Barclays Plc · LSE:BARC
Barclays — Q3 2012 Earnings Presentation
63 slides from Barclays's earnings presentation, Oct 31, 2012
Slide 1: Investor Presentation: Q3 2012 Interim Management Statement
Investor Presentation Q3 2012 Interim Management Statement
Slide 2: Overview for the first nine months of 2012
Overview for the first nine months of 2012 Income growth in the IB supported by stable customer net interest income in other businesses Adjusted income flat at £22,347m despite macroeconomic challenges and the continuing low interest rate environment Income at the Investment Bank improved 7% to
Slide 3: Index
Index Slide Slide Group financial highlights 4-7 Business performance (cont.) - Income 8-9 - Barclaycard 30-31 - Impairment 10 - Investment bank 32-34 - Costs 11-12 - Corporate bank 36-37 - Capital, funding & liquidity 13-20 - Wealth & Investment Mgmt 38-39 - Balance sheet 21 - Eurozone summary 22 B
Slide 4: Balanced profit distribution across the Group
Balanced profit distribution across the Group Composition of adjusted profit before tax demonstrates the benefits of the universal banking model Adj. PBT: £5,954m +17.6% Adj. PBT: £5,062m Investment Bank, £3,205m Investment Bank, £2,698m Corporate Bank, £167m Corporate Bank, £444m Wealth & Investmen
Slide 5: Adjusted financial highlights
Adjusted financial highlights Adjusted profits up 18% with improvements of 27% in Corporate and Investment Banking Nine months ended – 2012 2011 Change • Adjusted income was flat despite macroeconomic September (£m) (£m) (%) challenges and the continuing low interest rate environment Income 22,347 2
Slide 6: Adjusting items to profit before tax
Adjusting items to profit before tax Q312 Q212 Q112 Q411 Q311 Q211 (£m) (£m) (£m) (£m) (£m) (£m) Adjusted profit before tax 1,727 1,782 2,445 528 1,337 1,721 Own credit (1,074) (325) (2,620) (263) 2,882 440 Gains on debt buy-backs - - - 1,130 - - Impairment and gain/(loss) on - 227 - - (1,800) (58)
Slide 7: Adjusted return on equity (RoE) increased to 8.8%
Adjusted return on equity (RoE) increased to 8.8% RoE improvements in five of seven businesses with the Investment Bank achieving c14% return on equity in difficult market conditions Q3 YTD 2011 RoE Q3 YTD 2012 RoE 8.4% Group 8.8% 16.7% UK RBB 16.9% (3.9%) Europe RBB (7.6%) 9.6% Africa RBB 4.9% 18.4
Slide 8: Adjusted income in line with prior year at £22,347m
Adjusted income in line with prior year at £22,347m Income outperformance in the IB supported by growth in customer net interest income in other businesses 22,300 22,347 £m Q3 YTD 2012 9,129 8,517 Q3 YTD 2011 3,5273,335 3,1123,072 2,710 2,390 2,3982,205 1,2951,334 979 705 UK RBB Europe RBB Africa RB
Slide 9: NIM lower due to smaller contribution from hedges
NIM lower due to smaller contribution from hedges £m* Q3 YTD Q3 YTD 2011 2012 Customer Margin Hedge Income 1,805 989 Non Customer Margin Customer Income 7,380 7,345 Average Assets 317,408 317,987 250 209 Average Liabilities 269,387 279,348 200 186 41 22 basis points 150 100 168 164 50 0 Q3 YTD 2011
Slide 10: Adjusted impairment down 7% to £2,657m
Adjusted impairment down 7% to £2,657m Impairment improvement principally reflecting improvements in the UK businesses £m Q3 YTD 2012 2,851 2,657 Q3 YTD 2011 988 895 714 635 501 380 378 346 198 233 178 3 31 25 UK RBB Europe RBB Africa RBB Barclaycard Investment Corporate Wealth and IM Group Bank Ban
Slide 11: Cost to income ratio improved to 62% (2011: 65%)
Cost to income ratio improved to 62% (2011: 65%) Cost remains a core focus given the flat income environment in which many of our businesses currently operate £m 22,300 22,347 Performance costs Non-performance costs 14,441 (4%) 13,832 2,184 (9%) 1,995 (3%) 12,257 11,837 Q3 YTD 2011 Q3 YTD 2012 Q3 YT
Slide 12: Non-performance cost savings
Non-performance cost savings On target to meet non-performance cost savings of £2bn by 2013 despite on-going regulatory cost pressures and continued business investment Actuals Targets £17.5bn 2010 Medium Term Plan Annualised Q3 12 YTD Actuals £2bn £16.4bn Savings Target £15.8bn £15.5bn Pre 2010 201
