Barclays Plc · LSE:BARC
Barclays — H1 2017 Earnings Presentation
49 slides from Barclays's earnings presentation, Jul 28, 2017
Slide 1: H1/Q2 2017 Financial Results
Barclays PLC H1/Q2 2017 Financial Results 28 July 2017
Slide 2: Jes Staley, Barclays Group Chief Executive Officer
Jes Staley Barclays Group Chief Executive Officer
Slide 3: Completed Barclays' restructuring
Completed Barclays’ restructuring Sold down to target shareholding of c.15% and achieved Africa selldown complete proportional regulatory consolidation CET1 ratio of 13.1%, reflecting strong capital generation CET1 ratio within end-state range from profits and 47bps from Africa selldown Closure on 1
Slide 4: Transatlantic Consumer, Corporate and Investment bank
Transatlantic Consumer, Corporate and Investment bank Barclays UK Stronger and simpler Barclays International Barclays, benefitting RoTE of 20.4%1 RoTE of 12.4% from diversification UK consumer and business bank Diversified transatlantic wholesale Differentiated by scale and digital innovation and s
Slide 5: Targeting Group RoTE of >10%
Targeting Group RoTE of >10% Eliminate structural reform Drive cost efficiency 1 and restructuring costs 2 Improve CIB returns 3 through the Service Company • Group-wide processes Non- 1 Redeployment of capital in • Standardised ops & tech Core the CIB loan book and improved c.£1.2bn costs funding a
Slide 6: CIB has a well balanced, low volatility business model
CIB has a well balanced, low volatility business model H117 Income by Product Fee share gains across Banking Stable Income £5,346m H116 H117 Markets Banking Fees Corporate Lending & Transactional Banking Average of previous four quarters3 Advisory 3.5% 4.0% 2014 2015 2016 2017 Banking Fees 26% 2.7 2
Slide 7: Restructured and repositioned CIB to deliver higher returns
Restructured and repositioned CIB to deliver higher returns Corporate and Investment Bank RoTE RoTE Prospective impact of Non-Core reabsorption and Q4 UK bank levy • Combined the Corporate Bank and Investment Bank in March 2016 • Successfully repositioned and restructured the business over last 3 ye
Slide 8: Focused on two primary levers to improve CIB returns
Focused on two primary levers to improve CIB returns 1 CIB capital allocation and funding 2 Cost efficiencies and strategic investments CIB loan book RWAs (£bn) Return < cost of capital Performance • Alignment of in-year P&L with performance awards 25% costs introduced in Q416 £90bn • Rationalisatio
Slide 9: Targeting Group RoTE of >10%
Targeting Group RoTE of >10% Eliminate structural reform Drive cost efficiency 1 2 Improve CIB returns 3 through the Service Company and restructuring costs • Group-wide processes Non- 1 Redeployment of capital in • Standardised ops & tech Core the CIB loan book and improved c.£1.2bn costs funding a
Slide 10: Service Company: Standardising and improving processes
Service Company: Standardising and improving processes to further enhance customer experience and cost efficiency PRIMARY FOCUS AREAS EFFICIENCY DRIVERS Group-wide set of processes World-class Standardised ops & tech and 10 1 1 Central Shared functional services Fraud handling Services Improve
Slide 11: Creating capacity for investment
Creating capacity for investment Co-brand #9 model New co-brand US Cards Issuer credit card in the US1 partnership with Uber #2 Payments Unique payments Merchant 1 in every 3 processed in footprint across the Payments UK card Q217 full consumer to Acquirer transactions in Europe1 £61bn corporate spe
Slide 12: Group financial targets
Group financial targets Returns Group Return on >10% Tangible Equity (RoTE) Capital 150-200 bps above Group regulatory minimum level CET1 ratio ⇒ c.13% Costs Group <60% Cost: income ratio Intend to achieve these targets within a reasonable timeframe 12 | Barclays H1/Q2 2017 Financial Results | 28 Ju
Slide 13: Tushar Morzaria, Barclays Group Finance Director
Tushar Morzaria Barclays Group Finance Director
Slide 14: Material & other items – Q217 and Q216
Material & other items – Q217 and Q216 Q217 Q216 Material items (£m) Core Non-Core Group Core Non-Core Group Discontinued operation – Africa Banking – Impairment of Barclays’ holding in BAGL - - (206) - - - – Loss on sale of 33.7% of BAGL’s issued share capital - - (1,435) - - - Africa selldown effe
Slide 15: Group Return on Tangible Equity of 7.2%
Group Return on Tangible Equity of 7.2%1 Three months ended (£m) Jun-17 Jun-16 % change Q217 performance metrics1 Income 5,058 5,972 (15%) Impairment (527) (488) (8%) • Group RoTE was 7.2% and EPS 5.3p, excluding losses relating to the Africa – Operating expenses (excluding L&C) (3,398) (3,425) 1% s
Slide 16: Core delivered an RoTE of 9.7%, and cost: income ratio of 60%
