Barclays Plc · LSE:BARC
Barclays — Q2 2018 Earnings Presentation
51 slides from Barclays's earnings presentation, Aug 2, 2018
Slide 1: Barclays PLC Q2 2018 Financial Results
Barclays PLC Q2 2018 Financial Results 2 August 2018
Slide 2: Jes Staley, Barclays Group Chief Executive
Jes Staley Barclays Group Chief Executive
Slide 3: Transatlantic Consumer and Wholesale Bank
Transatlantic Consumer and Wholesale Bank Double digit Group and operating business returns in Q218 Group RoTE 12.3%1 TNAV 259p, up 8p CET1 ratio 13.0%, with 44bps from profits Cost: income ratio 59%1 2.5p interim dividend declared and intend to pay 6.5p total for 20182 1 Excluding £81m L&C | 2 Subj
Slide 4: Tushar Morzaria, Barclays Group Finance Director
Tushar Morzaria Barclays Group Finance Director
Slide 5: Q218 Group highlights
Q218 Group highlights Double digit Group returns with positive jaws driving improved profitability Financial performance1 Group RoTE was 12.3% as PBT increased 44% • Double digit returns in BUK of 18.8% and BI of 12.2% Income 10% £5.6bn2 (Q217: £5.1bn) Income growth of 10% and improved operatin
Slide 6: Q218 Barclays UK results
Q218 Barclays UK results RoTE of 18.8% with growth in customer balances and ongoing investment in digital banking Stable income in a competitive market Q217 Q317 Q417 Q118 Q218 Financial performance1 YoY • NIM of 3.22%, including impact of mix shift given growth in +1% Income 1% 286 351 330 secur
Slide 7: Q218 Barclays International results
Q218 Barclays International results Double digit returns with strong performance across CIB and CC&P Barclays International delivered a 12.2% Financial performance1 RoTE as PBT increased 7% Income balanced across businesses Income 3% 6% depreciation of average USD against £3.7bn (Q217: £3.6bn)
Slide 8: Q218 Barclays International: Corporate & Investment Bank results
Q218 Barclays International: Corporate & Investment Bank results Continued strength in Markets and Banking fees Markets income increased 11%, or 15% Financial performance1 in USD Income • Equities increased 37% in USD driven GBP basis (£m) USD basis2 ($m) Income 1% by derivatives and equity finan
Slide 9: Q218 Barclays International: Consumer, Cards & Payments results
Q218 Barclays International: Consumer, Cards & Payments results Strong returns whilst investing in growth across CC&P businesses Income increased 8% reflecting continued Q217 Q317 Q417 Q118 Q218 Financial performance1 underlying growth in US Cards and £53m YoY gain on sale of a US card portfolio +
Slide 10: Head Office
Head Office Post Non-Core integration Income included a one-off gain of £155m from settlement of receivables relating to Q217 Q317 Q417 Q118 Q218 Lehman Brothers acquisition and a £46m dividend from stake in BAGL 6 33 • Excluding these, negative income 84 Income reflected c.£90m impact from certai
Slide 11: Impairment
Impairment Q218 impairment 1 In the UK, underlying credit metrics were broadly stable and economic conditions steady, resulting in steady impairment charges in BUK 2 Material improvement in CC&P reflecting higher than expected seasonal repayment of certain US card balances 3 Further single-nam
Slide 12: Continued cost reduction towards 2019 guidance
Continued cost reduction towards 2019 guidance Improved operational efficiency creating capacity to invest in growth and digitisation Targeting cost: income ratio Further absolute cost reduction BX generating significant below 60% to 2019 (£bn)1 operational leverage Process automation • Standardis
Slide 13: Capital accretion driven by strong profitability
Capital accretion driven by strong profitability Generating capacity for attractive capital returns to shareholders over time CET1 ratio1 CRD IV MDR hurdle 44bps Target of 11bps 10bps c.13% c.13% 13bps 5bps 13.0% 1.6% Management buffer1 12.7% 16bps 0.5% CCyB 11.4% 2.5% CCB 1.5% G-SII Pillar 2A 2.4%
Slide 14: Tangible Net Asset Value
