong ratings Focus on maintaining current ratings profile during COVID-19 stress Current Senior Long and Moody’s Standard & Poor’s Fitch Short Term ratings Baa2 BBB A Barclays PLC Stable Negative RWN P-2 A-2 F1 A1 A A+ Barclays Bank PLC Stable Negative RWN (BBPLC) P-
Slide 20: Tushar Morzaria, Group Finance Director
Tushar Morzaria Barclays Group Finance Director
Slide 21: Q&A
Q&A
Slide 22: Appendix
Appendix
Slide 23: Increased impairment charges resulted in higher coverage ratios
Increased impairment charges in Q120 and Q220 have resulted in higher coverage ratios across portfolios Impairment charges (£m) Group loan loss rate (bps) 2,115 2000 250 223 1,623 200 724 179 1500 • Although reduced from Q1 level, impairment Corporate & 150 increased YoY reflecting single name 596 I
Slide 24: Q220 impairment coverage ratios for cards, unsecured loans and other retail
Q220 impairment coverage ratios for credit cards, unsecured loans and other retail lending UK and US cards stage 2 coverage ratios increased to 28% and 24.5% respectively UK cards US cards Gross exposure (£m) Impairment allowance (£m) Coverage ratio Gross exposure (£m) Impairment allowance (£m) Cove
Slide 25: Exposure to selected vulnerable sectors only 13% of wholesale
Exposure to selected sectors vulnerable to the current environment only 13% of total wholesale exposure • Our exposure to higher risk sectors as a result of the Gross exposure as at Jun-20 COVID-19 pandemic totalled £20.7bn £1.3bn Transportation Shipping • Majority of exposure (>65%) is to clients i
Slide 26: Balances on payment holidays well covered as at Jun-20
Balances on payment holidays across portfolios were well covered as at Jun-20 UK mortgages: The average current LTV of balances on UK cards: Total net exposure on payment holidays of £451m active payment holidays is 57% £11.8bn £3.0bn £0.1bn £211m £442m £11m 1 Gross on Gross on balance sheet £14.9bn
Slide 27: Payment holidays granted continue to reduce
Payment holidays granted continue to reduce and net balances are also reducing as customers roll off UK mortgages UK cards1 Net Balance (£m) 8,303 17,960 20,348 14,919 Net Balance (£m) 644 810 663 232 Payment holidays Payment holidays granted (£m) granted (£m) 8,303 9,672 644 2,769 857 166 63 26 Rol
Slide 28: Retail portfolios in the UK and US prudently positioned
Retail portfolios in the UK and US prudently positioned ahead of the crisis H119 FY19 H120 £138.3bn £143.3bn £145.2bn • Focused on growing mortgage book within risk appetite UK 67.1% 67.9% 68.4% UK mortgage • c.50% average LTV of mortgage book stock balance secured • Buy-to-Let mortgages represent o
Slide 29: 2020 pension update
2020 pension update Capital benefit of £250m in Q2 due to UK Retirement Fund (UKRF) Trustee investment in Senior Notes • As at 30 September 2019, the triennial valuation showed a funding deficit of £2.3bn with the difference to the IAS 19 surplus representing a different approach to setting the disc
Slide 30: Managing call and maturity profiles of capital instruments
Managing the call and maturity profiles of BPLC and BBPLC capital instruments BPLC capital call and maturity profile (£bn) BPLC AT1 capital as at 30 June 20201 BPLC Tier 2 capital as at 30 June 20201 First or next call date By contractual maturity as applicable By next call date as applicable 3.4 4.
Slide 31: Continued progress in HoldCo issuance
Continued progress in HoldCo issuance Annual HoldCo issuance volume materially lower compared to 2016-18 (£bn)1 H120 HoldCo issuance by currency3 AT1 Tier 2 Senior unsecured 13.4 12.1 12.2 April: EUR 2bn Senior 11.5 6.2 8.6 May: USD 1.75bn Senior 6.1 Target: 7-8 9.3 10.2 1.8 4.0 May: GBP 500m Tier 2
Slide 32: Balanced HoldCo funding profile by debt class and tenor
Balanced HoldCo funding profile by debt class and tenor Barclays PLC AT1 Tier 2 Senior unsecured 18% By 15% product £59bn 67% BPLC AT1 capital BPLC Tier 2 capital BPLC Senior unsecured debt as at 30 June 20201 as at 30 June 20201 as at 30 June 20201 First or next call date By contractual maturity as
Slide 33: Legal entity structure of the Group since April 2018
Legal entity structure of the Group since April 2018 Barclays PLC Barclays International Barclays UK and Head Office1 Market leading UK retail bank, combining digital Diversified bank across Cards & Payments, innovation and scale Corporate & Investment Banking and Private Banking Divisions Personal
Slide 34: Set up to continue serving clients based in the EU
Barclays is set up to continue serving clients based in the European Union European Union subsidiary operational with a significant number of clients migrated • Barclays is well positioned to continue providing European footprint to service key markets services in the European Union with minimal dis
Slide 35: Diversified funding sources across all legal entities
Diversified Funding Sources1 across all legal entities Majority of funding within legal entities through deposits Barclays PLC 57 8% 46 6% 467 77 64% 11% H120: £730bn2 2% 11 8% 59 2% Barclays Bank UK PLC 3 Barclays Bank PLC 3 13 14 5 2% 48 7 Key: 5% 2% 13 11% 5% Deposits 41 11 9% 4% Shareholders’ eq
Slide 36: Deposit and wholesale funding sources of Barclays Bank UK and Barclays Bank
Deposit and wholesale funding sources of Barclays Bank UK PLC and Barclays Bank PLC Barclays PLC Barclays Bank UK PLC Barclays Bank PLC (and subsidiaries) H120 FY19 H120 FY19 Personal Banking 170 159 Corporate and Investment Bank 174 146 Deposit funding2 226 206 246 214 Business Banking 56 46 Consum
Slide 37: Wholesale funding composition as at 30 June 2020
Wholesale funding composition as at 30 June 20201 <1 1-3 3-6 6-12 Total 1-2 2-3 3-4 4-5 As at 30 June 2020 (£bn) >5 years Total month months months months <1 year years years years years Barclays PLC (the Parent company) Senior unsecured - 0.3 - 2.6 2.9 2.8 5.2 7.2 6.3 14.0 38.4 (Public benchmark) S
Slide 38: Barclays rating composition for senior debt
Barclays rating composition for senior debt Moody’s Standard & Poor’s Fitch BPLC BBPLC BBUKPLC BPLC BBPLC BBUKPLC BPLC BBPLC BBUKPLC Adj. Baseline Credit baa2 baa2 a3 Stand-Alone Credit Profile bbb+ Viability Rating2 a a a Assessment Macro profile Strong+ Strong+ Strong+ Anchor bbb+ Operating enviro
Slide 39: Barclays rating composition for subordinated debt
Barclays rating composition for subordinated debt Moody’s Standard & Poor’s Fitch Adj. Baseline Stand-alone Stand-Alone Viability Credit baa2 baa2 bbb+ a a rating Assessment Credit Profile Rating BPLC BBPLC BPLC BBPLC BPLC BBPLC T2 T1 T2 T2 T2 AT1 LT2 UT2 T2 AT1 LT2 UT2 T1 T2 AT1 LT2 UT2 T1 Coco (cu
Slide 40: 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