Diversified business model delivered a resilient operating performance Q320 YTD
Despite the pandemic, Barclays delivered a Q320 YTD Group profit before tax of £2.4bn (Q319 YTD: £3.3bn, included a Payment Protection Insurance (PPI) provision of £1.4bn), a return on tangible equity (RoTE) of 3.6% (Q319 YTD: 5.1%), earnings per share (EPS) of 7.6p (Q319 YTD: 10.4p) and a common equity tier 1 (CET1) ratio of 14.6% (December 2019: 13.8%)
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Income
Diversified income streams with strong Q320 YTD CIB income offsetting challenges in Barclays UK and CC&P |
Group income of £16.8bn up 3% versus prior year |
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Barclays International income of £12.4bn, up 11% versus prior year |
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Corporate and Investment Bank (CIB) income of £9.8bn, up 24% driven by strong Markets income reflecting wider spreads and market share gains3 |
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– |
Consumer, Cards and Payments (CC&P) income of £2.6bn, down 21% driven by lower balances, margin compression and reduced payments activity |
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Barclays UK income of £4.7bn down 12% versus prior year reflecting lower interest rates and unsecured lending balances, COVID-19 customer support actions and the removal of certain fees |
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Credit impairment charges
Increased impairment provisioning driving higher coverage ratios across portfolios |
Group credit impairment charges increased to £4.3bn (Q319 YTD: £1.4bn) reflecting the impact from revised IFRS 9 scenarios and £0.7bn in respect of single name wholesale loan charges |
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Impairment coverage ratio for the unsecured consumer lending and wholesale portfolios increased to 12.2% (FY19: 8.1%) and 1.5% (FY19: 0.8%) respectively |
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Costs4
Improved cost: income ratio |
Group operating expenses of £10.0bn down 1% versus prior year |
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Cost efficiencies and cost discipline contributed to positive cost: income jaws of 4% resulting in an improved cost: income ratio of 59% (Q319 YTD: 62%) |
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Capital, liquidity and TNAV
Strong capital and liquidity position |
CET1 ratio of 14.6%, a YTD increase of 80bps |
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The increase over the first nine months of the year reflects profits, regulatory measures and cancellation of the full year 2019 dividend payment, partially offset by a YTD increase in Risk Weighted Assets (RWAs) |
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Headroom of 3.3% above Maximum Distributable Amount (MDA) hurdle of 11.3%5 |
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The Group liquidity pool was £327bn (December 2019: £211bn) and the liquidity coverage ratio (LCR) was 181% (December 2019: 160%) |
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Tangible net asset value (TNAV) per share increased to 275p (December 2019: 262p) |
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Q320 performance
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Q320 Barclays UK and CC&P income improved from Q220, whilst CIB remains strong year on year
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Q320 Group profit before tax of £1.1bn (Q319: £0.2bn), resulting in a RoTE of 5.1% (Q319: (2.4%)) and EPS of 3.5p (Q319: (1.7p)) |
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Q320 Group income of £5.2bn, down 6% versus prior year |
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Q320 Barclays International income of £3.8bn, up 1% versus prior year |
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Q320 CIB income of £2.9bn, up 11% versus prior year driven by a 29% increase in Markets income, but down 12% versus prior quarter |
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Q320 CC&P income of £0.9bn, down 23% versus prior year but up 26% versus prior quarter improved from the Q220 low point reflecting recovery in US cards spend, deposit repricing, UK merchant acquiring volumes, and the non-recurrence of a £100m valuation loss in Barclays' preference shares in Visa Inc. |
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Q320 Barclays UK income of £1.6bn, down 16% versus prior year but up 6% versus prior quarter improved from the Q220 low point with Q320 net interest margin (NIM) stable at 2.51% (Q220: 2.48%) |
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Q320 Group credit impairment charge of £0.6bn, up 32% versus prior year but down 63% versus prior quarter |
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Q320 Group operating expenses of £3.4bn4, up 3% versus prior year and 2% versus prior quarter |
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CET1 ratio of 14.6%, an increase of 40bps in Q320 mainly due to lower RWAs |
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1 |
Total payment holidays granted as at 30 September 2020, business lending and commercial paper issuance data as at 19 October 2020. |
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2 |
Across Equity and Debt Capital Markets. |
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3 |
Data source: Coalition, H120 Competitor Analysis. Market share represents Barclays share of the total industry Revenue Pool. Analysis is based on Barclays internal business structure and internal revenues. |
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4 |
Excluding litigation and conduct. |
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Barclays' MDA hurdle will fluctuate depending on the total RWAs at each reporting period and any future regulatory changes. |
Group outlook
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Outlook remains uncertain and subject to change depending on the evolution and persistence of the COVID-19 pandemic and the outcome of Brexit negotiations |
Income |
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Certain headwinds to income in Barclays UK are expected to persist in 2021 including the low interest rate environment |
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The drivers of CC&P income are showing signs of recovery but the outlook remains uncertain |
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After a strong Q320 YTD CIB performance driven by Markets, the franchise is well positioned for the future |
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Impairment |
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Provided macroeconomic assumptions remain consistent with expectations, we expect the H220 impairment charge to be materially below that of H120 and it is likely that the full year 2021 impairment charge will be below that of 2020 |
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Costs |
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The Group expects FY20 costs, excluding litigation and conduct, to be broadly flat versus FY19. However, the Group will be evaluating actions to reduce structural costs, which could result in additional charges, the timing and size of which remain to be determined |
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Capital |
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The Group remains in a strong capital position and is confident of its capital generation capacity over time, acknowledging likely headwinds to the CET1 ratio from procyclical effects on RWAs and reduced benefit from transitional relief on IFRS 9 impairment |
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The Board recognises the importance of capital returns to shareholders and will provide an update on its policy and dividends at FY20 results |
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Barclays Group results |