Tangible Net Asset Value TNAV accretion of 8p driven by strong profitability TNAV (pence per share) 1 5 7 3 259 2 251 Expect further TNAV accretion from here, driven by profits Mar-18 Profits Dividends paid Currency Fair value Other 1 Jun-18 translation through other reserve comprehensive income T
Slide 15: Focused on profitability and returning capital to shareholders
Focused on profitability and returning capital to shareholders Q218 highlights Group targets >9% in 2019 Double digit returns – Group 12.3%1 RoTE2 >10% in 2020 CET1 ratio of 13.0% and full regulatory deconsolidation of BAGL CET1 ratio3 c.13% 59% Group cost: income ratio £13.6-13.9bn in 20191 Costs w
Slide 16: Barclays PLC Q2 2018 Financial Results
Barclays PLC Q2 2018 Financial Results 2 August 2018
Slide 17: Appendix
Appendix
Slide 18: Litigation & conduct and other items
Litigation & conduct and other items Litigation & conduct (£m) Q218 Q217 PPI - (700) Barclays UK Other (81) (15) Group (across divisions) Total (81) (715) Other items of interest (£m) Income Settlement of receivables relating to Lehman Brothers acquisition 155 - Head Office Gain on sale of a US card
Slide 19: Q218 Group results
Q218 Group results Three months ended (£m) Jun-18 Jun-17 % change Excluding L&C – Three months ended (£m) Jun-18 Jun-17 % change Income 5,576 5,058 10% PBT 1,976 1,374 44% Impairment (283) (527) 46% Attributable profit / (loss) 1,291 (698) – Operating expenses (excluding L&C) (3,310) (3,398) 3% – Li
Slide 20: Q218 Barclays UK results
Q218 Barclays UK results Business performance Excluding L&C – Three months ended (£m) Jun-18 Jun-17 % change Three months ended (£m) Jun-18 Jun-17 % change PBT 659 625 5% – Personal Banking 1,015 1,033 (2%) Attributable profit 465 406 15% – Barclaycard Consumer UK 504 495 2% Performance measures – B
Slide 21: Think digital, think Barclays UK
Think digital, think Barclays UK Building meaningful relationships with our 24 million customers Front end Changing the shape of our business digitisation Delivering sustainable Investing in digital talent, income generation through cyber resilience Automation digital transformation and digital tech
Slide 22: Q218 Barclays International results
Q218 Barclays International results Business performance Excluding L&C – Three months ended (£m) Jun-18 Jun-17 % change Three months ended (£m) Jun-18 Jun-17 % change PBT 1,344 1,257 7% – CIB 2,580 2,564 1% Attributable profit 924 816 13% – CC&P 1,127 1,046 8% Performance measures Income 3,707 3,610
Slide 23: Q218 Barclays International: CIB and CC&P results
Q218 Barclays International: Corporate & Investment Bank and Consumer, Cards & Payments results CIB Business performance CC&P Business performance % change % change Three months ended (£m) Jun-18 Jun-17 % change Three months ended (£m) Jun-18 Jun-17 GBP basis USD basis Income 1,127 1,046 8% – FICC 7
Slide 24: Head Office and Non-Core results
Head Office and Non-Core results Head Office Business performance Non-Core Business performance Three months ended (£m) Jun-18 Jun-17 Three months ended (£m) Jun-18 Jun-17 Income 33 84 Income - (456) Impairment (1) (1) Impairment - (27) – Operating expenses (excluding L&C) (36) (40) – Operating expe
Slide 25: Income and margins
Income and margins NII (£m) – Three months ended Jun-18 Jun-17 % change Q218 performance metrics – Barclays UK 1,493 1,534 (3%) • Combined Barclays UK and Barclays International1 NIM decreased – Barclays International1 962 1,064 (10%) to 349bps – Other2 (265) (19) – Barclays UK NIM declined to 322bp
Slide 26: Interest rate sensitivity
Interest rate sensitivity Illustrative sensitivity of Group NII to a 100bps parallel upward shift in interest rates1 Change in NII (£m) Reconciling items Year 1 Year 2 Year 3 • This analysis is based on the modelled performance of the consumer and corporate banking book, and includes the impact of b
Slide 27: P&L bridge from Barclays UK division to BBUKPLC legal entity
P&L bridge from Barclays UK division to Barclays Bank UK PLC (BBUKPLC) legal entity 1 2 3 4 Removal of Head Office BX Service Barclays BBUKPLC H118 (£m) BUK B Group within Company Other UK Group Q118 impact BBUKPLC margin Total income 3,624 (1,788) (44) - 51 1,843 Credit impairment charges and other
