Barclays Plc · LSE:BARC
Barclays — Q2 2020 Earnings Presentation
54 slides from Barclays's earnings presentation, Jul 29, 2020
Slide 1: Barclays PLC Q2 2020 Results
Barclays PLC Q2 2020 Results 29 July 2020 | Barclays Q2 2020 Results | 29 July 2020
Slide 2: Jes Staley, Barclays Group Chief Executive
Jes Staley Barclays Group Chief Executive | Barclays Q2 2020 Results | 29 July 2020
Slide 3: COVID-19 lockdowns have caused unprecedented economic disruption met with bold policy actions
COVID-19 lockdowns have caused unprecedented economic disruption met with bold policy actions Our main markets saw severe GDP contractions With ambitious support measures quickly put in place • UK and US GDP forecast to trough in Q220, significantly lower • Largest economic stimulus packages in hist
Slide 4: Remained open for business during the COVID-19 pandemic helping support the economy
Remained open for business during the COVID-19 pandemic helping support the economy Supporting Supporting Supporting our communities customers businesses and colleagues Supported customers Delivered UK Government Used our reach to support everyone in financial need with support measures for small bu
Slide 5: Resilient performance in H120 reflecting the Group's diversified business model
Resilient performance in H120 reflecting the Group’s diversified business model H120 Financial highlights Resilient operating performance delivered Group PBT of £1.3bn £11.6bn Income Income increased 8%, driven by a particularly strong Cost: performance in CIB (+31%) 57% income ratio Positive jaws o
Slide 6: Corporate and Investment Bank drivers
Corporate and Investment Bank drivers Lending Banking Markets Provided support to customers via Investment grade bond issuance saw Volatility spiked in March and remained at Revolving Credit Facilities (RCFs) in record levels in Q2 and Barclays elevated levels throughout Q2, March. They have started
Slide 7: Consumer business drivers
Consumer business drivers Consumer spending1 Unemployment Digital engagement Customer spend levels in the UK and US Remain cautious on the economic Continued to serve customers throughout reduced dramatically as lockdowns came outlook and factor a more gradual the pandemic through our digital into f
Slide 8: Diversification is a key strength of Barclays
Diversification is a key strength of Barclays 59% Resilient performance in H120, despite severe 12% Wholesale 22% global macro-economic downturns Banking fees H120 Markets Strong CIB performance more than offset Group income by customer1 Corporate income headwinds in the consumer businesses 15% 39%
Slide 9: Tushar Morzaria, Barclays Group Finance Director
Tushar Morzaria Barclays Group Finance Director | Barclays Q2 2020 Results | 29 July 2020
Slide 10: 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 11: Q220 Group highlights
Q220 Group highlights Barclays remained profitable in the second quarter supported by a strong balance sheet • Pre-provision profits were broadly stable at £2.0bn Financial performance `` • Income decreased 4% as continued strong performance in CIB, particularly in Markets, was offset by Income inco
Slide 12: Income decreased 4% YoY in Q220, as strong performance in CIB was offset by headwinds
Income decreased 4% YoY in Q220, as strong performance in CIB was offset by income headwinds in BUK and CC&P £6.3bn £5.5bn £5.5bn £5.3bn £5.3bn Overall CIB income increased 19% YoY • Markets income increased 49% as FICC increased 60% and £3.6bn £2.8bn £2.3bn Equities increased 30% £2.6bn Corporate a
Slide 13: Income in BUK and CC&P expected to gradually recover from Q220 levels
Income in BUK and CC&P expected to gradually recover from Q220 levels • Balances in UK and US cards likely to continue to be lower Jan Feb Mar Apr May Jun year on year in H2, driven by (8%) (9%) (10%) (10%) (14%) (18%) Lower UK cards 10% − Reduced spend volumes year on year, despite recovering Inter
Slide 14: Continued focus on cost discipline, but short-term headwinds remain
Continued focus on cost discipline, but short-term headwinds remain from spend on COVID-19 initiatives Cost: income ratio of 57% in H120 Costs of £6.6bn in H120 Total £6.9bn (4%) £6.6bn Total costs Income £10.8bn 8% £11.6bn Non-compensation £3,163m (10%) £2,852m costs Pre-provision £5.0bn Performanc
Slide 15: Increased impairment charges in Q120 and Q220 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 16: Q220 impairment charge driven by updated economic forecasts and slower recovery