Core delivered an RoTE of 9.7%1, and cost: income ratio of 60%1 Business performance Q217 performance metrics1 Three months ended (£m) Jun-17 Jun-16 % change • Core delivered an RoTE of 9.7%, excluding the charges for PPI, reflecting the benefits of diversification Income 5,514 6,316 (13%) • Results
Slide 17: 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 allocated tangible equity1 Return on average allocated tangible equity3 RoTE RoTE excluding UK bank levy RoTE excluding charges for PPI Q217 Q216 RoTE excluding UK bank levy and additional charge
Slide 18: Barclays UK: Robust RoTE of 19.1%
Barclays UK: Robust RoTE of 19.1%1 Business performance Q217 performance metrics1 Three months ended (£m) Jun-17 Jun-16 % change • Income increased 2% to £1.8bn excluding the Visa sale gain of £151m – Personal Banking 933 1,068 (13%) attributable to Barclays UK in Q216, driven by a 4% increase in Ne
Slide 19: Barclays UK: Realising the opportunity with our 24 million customers
Barclays UK: Realising the significant opportunity with our 24 million customers by leveraging digital and data Significant growth in digital banking – year-on-year Barclays Leveraging our data 5.9m Income Mobile Active users +19% to drive meaningful growth Banking customer relationships 9.6m Digita
Slide 20: Barclays International: RoTE of 12.4% reflecting improved returns in CIB
Barclays International: RoTE of 12.4% reflecting improved returns in CIB Business performance Q217 performance metrics1 Three months ended (£m) Jun-17 Jun-16 % change • Income increased by 1% to £3.6bn, excluding the Visa sale gain of £464m in Q216 – Corporate & Investment Bank (CIB) 2,564 2,611 (2%
Slide 21: Barclays International: Corporate & Investment Bank
Barclays International: Corporate & Investment Bank Strong banking fees delivered RoTE of 11.1% Business performance Q217 performance metrics Three months ended (£m) Jun-17 Jun-16 % change • Income reduced 2% to £2.6bn, including the appreciation of USD and EUR vs. GBP – Strong performance in Bankin
Slide 22: Barclays International: Consumer, Cards & Payments
Barclays International: Consumer, Cards & Payments 9% income growth1 and 19.4% RoTE Business performance Q217 performance metrics1 Three months ended (£m) Jun-17 Jun-16 % change Income 1,046 1,428 (27%) • Income increased by 9%, excluding the Visa sale gain of £464m in Q216 Impairment (280) (203) (3
Slide 23: Head Office
Head Office Business performance Q217 performance metrics Head Office – Three months ended (£m) Jun-17 Jun-16 • Profit before tax reduced £379m to a loss of £122m Income 84 334 • Income reduced from £334m, including £292m of own credit, to £84m – Following the early adoption of the own credit provis
Slide 24: Non-Core: Residual RWAs of £23bn on closure, ahead of guidance
Non-Core: Residual RWAs of £23bn on closure, ahead of guidance Business performance Q217 vs. Q117 performance metrics Three months ended (£m) Jun-17 Mar-17 Jun-16 • Loss before tax increased to £406m driven by lower income, partially offset by lower operating expenses, and a gain on the sale of Barc
Slide 25: Non-Core: Closure at 1 July and reabsorption in Core in H217
Non-Core: Closure at 1 July and reabsorption in Core in H217 Loss before tax (£bn)1 Overview c.1.0 • Closure of Non-Core on 1 July 2017, with residual assets and liabilities to be reabsorbed into the Core H217 0.3-0.4 • Guidance for loss before tax from Non-Core businesses/assets remains approximate
Slide 26: Material reductions in our cost base
Material reductions in our cost base, creating capacity to self-fund investment in the business Group operating costs excluding notable items1, conduct and litigation £4.5bn Target CIR £19.5bn over time achieved 2.0 < 60% 1.2 £15.0bn2 Capacity for 1.6 re-investment c.0.5 Of which c.£1bn 1.1 c.0.7 ex
Slide 27: Within our end-state CET1 ratio target range
Within our end-state CET1 ratio target range CET1 ratio progression in Q217 Pro-forma CET1 ratio assuming full regulatory deconsolidation of BAGL End-state target c.13% Tailwinds Headwinds 0.10% 0.27% 0.47% • Organic profit generation • IFRS 9 (expected to be 13.4% • Additional 26bps expected from t
Slide 28: Transatlantic Consumer, Corporate and Investment bank
Transatlantic Consumer, Corporate and Investment bank Benefits of diversification by customer, product and geography showing through Closure of Non-Core on 1 July 2017 with £23bn of RWAs, marking the end of restructuring 13.1% CET1 ratio at end-state target. Pro-forma 13.4% for full regulatory decon
Slide 29: Barclays PLC H1/Q2 2017 Financial Results
Barclays PLC H1/Q2 2017 Financial Results 28 July 2017
Slide 30: Appendix
Appendix
Slide 31: Material & other items – Q217 and Q117
Material & other items – Q217 and Q117 Q217 Barclays Material items (£m) Barclays UK Head Office Core Non-Core Group International Discontinued Operation – Africa Banking – Impairment of Barclays’ holding in BAGL - - - - - (206) – Loss on sale of 33.7% of BAGL’s issued share capital - - - - - (1,435