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for the nine months ended |
30.09.20 |
30.09.19 |
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£m |
£m |
% Change |
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Total income |
16,825 |
16,331 |
3 |
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Credit impairment charges |
(4,346) |
(1,389) |
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Net operating income |
12,479 |
14,942 |
(16) |
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Operating expenses |
(9,954) |
(10,051) |
1 |
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Litigation and conduct |
(106) |
(1,682) |
94 |
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Total operating expenses |
(10,060) |
(11,733) |
14 |
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Other net income |
– |
51 |
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Profit before tax |
2,419 |
3,260 |
(26) |
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Tax charge |
(441) |
(814) |
46 |
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Profit after tax |
1,978 |
2,446 |
(19) |
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Non-controlling interests |
(41) |
(38) |
(8) |
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Other equity instrument holders |
(631) |
(628) |
– |
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Attributable profit |
1,306 |
1,780 |
(27) |
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Performance measures |
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Return on average tangible shareholders' equity |
3.6% |
5.1% |
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Average tangible shareholders' equity (£bn) |
48.5 |
46.6 |
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Cost: income ratio |
60% |
72% |
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Loan loss rate (bps) |
164 |
53 |
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Basic earnings per share |
7.6p |
10.4p |
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Dividend per share |
– |
3.0p |
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Performance measures excluding litigation and conduct1 |
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Profit before tax |
2,525 |
4,942 |
(49) |
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Attributable profit |
1,378 |
3,391 |
(59) |
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Return on average tangible shareholders' equity |
3.8% |
9.7% |
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Cost: income ratio |
59% |
62% |
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Basic earnings per share |
8.0p |
19.7p |
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As at 30.09.20 |
As at 31.12.19 |
As at 30.09.19 |
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Balance sheet and capital management2 |
£bn |
£bn |
£bn |
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Loans and advances at amortised cost |
344.4 |
339.1 |
345.1 |
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Deposits at amortised cost |
494.6 |
415.8 |
420.6 |
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Tangible net asset value per share |
275p |
262p |
274p |
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Common equity tier 1 ratio |
14.6% |
13.8% |
13.4% |
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Common equity tier 1 capital |
45.5 |
40.8 |
41.9 |
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Risk weighted assets |
310.7 |
295.1 |
313.3 |
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Average UK leverage ratio |
5.1% |
4.5% |
4.6% |
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UK leverage ratio |
5.2% |
5.1% |
4.8% |
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Funding and liquidity |
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Group liquidity pool (£bn) |
327 |
211 |
226 |
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Liquidity coverage ratio |
181% |
160% |
151% |
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Loan: deposit ratio |
70% |
82% |
82% |
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1 |
Refer to pages 40 to 49 for further information and calculations of performance measures excluding litigation and conduct. |
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2 |
Refer to pages 29 to 35 for further information on how capital, RWAs and leverage are calculated. |
Group Chief Executive Officer's Review
“In this historically challenging year for our customers and clients we have continued to provide huge support to help people through the social and economic impact of the COVID-19 pandemic. This remains a priority, alongside maintaining the financial integrity of the firm and keeping our colleagues safe.
For customers, we have provided over 640,000 payment holidays globally1, and this is in addition to some £100m of income foregone in the form of waived overdraft interest and banking charges for our UK customers and business banking clients.
We have now delivered some £25bn through the government support measures to UK businesses.1 This includes 296,000 Bounce Back Loans totalling £9.2bn, around £3bn under the CBILS programmes2, and £12.4bn through the Covid Corporate Financing Facility.1 In addition, we have helped businesses and institutions to access global capital markets, including underwriting over £1tn of new issuance in Q220 and Q320.3
Our £100m Community Aid Package is making a positive difference for thousands of people via hundreds of charities we have supported which are mitigating the impact of COVID-19, including donations to NHS hospital charities, Age UK and Mind.
This support is made partly possible because we have a resilient and diversified business model which means we remain profitable as we weather this crisis, with strong income performance in our CIB more than offsetting headwinds in our consumer businesses.
In the first nine months Group income increased 3% to £16.8bn with pre-provision profits4 increasing 9% to £6.9bn.
Our impairment charges now total £4.3bn, with an additional £608m taken in Q320, a figure down 63% on the previous quarter. We expect the impairment charge in the second half of the year to be materially lower than the first half.
Group profit before tax for the first nine months was £2.4bn, with the Group remaining profitable in each quarter so far.
In Barclays International, CIB income increased 24% to £9.8bn with Markets income up 52% mainly reflecting wider spreads and market share gains.5 Profit before tax in the CIB increased 25% to £3.2bn.
Our CC&P business returned to profitability in the third quarter with profit before tax of £165m, reducing the year to date loss before tax to £449m, which included impairment charges of £1.5bn.
Barclays UK also returned to profitability in the third quarter, with profit before tax of £196m, as economic activity recovered from the spring low point and impairment charges reduced. For the first nine months Barclays UK delivered profit before tax of £264m. Income headwinds in Barclays UK are expected to persist into 2021 including the low interest rate environment.
Group costs excluding litigation and conduct are down 1% at £10.0bn, resulting in positive cost to income jaws of 4%, and an improved cost to income ratio of 59%.
Group RoTE was 3.6% including 10.5% for the CIB; and 2.2% for Barclays UK. The Group generated EPS of 7.6 pence.
In the third quarter Group income was £5.2bn and Group profit before tax increased to £1.1bn due to the non-recurrence of the 2019 PPI provision.
Our CET1 ratio increased 40bps in the quarter to 14.6%, more than 300 basis points above our regulatory minimum. The Board recognises the importance of capital returns to shareholders and will provide an update on its policy and dividends at full year results.”
James E Staley, Group Chief Executive Officer