Slide 13: Solid capital, funding and liquidity
Solid capital, funding and liquidity Our financial strength continues to serve us well in the current environment and remains a core component of our strategy going forward 30 Sep 30 Jun • CT1 ratio of 11.2% reflecting a broadly stable As at 2012 2011 CT1 equity at £42.5bn and reduced risk weighted
Slide 14: Capital ratios and leverage
Capital ratios and leverage Our financial strength continues to serve us well in the current environment and remains a core component of our strategy going forward Basel 2 Basel 2.5 Basel 2 Basel 2.5 10.8% 11.0% 11.2% 28x £bn 10.0% 16.6% 16.9% 16.4% 16.9% 20x 20x 20x 20x 13.6% 13.7% 13.0% 13.5% 12.9
Slide 15: Pro forma Core Tier 1 ratios
Pro forma Core Tier 1 ratios We continue to manage the business to absorb changing regulation. Pro forma CT1 ratios are subject to finalisation of Basel 3 rules and market conditions % 11.2 10.9 10.4 9.5 9.1 8.2 30 Sep 12 (Basel 2.5) 31 Dec 12 (Basel 2.5) 01 Jan 13 (Basel 3) 31 Dec 13 (Basel 3) Repo
Slide 16: Pro forma CRD IV capital and RWAs
Pro forma CRD IV capital and RWAs Reported Pro forma Pro forma Pro forma Sep-12 Dec-12 Jan-13 Dec-13 CT1 Capital 42.5 42.9 42.9 47.2 CRDIV impact to CT1 Capital 1.3 1.3 CT1 Capital (under CRDIV) 44.2 48.5 RWAs (pre CRD IV and Regulatory changes) 379 379 379 379 Operational Risk and Slotting (Q4-12)
Slide 17: Pro forma capital and RWAs ─ Notes
Pro forma capital and RWAs ─ Notes Notes on Basel 3 Core Tier 1 pro formas 1. Pro forma uses consensus estimates for retained earnings from 23 sell-side analysts, including consensus dividend payout. Barclays neither endorses nor verifies the estimates used 2. Pro forma assumes exercise of outstandi
Slide 18: 'Target' Capital Structure post CRD IV and ICB
‘Target’ Capital Structure post CRD IV and ICB Irrespective of final regulatory outcomes, proposed CRD IV requirements and ICB proposals provide enough certainty to target an end state capital structure with considerable confidence 16.9% Total 17.0% Total • Barclays “target” capital structure embrac
Slide 19: Funding
Funding Barclays maintains access to a variety of funding sources, including customer deposits and wholesale funding. YTD Barclays has raised £22bn of term funding, incl. £1bn under FLS. £bn 138% 130% 124% 118% 111% 111% Group Loans & Advances to Customers 462 432 455 453 Group Deposits from Custome
Slide 20: Liquidity pool
Liquidity pool Barclays continues to maintain a strong and high-quality liquidity pool that consists exclusively of unencumbered assets Liquidity pool amounted to £160bn at end of September 2012, with 87.5% held in cash, high quality government bonds and deposits with central banks 170 154 160 £bn
Slide 21: Balance sheet as at 30 June 2012
Balance sheet as at 30 June 2012 Whilst the balance sheet totals £1.6tn, wholesale funding requirements are limited to £263bn as a consequence of its structure £1,571bn1 £515bn £505bn Assets Liabilities £407bn £407bn £335bn £308bn £118bn £170bn £145bn £144bn £89bn Total Gross Derivative Repo financi
Slide 22: Reduced exposure to the Eurozone periphery
Reduced exposure to the Eurozone periphery Direct exposures continue to be managed down, whilst redenomination risk is significantly reduced in Spain and Portugal Exposures by Geography • During first 9 months, exposure to Spain, Italy, Portugal £67.5bn and Ireland decreased 11.6% to £59,623m, with
Slide 23: Results by Business
Results by Business # BARCLAYS
Slide 24: UK Retail and Business Banking
UK Retail and Business Banking Returns performance driven by solid new mortgage lending and deposit inflows, a continued reduction in impairment and ongoing cost control 2012 2011 Change Nine months ended – September (£m) (£m) (%) Income 3,335 3,527 (5) Impairment charges (198) (380) (48) Net operat
Slide 25: UK Retail and Business Banking