Slide 32: Material items – Q216
Material items – Q216 Q216 Barclays Notable items (£m) Barclays UK Head Office Core Non-Core Group International Income Gain on disposal of Barclays’ share of Visa Europe Limited 151 464 - 615 - 615 Own credit - - 292 292 - 292 Litigation and conduct Charges for PPI (400) - - (400) - (400) Total (24
Slide 33: Africa selldown and pension triennial valuation
Africa selldown and pension triennial valuation Africa selldown Pension triennial valuation complete Completion of the latest triennial valuation of the UK Retirement Fund Sale of BAGL’s issued share capital on 1 June 2017, 33.7% resulting in the accounting deconsolidation of BAGL (UKRF), with an ef
Slide 34: Non-Core: RWA reallocation and guidance
Non-Core: RWA reallocation and guidance 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 Reallocated RWAs 3
Slide 35: Income and margins – Q217
Income and margins – Q217 Income (£m) – Three months ended Jun-17 Jun-16 % change Q217 performance metrics – Barclays UK 1,534 1,476 4% • Barclays UK NII increased 4% to £1.5bn as growth in deposits and liability repricing initiatives offset impact from the lower UK base rate – Barclays Internationa
Slide 36: Barclays UK: Improved NIM and growth in deposits
Barclays UK: Improved NIM and growth in deposits Income (£m) – Three months ended Jun-17 Jun-16 % change Q217 performance metrics1 Net interest income (NII) 1,534 1,476 4% • NIM increased 14bps to 370bps as NII grew 4% to £1.5bn – Net interest margin (NIM) 3.70% 3.56% – Liability repricing initiativ
Slide 37: Africa Banking
Africa Banking Business performance Q217 highlights Three months ended (£m) Jun-17 Mar-17 • On 1 June 2017, Barclays sold 286 million ordinary shares of Barclays Africa Group Limited (BAGL), representing 33.7% of BAGL’s issued share Income 704 1,082 capital Impairment (71) (106) • The sale resulted
Slide 38: Underlying stable trends reflect prudent approach to credit risk management
Underlying stable 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 Jun-17 CRL coverage prudent risk appetite since the financial crisis • In US Cards, as part of our ongoing f
Slide 39: Flat underlying impairment trends in UK Cards and active management of US Cards growth
Flat underlying impairment trends in UK Cards and active management of US Cards growth Q217 UK Cards balance mix UK Cards Interest earning lending (IEL), as % of balances1 80% 0% Balance Transfers are <30% • c.90% has a duration of <24 months < 30% • Majority taken by existing customers 70% Barclayc
Slide 40: Tangible Net Asset Value movements
Tangible Net Asset Value movements TNAV (pence per share) – Mar-17 to Jun-171 Q217 highlights • TNAV decreased to 284p at Jun-17 • The net impact of the selldown and accounting deconsolidation of BAGL was broadly neutral from a 5 4 TNAV perspective, as the loss on sale and impairment of Barclays’ ho
Slide 41: 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 • End-state CET1 ratio expectation of around13%: 2017 Pillar 2A CET1 requirement CRDIV Mandatory distribution restrictions (MDR) hurdle
Slide 42: 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 20.7% (Dec-16: 19.6%), while the fully loaded total capital ratio increased to 19.8
Slide 43: Managing capital position above mandatory distribution restrictions and stress test hurdles
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 44: Progressing well on MREL issuance
Progressing well on MREL issuance HoldCo MREL position and requirement including requisite buffers Well advanced on HoldCo issuance plan Issuance plan – currently expect average issuance of c.£8bn p.a. 28.5% from 20182 CCyB: 0.5% • Our MREL issuance guidance for 2017 is c.£10bn of which we have issu
Slide 45: 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 Short-term debt and other deposits Unsecured term funding 149% 140% £522bn £508bn £49
Slide 46: Progress on Group legal structure
Progress on Group legal structure Barclays PLC Barclays UK Barclays International constructs Divisional UK consumer and business bank Diversified transatlantic wholesale differentiated by scale and digital innovation and consumer bank Group Service Company1 Future legal entity constructs Formation o
Slide 47: Structural reform plan remains on track achieving critical milestones as planned
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 48: Ratings are a key strategic priority
Ratings are a key strategic priority Current Senior Long and Future ratings expectations of Barclays Fitch Standard & Poor’s Moody's Short Term ratings UK and Barclays Bank PLC • Rating agencies have made various statements on their expectation of ratings post ring-fencing − Fitch has said that they
Slide 49: 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