Barclays Plc
3rd Quarter Results
Performance Highlights
The Group's diversified business model delivered a record Group profit before tax of £6.9bn (Q320 YTD: £2.4bn), a return on tangible equity (RoTE) of 14.9% (Q320 YTD: 3.6%) and earnings per share (EPS) of 30.8p (Q320 YTD: 7.6p)
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James E Staley, Chief Executive Officer, commented “On top of a good first half, a strong third quarter performance means Barclays has delivered its highest Q3 YTD pre-tax profit on record in 2021, demonstrating the benefits of our diversified business model. We continue to support our customers and clients through the COVID-19 pandemic, have achieved a double-digit RoTE in every quarter year to date, and expect to deliver a full year RoTE above 10%. While the CIB performance continues to be an area of strength for the Group, we are also seeing evidence of a consumer recovery and the early signs of a more favourable rate environment. Against that backdrop, we are focused on balancing cost efficiencies with further investment into high-returning growth opportunities. Our CET1 ratio of 15.4% means we are also in a strong position to balance this growth with a key priority of returning excess capital to shareholders.” |
Key financial metrics:
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Income |
Cost: income ratio |
Profit before tax |
RoTE |
EPS |
CET1 |
|
Q321 YTD |
£16.8bn |
64% |
£6.9bn |
14.9% |
30.8p |
15.4% |
|
Q321 |
£5.5bn |
64% |
£2.0bn |
11.9% |
8.5p |
Performance highlights:
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Strong Corporate and Investment Bank (CIB) performance: Investment Banking fees and Equities income had their best Q3 YTD on a comparable basis1 driving a CIB RoTE of 16.4% (Q320 YTD:10.5%) |
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· |
Ongoing consumer recovery and well positioned for a rising rate environment: continue to experience strong UK mortgage and deposit volumes. Although yet to translate into meaningful unsecured balance growth, positive trends in UK and US consumer spending and in payments volumes have been observed following easing of lockdown restrictions |
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· |
Investing for growth: reinvesting efficiency savings to drive income growth. Excluding structural cost actions and performance costs, Group total operating expenses were flat |
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· |
Net credit impairment release: £0.6bn Q321 YTD release driven by an improved macroeconomic outlook and benign credit performance |
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· |
Strong capital: Common equity tier 1 (CET1) ratio of 15.4%, above the target range of 13-14% |
Summary outlook:
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Returns: expect to deliver a RoTE above 10% in 2021 |
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· |
Impairment: the impairment run rate is expected to remain below historical levels in coming quarters |
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Costs: excluding structural cost actions and performance costs, FY21 costs are expected to be c.£12bn2. The Group is evaluating planned structural cost actions for Q421 |
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Capital: the CET1 ratio is expected to remain above the target range of 13-14% at 31 December 2021 |
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Capital returns: maintaining a progressive ordinary dividend policy and additional cash returns, including share buybacks, as appropriate |
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1 |
Period covering Q114 – Q321. Pre 2014 financials were not restated following re-segmentation in Q116. |
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2 |
Group cost outlook is based on an average rate of 1.38 (USD/GBP) in H221 and subject to foreign currency movements. |
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Barclays Group results for the nine months ended |
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30.09.21 |
30.09.20 |
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|
|
£m |
£m |
% Change |
|
Net interest income |
5,843 |
6,278 |
(7) |
|
Net fee, commission and other income |
10,937 |
10,547 |
4 |
|
Total income |
16,780 |
16,825 |
– |
|
Credit impairment releases/(charges) |
622 |
(4,346) |
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Net operating income |
17,402 |
12,479 |
39 |
|
Operating expenses |
(10,578) |
(9,954) |
(6) |
|
Litigation and conduct |
(131) |
(106) |
(24) |
|
Total operating expenses |
(10,709) |
(10,060) |
(6) |
|
Other net income |
247 |
– |
|
|
Profit before tax |
6,940 |
2,419 |
|
|
Tax charge |
(1,076) |
(441) |
|
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Profit after tax |
5,864 |
1,978 |
|
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Non-controlling interests |
(20) |
(41) |
51 |
|
Other equity instrument holders |
(586) |
(631) |
7 |