UK Retail and Business Banking 2012 compared to 2011 • Adjusted profit before tax decreased 4% to £1,146m. Statutory profit before tax was £296m (2011: £798m) after £850m (2011: £400m) provision for PPI redress, including claims management costs ─ Solid growth in new mortgage lending and customer de
Slide 26: Europe Retail and Business Banking
Europe Retail and Business Banking Performance deteriorated as macro economic environment continues to have a significant drag on income and impairment 2012 2011 Change Nine months ended – September (£m) (£m) (%) Income 705 979 (28) Impairment charges (233) (178) 31 Net operating income 472 801 (41)
Slide 27: Europe Retail and Business Banking
Europe Retail and Business Banking 2012 Compared to 2011 • Loss before tax increased 39% to £151m ─ Decrease in income reflecting the challenging economic environment in Europe ─ Offset by lower costs following restructuring charges in 2011 and subsequent cost savings • Income declined 28% to £705m
Slide 28: Africa Retail and Business Banking
Africa Retail and Business Banking Higher credit impairment in the South African home loans portfolio and adverse currency movements have both impacted performance as we deliver our One Africa strategy 2012 2011 Change Nine months ended – September (£m) (£m) (%) Income 2,390 2,710 (12) Impairment ch
Slide 29: Africa Retail and Business Banking
Africa Retail and Business Banking 2012 Compared to 2011 • Profit before tax decreased 41% to £330m ─ Higher credit impairment charges primarily in South African home loans recovery book ─ Adverse currency movements reflecting depreciation of major African currencies against Sterling • Income declin
Slide 30: Barclaycard
Barclaycard Strong performance driven by solid profit growth within the UK and International businesses 2012 2011 Change Nine months ended – September (£m) (£m) (%) Income 3,072 3,112 (1) Impairment charges (714) (988) (28) Net operating income 2,358 2,124 11 Operating expenses (excluding provision
Slide 31: Barclaycard
Barclaycard 2012 Compared to 2011 • Adjusted profit before tax improved 21% to £1,150m. Statutory profit before tax was £1,000m (2011: £302m) after £150m (2011: £600m) provision for PPI redress, including claim management costs, and goodwill impairment in 2011 ─ Solid profit growth within the UK and
Slide 32: Investment Bank
Investment Bank Strong income performance with costs tightly managed and impairment largely affected by one-off items. RoE of 14.2% in challenging environment 2012 2011 Change Nine months ended – September (£m) (£m) (%) Income 9,129 8,517 7 Impairment charges (346) (3) Net operating income 8,783 8,5
Slide 33: Investment Bank
Investment Bank 2012 Compared to 2011 • Profit before tax increased 19% to £3,205m, primarily driven by income growth of 7% and a reduction in operating expenses of 4% despite a £193m charge relating to the Investment Banking allocation of the £290m penalty arising from the industry wide investigati
Slide 34: Investment Bank Q3 income up 7% vs. Q3 2011
Investment Bank Q3 income up 7% vs. Q3 2011 £m 3,464 Q2 2011 3,032 Q3 2011 2,897 Q4 2011 2,633 Q1 2012 2,396 Q2 2012 2,254 Q3 2012 1,968 1,818 Total income 1,715 1581 1,438 • Q3 2012 vs Q3 2011 up 17% • Q3 2012 vs Q2 2012 down 13% 971 563 550 534 520 506 509 501 487 423 389 338 305 Total income FICC
Slide 35: Intentionally left blank
Intentionally left blank # BARCLAYS
Slide 36: Corporate Banking
Corporate Banking UK performance remains strong, with improving international businesses and good cost control. 3% growth in customer deposits reflects strength of franchise in challenging markets 2012 2011 Change Nine months ended – September (£m) (£m) (%) Income 2,205 2,398 (8) Impairment charges
Slide 37: Corporate Banking
Corporate Banking 2012 Compared to 2011 • Adjusted profit before tax improved £277m to £444m, including a gain of £61m (2011: loss of £72m) on the net valuation of fair value loans. Statutory loss before tax was £6m (2011: £103m profit), after charging £450m provision for interest rate hedging produ
Slide 38: Wealth and Investment Management