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 17: 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 18: Q220 impairment coverage ratios for credit cards, unsecured loans and other retail lending
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 19: Exposure to selected sectors vulnerable to the current environment 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 20: Balances on payment holidays across portfolios were 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 21: Payment holidays granted continue to reduce as customers roll off
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 22: Q220 Barclays UK
Q220 Barclays UK Loss before tax reflects the impacts of COVID-19 on impairment and income, with costs remaining controlled Financial performance • Income decreased 17% in a challenging operating Q219 Q319 Q419 Q120 Q220 environment Income − Impact of COVID-19 customer support measures, 1,771 1,846
Slide 23: Q220 Barclays International
Q220 Barclays International Strong income growth offset by higher impairment resulting in RoTE of 5.6% Financial performance • Income increased 3% to £4.0bn, reflecting Income balanced across strong performance in CIB businesses and geographies Income − Income diversified by business and £4.0bn Q219
Slide 24: Q220 Barclays International: Corporate & Investment Bank
Q220 Barclays International: Corporate & Investment Bank RoTE of 9.6% driven by strong income performance and positive jaws • Overall CIB income increased 19% to £3.3bn Financial performance • Markets income increased 49% (66% ex. Tradeweb), Income resulting in the best ever Q2 on a comparable basis
Slide 25: Q220 Barclays International: Consumer, Cards & Payments
Q220 Barclays International: Consumer, Cards & Payments Loss before tax driven by subdued income performance reflecting the impact of COVID-19 Q219 Q319 Q419 Q120 Q220 Financial performance • Income decreased 37%, due to lower balances YoY on co-branded cards, reduced payments activity Q220 CC&P inc
Slide 26: Head Office
Head Office Q219 Q120 Q220 • Q220 negative income of £139m included: – c.£50m mark-to-market losses on legacy investments Income (65) – c.£30m residual negative income impact (£m) (136) (139) from legacy capital instruments – Certain negative treasury items – Hedge accounting losses Costs – Partiall
Slide 27: 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 28: RWAs decreased over Q220
RWAs decreased over Q220 RWAs reduced as anticipated pro-cyclical RWA inflation was more than offset by management actions and lower loan demand Total RWAs (£bn) • Anticipated pro-cyclicality in RWAs only partially materialised in the quarter, with a c.£5bn increase in credit risk RWAs from Mar-20 3
Slide 29: Continue to 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 30: High quality and conservatively positioned liquidity and funding position
High quality and conservatively positioned liquidity and funding position Balance sheet composition as at Jun-20 (£bn) Group LCR significantly exceeding minimum requirement Variance to 186% Dec-19 (£bn) Minimum 160% 155% requirement: 70 Equity (inc. AT1) 100% Liquidity 298 124 Wholesale pool funding
Slide 31: Outlook: Diversification delivering resilient performance
Outlook: Diversification delivering resilient performance Income in BUK and CC&P is expected to gradually recover from Q220 levels, but certain headwinds including from the low interest rate environment, are likely to persist into 2021 The CIB performance in the first half benefitted from increased
Slide 32: Appendix
Appendix | Barclays Q2 2020 Results | 29 July 2020
Slide 33: Support for customers in the UK
Support for customers in the UK1 • Mortgage payment holidays granted for c.121,000 accounts Mortgages • 12 month interest only payments granted Personal loans and • Repayment holidays granted for c.106,000 personal loan and point of sale point of sale financing finance accounts • Continue to provide
Slide 34: Support for businesses
Support for businesses1 • £14bn three year lending fund for UK SMEs Existing lending • Over £50bn of lending limits available to UK clients and withholding fees • Free banking and overdraft fees waived for 650,000 UK SMEs • 12-month capital repayment holidays for most loans over £25,000 • c.249,000
Slide 35: Support for our communities and colleagues
Support for our communities and colleagues1 • £45m of £100m Community Aid Package allocated to charities Supporting (for charity partners primarily in the UK, US, and India) communities • Extended LifeSkills and Digital Eagles programmes to support home schooling and fraud prevention • 70,000 of 88,