Slide 28: P&L bridge from Barclays International division to BBPLC legal entity
P&L bridge from Barclays International division to Barclays Bank PLC (BBPLC) legal entity 1 2 3 4 Head Office BX Service Barclays BBPLC H118 (£m) within Company Other International Group BBPLC margin Total income 7,515 (257) - (5) 7,253 Credit impairment charges and other provisions (161) 5 - - (156
Slide 29: Fixed income appendix
Fixed income appendix
Slide 30: Strong Group CET1 and leverage ratios
Strong Group CET1 and leverage ratios Fully loaded and transitional CET1 ratio Fully loaded CET1 ratio -30bps • Transitional CET1 ratio increased by 30bps in the quarter to 13.0% Transitional benefit +30bps • Transitional CET1 ratio decreased by 30bps in the half to 13.0% 1 13.3% 1 13.0% 1 positivel
Slide 31: Managing Group capital position above mandatory distribution restrictions
Managing Group capital position above mandatory distribution restrictions Illustrative evolution of minimum CET1 requirements and buffers 2017 Pillar 1 requirement Countercyclical Buffer (CCyB) Distribution restrictions and management buffer 2017 Pillar 2A CET1 requirement CRD IV Mandatory Distribut
Slide 32: Managing capital position above stress test hurdles
Managing capital position above stress test hurdles Barclays’ expected hurdle rate for 2018 BoE stress test1 2017 P1 requirement Countercyclical Buffer (CCyB) Stress tests 2017 P2A CET1 requirement Maximum and indicative • Barclays’ end-state stress buffer is expected to be at least c.4.6% when G-SI
Slide 33: Transition to CRD IV capital structure well established
Transition to CRD IV capital structure well established Illustrative evolution of CRD IV capital structure Well managed and balanced total capital structure 20.5% • BBPLC issued capital instruments are expected to qualify as MREL in Total capital ratio line with their regulatory capital values until
Slide 34: Managing evolving future Group minimum leverage requirements
Managing evolving future Group minimum leverage requirements Illustrative evolution of minimum leverage requirements and buffers under the UK regime BoE minimum leverage requirement Maximum BoE stress test hurdle rate for 2018 tests1 Leverage requirements G-SII leverage buffer Regulatory minimum lev
Slide 35: Leverage requirements
Leverage requirements Requirements Requirements Disclosure Disclosure obligations obligations Basis Basisof of preparation preparation 30- Jun-18 01-Jan-191 01-Jan-22 FY17 Q118 onwards Today 01-Jan -225 Pillar 1 3.25% 3.25% G-SII 0.394% 0.525% CCyB 0.1% 0.2% FPC expected 1. Spot basis 1. Spot basis
Slide 36: ADI position supports strong distribution capacity
ADI position supports strong distribution capacity Distribution capacity as at 31 December 2017 (£m) Distributable items ADI Barclays PLC dividend payments Barclays PLC AT1 coupons • Barclays PLC has significant Available Distributable Items (ADIs)1 to cover dividends on ordinary shares and AT1 dist
Slide 37: Transition to HoldCo funding model continues steadily
Transition to HoldCo funding model continues steadily HoldCo MREL position and requirement Well advanced on HoldCo issuance plan including requisite buffers 2018 issuance plan – currently expect c.£10bn equivalent issuance in 20183 29.1% • Issued £6.2bn equivalent of MREL in H118, all in senior form
Slide 38: Proactive transition to HoldCo capital and funding model
Proactive transition to HoldCo capital and funding model HoldCo issuance by year1 Senior unsecured Total: £3.8bn • The Group has continued to make strong T2 Total: £2.4bn HoldCo Snr: £3.8bn Total: £11.6bn progress on its commitment to transition to AT1 HoldCo Snr: £2.4bn T2: £0.0bn HoldCo Snr: £6.2b
Slide 39: High quality liquidity and funding position
High quality liquidity and funding position with a conservatively positioned liquidity pool and stable LDR Liquidity remains in prudential surplus Loan: deposit ratio1 Liquidity Coverage Loans and advances2 (£bn) Deposits2 (£bn) LDR Ratio (LCR) 84% 84% 83% (%) 154% 147% 154% 131% 399 348 391 324 317