Wealth and Investment Management Strong delivery against strategic programme with significant front office hiring and technology improvements driving efficiencies as well as improved service to clients 2012 2011 Change Nine months ended – September (£m) (£m) (%) Income 1,334 1,295 3 Impairment charg
Slide 39: Wealth and Investment Management
Wealth and Investment Management 2012 Compared to 2011 • Profit before tax increased 31% to £200m ─ Continue to execute strategic investment programme with a focus on building productive capacity and delivering a step change in the client experience • Income increased by 3% to £1,334m driven by the
Slide 40: Appendix
Appendix # BARCLAYS
Slide 41: Barclays overview
Barclays overview A Global Universal Bank Key Financial Metrics as at 30 Sep 2012 • Major global financial services provider Total Assets £1.6tr • 3 main businesses: Core Tier I (Basel 2.5) 11.2% - Retail and Business Banking (RBB), - Corporate & Investment Banking, and Adj. Gross Leverage Ratio 20x
Slide 42: Analysis of net interest margin
Analysis of net interest margin RBB, Total RBB, Corporate Corporate Wealth and As at 30 September 2012 UK RBB Europe RBB Africa RBB Barclaycard Corporate and Wealth Banking IM and Wealth interest income Customer asset margin (%) 1.09 0.82 3.25 9.34 1.18 0.64 2.11 5,025 Customer liability margin (%)
Slide 43: Analysis of net interest income
Analysis of net interest income Nine months ended 30 Sep 12 30 Sep 11 RBB, Corporate Banking and Wealth and Investment Management - Customer asset income 5,025 5,303 - Customer liability income 2,320 2,077 Total customer net interest income 7,345 7,380 Total non-customer net interest income 989 1,80
Slide 44: Strong asset quality
Strong asset quality Despite challenging macroeconomic environment, retail and wholesale portfolios are performing well, as evidenced by limited Credit Risk Loans (CRLs) and low loan loss rates 51.7% 50.4% 51.0% 47.9% 49.3% 49.7% 48.9% 39.0%* 5.1% 4.8% 4.5% 4.6% 4.4% 3.8% 3.7% 156bp 118bp 118bp 74bp
Slide 45: Mortgage book – delinquency & LTV summary as at 30 June 2012
Mortgage book – delinquency & LTV summary as at 30 June 2012 >90 day MTM New Proportion Gross L&A As at 30 June 2012 arrears LTV LTV >85% LTV (£m) (%) (%) (%) (%) UK 110,004 0.3 44.3 55.3 8.8 South Africa 16,752 2.8 45.0 62.9 22.5 Spain 13,886 0.7 62.7 62.5 19.7 Italy 15,450 1.0 46.5 56.2 2.0 Portug
Slide 46: Credit cards, overdrafts and unsecured loans – delinquency summary
Credit cards, overdrafts and unsecured loans – delinquency summary as at 30 June 2012 Gross >30 day >90 day Recoveries imp. Gross L&A charge-off As at 30 June 2012 arrears arrears coverage ratio (£m) rates (%) (%) (%) (%) UK cards 14,686 2.7 1.2 5.1 80.7 US cards 8,510 2.5 1.2 5.7 89.3 UK personal l
Slide 47: Balance Sheet summary
Balance Sheet summary 30 Sep 12 30 Jun 12 (£bn) (£bn) Total assets 1,599 1,631 Including Derivative financial instruments 495 518 Loans and advances to customers 453 455 Total liabilities 1,535 1,568 Including Derivative financial instruments 488 507 Customer accounts 407 409 Shareholders’ equity 64
Slide 48: Calculation of adjusted gross leverage
Calculation of adjusted gross leverage 30 Sep 12 30 Jun 12 As at (£bn) (£bn) Total assets 1,599.1 1,631.3 Counterparty netting (411.4) (425.6) Collateral on derivatives (48.1) (51.4) Net settlement balances and cash collateral (100.1) (97.2) Goodwill and intangible assets (7.9) (7.9) Customer assets
Slide 49: Capital resources
Capital resources 30-Sep-12 30-Jun-12 As at (£m) (£m) Shareholders’ equity (ex. NCIs) 54,295 54,205 Net NCIs 2,409 2,525 Regulatory adjustments and deductions: Goodwill and intangible assets (7,564) (7,574) Own credit cumulative gain (net of tax) 323 (492) Defined benefit pension adjustment (2,297)
Slide 50: RWAs by business
RWAs by business 30 Sep 12 30 Jun12 As at (£m) (£m) UK RBB 37,305 36,038 Europe RBB 16,055 16,563 Africa RBB 26,846 27,909 Barclaycard 33,573 33,149 Investment Bank 180,415 190,553 Corporate Banking 64,349 69,328 Wealth and Investment Management 14,095 13,998 Head Office and Other Operations 6,004 2