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Attributable profit |
5,258 |
1,306 |
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|
|
|
|
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Performance measures |
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|
|
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Return on average tangible shareholders' equity |
14.9% |
3.6% |
|
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Average tangible shareholders' equity (£bn) |
47.1 |
48.5 |
|
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Cost: income ratio |
64% |
60% |
|
|
Loan loss rate (bps) |
– |
164 |
|
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Basic earnings per share |
30.8p |
7.6p |
|
|
Basic weighted average number of shares (m) |
17,062 |
17,298 |
(1) |
|
Period end number of shares (m) |
16,851 |
17,353 |
(3) |
|
|
|
|
|
|
|
As at 30.09.21 |
As at 31.12.20 |
As at 30.09.20 |
|
Balance sheet and capital management1 |
£bn |
£bn |
£bn |
|
Loans and advances at amortised cost |
353.0 |
342.6 |
344.4 |
|
Loans and advances at amortised cost impairment coverage ratio |
1.7% |
2.4% |
2.5% |
|
Deposits at amortised cost |
510.2 |
481.0 |
494.6 |
|
Tangible net asset value per share |
287p |
269p |
275p |
|
Common equity tier 1 ratio |
15.4% |
15.1% |
14.6% |
|
Common equity tier 1 capital |
47.3 |
46.3 |
45.5 |
|
Risk weighted assets |
307.5 |
306.2 |
310.7 |
|
Average UK leverage ratio |
4.9% |
5.0% |
5.1% |
|
UK leverage ratio |
5.1% |
5.3% |
5.2% |
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|
|
|
|
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Funding and liquidity |
|
|
|
|
Group liquidity pool (£bn) |
293 |
266 |
327 |
|
Liquidity coverage ratio |
161% |
162% |
181% |
|
Loan: deposit ratio |
69% |
71% |
70% |
|
1 |
Refer to pages 27 to 33 for further information on how capital, Risk Weighted Assets (RWAs) and leverage are calculated. |
Group Finance Director's Review
Group performance1
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· |
The Group's diversified business model enabled Barclays to deliver a record profit before tax of £6,940m (Q320 YTD: £2,419m), RoTE of 14.9% (Q320 YTD: 3.6%) and EPS of 30.8p (Q320 YTD: 7.6p) |
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Total income was stable at £16,780m (Q320 YTD: £16,825m). Barclays UK income increased 2%. Barclays International income decreased 2%, with CIB income down 1% and Consumer, Cards and Payments (CC&P) income down 6%. Excluding the impact of the 9% depreciation of average USD against GBP, total income was up, reflecting the Group's diversified income streams |
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Credit impairment net release of £622m (Q320 YTD: £4,346m charge). The net release included a reversal of £1.1bn in non-default charges, primarily reflecting the improved macroeconomic outlook. Excluding this reversal, the charge was £0.5bn, reflecting reduced unsecured lending balances and low delinquency. Management judgements have been maintained in the quarter in respect of customers and clients considered to be potentially more vulnerable as government and other support schemes have started to reduce. The reduction in unsecured lending balances and growth in secured balances have contributed to a decrease in the Group's loan coverage ratio to 1.7% (December 2020: 2.4%). Loan coverage ratios in unsecured and wholesale loan portfolios remained elevated compared to pre-COVID-19 pandemic levels |
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Total operating expenses increased 6% to £10,709m, due to structural cost actions of £392m primarily relating to the real estate review in Q221, higher performance costs that reflect improved returns, and continued investment and business growth, partially offset by the benefit from the depreciation of average USD against GBP and efficiency savings. This resulted in a cost: income ratio of 64% (Q320 YTD: 60%) |
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The effective tax rate was 15.5% (Q320 YTD: 18.2%). This reflects a £402m tax benefit recognised for the re-measurement of the Group's UK deferred tax assets (DTAs) as a result of the UK corporation tax rate increase from 19% to 25% effective from 1 April 2023. The UK Government is reviewing the additional 8% surcharge tax that applies to banks' profits and if the conclusion of that review is that the surcharge is reduced then the Group's UK DTAs would be re-measured again and decreased, the exact timing of an enactment of a reduction in the surcharge is uncertain but would be expected to occur in H122 |
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Attributable profit was £5,258m (Q320 YTD: £1,306m) |
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· |
Following the completion of the £700m share buyback announced with FY20 results and the ongoing £500m share buyback announced with H121 results, the period end number of shares was 16,851m (December 2020: 17,359m) |