Slide 36: Financial targets
Financial targets Group targets are subject to change depending on the evolution of the COVID-19 pandemic Group RoTE Cost efficiency <60% cost: income ratio >10% over time1 over time CET1 ratio Capital distribution CET1 ratio managed to ensure The Board will decide on future appropriate headroom abo
Slide 37: ESG supporting society and our franchise
ESG supporting society and our franchise Five focus areas which encompass the underlying ESG factors most relevant to Barclays Select metrics1 Financing facilitated in social Scope 1 and 2 carbon emission and environmental segments (£bn) reduction against 2018 baseline 2019 2018 2017 28.5 31.7 34.8
Slide 38: Intend to play a leading role in the climate change agenda
Intend to play a leading role in the climate change agenda Size and scale to make a real difference in helping to accelerate the transition to a low-carbon economy Net Zero by 2050 Increased restrictions in sensitive energy sectors Scope 1 and 2 : Coal Oil sands Net zero by 2030 Operational GHG emis
Slide 39: 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 40: Retail portfolios in the UK and US prudently positioned ahead of the crisis
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 41: Q220 TNAV movement
Q220 TNAV movement TNAV stable at 284p TNAV (pence per share) • TNAV stable at 284p: 1 1 – 1p from earnings 1 2 8 2 – 2p impact of employee share awards 1 – 2p from Fair Value through Other Comprehensive Income (FVOCI) reserve movements – 1p from the cash flow hedge reserve due to a gain on fair val
Slide 42: 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 43: Well positioned to navigate headwinds to capital
Well positioned to navigate headwinds to capital Drivers of CET1 ratio movements • Profit generation RWA pro-cyclicality • Management actions Migration of impairment into Stage 3 • Regulatory support Constructive regulatory action supporting our capital position, many Expected timeline in place for
Slide 44: 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 45: 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 46: Barclays is set up to continue serving clients based in the European Union
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 47: Financial results tables
Financial results tables | Barclays Q2 2020 Results | 29 July 2020
Slide 48: Other items of interest – Q220 vs. prior year
Other items of interest – Q220 vs. prior year Other items of interest (£m) Q220 Q219 Income Valuation loss on Barclays’ preference shares in Visa Inc. (101) - Consumer, Cards and Payments Strategic investment gain relating to the IPO of Tradeweb 36 166 Corporate and Investment Bank (Markets) Mark-to
Slide 49: Q220 Group
Q220 Group Three months ended (£m) Jun-20 Jun-19 % change Income 5,338 5,538 (4%) Impairment (1,623) (480) >(200%) – Operating costs (3,310) (3,501) 5% – Litigation and conduct (20) (53) 62% Total operating expenses (3,330) (3,554) 6% Other net (expenses)/income (26) 27 (196%) Profit before tax 359
Slide 50: Q220 Barclays UK
Q220 Barclays UK Three months ended (£m) Jun-20 Jun-19 % change – Personal Banking 826 946 (13%) – Barclaycard Consumer UK 367 497 (26%) – Business Banking 274 328 (16%) Income 1,467 1,771 (17%) – Personal Banking (130) (36) >(200%) – Barclaycard Consumer UK (396) (175) (126%) – Business Banking (57
Slide 51: Q220 Barclays International
Q220 Barclays International Three months ended (£m) Jun-20 Jun-19 % change – CIB 3,316 2,795 19% – CC&P 694 1,108 (37%) Income 4,010 3,903 3% – CIB (596) (44) >(200%) – CC&P (414) (203) (104%) Impairment charges (1,010) (247) >(200%) – Operating costs (2,186) (2,435) 10% – Litigation and conduct (11
Slide 52: Q220 Barclays International: CIB and Consumer, Cards & Payments
Q220 Barclays International: Corporate & Investment Bank and Consumer, Cards & Payments CIB business performance – CC&P business performance – Jun-20 Jun-19 % change three months ended (£m) Jun-20 Jun-19 % change three months ended (£m) – FICC 1,468 920 60% Income 694 1,108 (37%) – Equities 674 517
Slide 53: Q220 Head Office
Q220 Head Office Three months ended (£m) Jun-20 Jun-19 % change Income (139) (136) (2%) Impairment charges (30) (3) >(200%) – Operating costs (106) (44) (141%) – Litigation and conduct (3) (1) (200%) Total operating expenses (109) (45) (142%) Other net (expenses)/income (43) 15 >(200%) Loss before t
Slide 54: 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