Slide 51: Investment Bank credit market exposures
Investment Bank credit market exposures Barclays continues to reduce its credit market exposure, managing for value Nine months ended 30 Sep12 FV (losses) Imp. (charge) Total (losses) 30 Sep12 31 Dec 11 As at / gains / release / gains (£m) (£m) (£m) (£m) (£m) ABS CDO Super Senior 1,536 1,842 (24) (1
Slide 52: Managed Credit Market Exposure
Managed Credit Market Exposure Since December 2008, Barclays has successfully reduced its exposure to legacy assets by 76% to £10.0bn 2008-2012 CME Balances (£bn) • CMEs arose before market dislocation in mid-2007 and primarily consist of real estate and leveraged finance 41.7 -76.0% • Exposure mana
Slide 53: Wholesale debt maturity table as at 30 June 2012
Wholesale debt maturity table as at 30 June 2012 3-12 Total <1 Total >1 <1 month 1-3 months Total As at 30 June 2012 months year year (£bn) (£bn) (£bn) (£bn) (£bn) (£bn) Deposits from banks 16.7 7.2 3.5 27.4 8.2 35.6 Certificates of deposit and commercial paper 12.2 15.4 17.2 44.8 3.2 48.0 Asset bac
Slide 54: 2012 rating & outlook changes
2012 rating & outlook changes Despite re-rating of sector by all main rating agencies in the last 12 months, Barclays rating remains strong and in line with peers’ Barclays Bank plc 2012 Rating & Outlook Changes 1 January 2012 31 October 2012 Standard & Poor's Long Term A+ (Stable) A+ (Negative) Sho
Slide 55: Basel 3
Basel 3 Regulatory Timeline • The initial timeframe mentioned below is now expected to be delayed in the EU – alternative dates have yet to be communicated H1 2010 1 Jan 2011 1 Jan 2012 1 Jan 2013 1 Jan 2014 1 Jan 2015 1 Jan 2016 1 Jan 2017 1 Jan 2018 1 Jan 2019 Capital Phased-in Capital Requirement
Slide 56: Independent Commission on Banking (ICB)
Independent Commission on Banking (ICB) Barclays backs ICB’s initiative to improve stability of UK banking system and support a sustainable economy, however, requires alignment with international regulation and careful consideration of implementation costs Regulatory Timeline • September 2011: publi
Slide 57: Reduced exposure to the Eurozone periphery
Reduced exposure to the Eurozone periphery Total Eurozone exposure of £59.9bn comprised of £38.8bn of high quality retail assets, principally low LTV residential mortgages. Sovereign exposure has decreased 15% in Q3 to £4.8bn Spain Italy Portugal Ireland As at 30 September 2012 (£m) (£m) (£m) (£m) S
Slide 58: Spanish exposures
Spanish exposures Retail Gross mortgage exposure by location of Average indexed LTV of 64% outstanding balances Average retail customer age 48; less than 1% of mortgage balances with customers aged under 25 Barcelona 0.7% of home loans greater than 90 days in arrears* c.13% Corporate £4.6bn
Slide 59: Portuguese exposures
Portuguese exposures Retail Gross mortgage exposure by location of Average indexed LTV of 77% outstanding balances Average retail customer age 40; less than 1% of mortgage balances with customers aged under 25 0.6% of home loans greater than 90 days in arrears* Corporate Porto c.15% £1.7bn g
Slide 60: Italian exposures
Italian exposures Retail Gross mortgage exposure by location of Average indexed LTV of 46% outstanding balances Average retail customer age 46; less than 3% of mortgage balances with customers aged under 25 Milan c.10% 1.1% of home loans greater than 90 days in arrears* Corporate Focused on
Slide 61: Investor Relations contact information
Investor Relations contact information Charlie Rozes Kathryn McLeland Richard Caven (Debt IR) +44 (0)20 7116 5752 +44 (0)20 7116 4943 +44 (0)20 7116 2809 [email protected] [email protected] [email protected] James Johnson Adam Strachan Oihana Bessonart (Debt IR) +44 (0)
Slide 62: Legal disclaimers
Legal disclaimers 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
Slide 63: Legal disclaimers
Legal disclaimers Forward-looking Statements This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to certain of the Group’s plans a