Slide 40: Wholesale funding composition as at June 2018
Wholesale funding composition as at 30 June 20181 <1 1-3 3-6 6-12 Total 1-2 2-3 3-4 4-5 As at 30 June 2018 (£bn) >5 years Total month months months months <1 year years years years years Barclays PLC (the Parent company) Senior unsecured - 0.1 - - 0.1 2.3 2.8 2.7 2..4 16.8 27.1 (public benchmark) Se
Slide 41: Simplified business divisions, aligned to legal entity construct
Simplified business divisions, aligned to legal entity construct Barclays PLC Barclays International Barclays UK and Head Office1 UK consumer and business bank Diversified wholesale differentiated by scale and digital innovation and consumer bank Divisions Personal Banking Consumer, Cards & Payments
Slide 42: Deposit and wholesale funding sources of BBUKPLC and BBPLC
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) – Personal Banking 153 – Corporate and Investment Bank 130 Deposit funding 194 1922 – Business Banking 41 – Consumer, Cards and Payments 61 – Cer
Slide 43: Group expects to accommodate legal entity capital requirements within CET1 guidance
Group expects to accommodate all legal entity capital requirements within current Group CET1 guidance of c.13% Accounting and regulated sub-group Accounting sub-group Barclays PLC Barclays Bank UK PLC sub-group Barclays Bank PLC accounting sub-group Barclays Bank UK PLC (solus) Group Service Barclay
Slide 44: Preparation for Brexit
Preparation for Brexit Plans in place to expand Barclays Bank Ireland (BBI) in advance of March 2019 to support activity with European clients To provide a sense of size, using December 2017 Allows passported activity for EEA-domiciled clients post Brexit numbers, the EEA-domiciled clients and assum
Slide 45: Prudently managing credit risk in both the UK and US
Prudently managing credit risk in both the UK and US Conservatively positioned in the UK in the face of Brexit and the consumer credit cycle in the US Q416 Q217 Q417 Q218 Low LTV mortgage book Average LTV on flow Average LTV on stock Gross L&A <50% average LTV on stock as at Q218 UK Bias to grow
Slide 46: Ratings remain a key strategic priority
Ratings remain a key strategic priority Current Senior Long and Confirmed ratings of Barclays PLC, BBPLC Standard & Poor’s Fitch Moody’s Short Term ratings and BBUKPLC Rating agencies finalised their ratings for the holding company, ring-fenced bank and non ring-fenced bank following the implementat
Slide 47: Barclays rating composition for senior debt
Barclays rating composition for senior debt Fitch Moody’s Standard & Poor’s BPLC BBPLC BBUKPLC BPLC BBPLC BBUKPLC BPLC BBPLC BBUKPLC Viability Rating1 a a a Baseline Credit Assessment baa3 baa3 a3 Stand-Alone Credit Profile bbb+ Operating aa to a+ Macro profile Strong+ Strong+ Strong+ Anchor bbb+ en
Slide 48: Barclays rating composition for subordinated debt
Barclays rating composition for subordinated debt Fitch Moody’s Standard & Poor’s Baseline Stand-alone Viability Stand-Alone a a Credit baa3 baa3 bbb+ rating Rating Assessment Credit Profile BPLC BBPLC BPLC BBPLC BPLC BBPLC T2 T2 T1 T1 T2 T2 AT1 LT2 UT2 T1 T2 AT1 LT2 UT2 (non- T2 AT1 LT2 UT2 T1 Coco
Slide 49: UK approach to resolution
UK approach to resolution Illustrative UK resolution loss allocation waterfall assuming multiple OpCos1 OpCo waterfall Intercompany investments HoldCo waterfall • BRRD PONV write-down • Total OpCo losses are allocated to • Losses are transmitted to HoldCo • The loss on HoldCo’s investment powers ens
Slide 50: Abbreviations
Abbreviations AP Attributable Profit HO Head Office TNAV Tangible Net Asset Value AT1 Additional Tier 1 L&A Loans and Advances US DoJ US Department of Justice BAGL Barclays Africa Group Limited L&C Litigation & Conduct US IHC US Intermediate Holding Company BBI Barclays Bank Ireland LBT Loss Before
Slide 51: 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