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Total assets increased to £1,407bn (December 2020: £1,350bn) primarily due to a £37bn increase in cash at central banks, a £29bn increase in financial assets at fair value due to an increase in secured lending, a £18bn increase in cash collateral and settlement balances and a £17bn increase in trading portfolio assets due to increased activity, partially offset by a £44bn decrease in derivative assets driven by an increase in major interest rate curves |
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Deposits at amortised cost increased £29bn to £510bn further strengthening the Group's liquidity position and contributing to a loan: deposit ratio of 69% (December 2020: 71%) |
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Tangible net asset value (TNAV) per share increased to 287p (December 2020: 269p) primarily reflecting 30.8p of EPS, partially offset by negative reserve movements |
Barclays UK
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· |
Profit before tax increased to £1,957m (Q320 YTD: £264m). RoTE was 17.9% (Q320 YTD: 2.2%) reflecting materially lower credit impairment charges |
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Total income increased 2% to £4,837m. Net interest income reduced 1% to £3,889m with a net interest margin (NIM) of 2.53% (Q320 YTD: 2.63%) as strong customer retention and improved margins in mortgages was more than offset by lower unsecured lending balances. Net fee, commission and other income increased 18% to £948m, returning back towards pre-COVID-19 pandemic levels |
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– |
Personal Banking income increased 10% to £2,900m, reflecting strong growth in mortgages alongside improved margins, balance growth in deposits and the non-recurrence of COVID-19 customer support actions, partially offset by deposit margin compression from lower interest rates and lower unsecured lending balances |
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– |
Barclaycard Consumer UK income decreased 23% to £898m as reduced borrowing and repayments by customers resulted in a lower level of interest earning lending (IEL) balances |
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Business Banking income increased 12% to £1,039m due to lending and deposit balance growth from £12.1bn of government scheme lending and the non-recurrence of COVID-19 and related customer support actions, partially offset by deposit margin compression from lower interest rates |
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1 |
The 9% depreciation of average USD against GBP adversely impacted income and profits and positively impacted total operating expenses. |
Barclays UK (continued)
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· |
Credit impairment net release of £306m (Q320 YTD: £1,297m charge) driven by an improved macroeconomic outlook and lower unsecured lending balances due to customer repayments and lower delinquencies. As at 30 September 2021, 30 and 90 day arrears rates in UK cards were 1.0% (Q320: 1.7%) and 0.3% (Q320: 0.8%) respectively |
|
· |
Total operating expenses were stable at £3,187m (Q320 YTD: £3,172m) reflecting investment spend and higher operational and customer service costs primarily driven by increased volumes, offset by efficiency savings |
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· |
Loans and advances to customers at amortised cost increased 2% to £208.6bn predominantly from £9.2bn of mortgage growth following a strong flow of new applications as well as strong customer retention, offset by a £2.3bn decrease in the Education, Social Housing and Local Authority (ESHLA) portfolio carrying value as interest rate yield curves have steepened, £1.7bn lower unsecured lending balances and £0.5bn lower Business Banking balances as repayment of government scheme lending takes effect |
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· |
Customer deposits at amortised cost increased 7% to £256.8bn reflecting an increase of £13.6bn and £2.8bn in Personal Banking and Business Banking respectively, further strengthening the liquidity position and contributing to a loan: deposit ratio of 86% (December 2020: 89%) |
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· |
RWAs decreased to £73.2bn (December 2020: £73.7bn) as growth in mortgages was more than offset by a reduction in unsecured lending and the ESHLA portfolio |
Barclays International
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· |
Profit before tax increased 97% to £5,500m with a RoTE of 16.4% (Q320 YTD: 7.5%), reflecting a RoTE of 16.4% (Q320 YTD: 10.5%) in CIB and 16.2% (Q320 YTD: (10.6)%) in CC&P |
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The 9% depreciation of average USD against GBP adversely impacted income and profits and positively impacted total operating expenses |
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Total income decreased to £12,155m (Q320 YTD: £12,435m) |
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CIB income decreased 1% to £9,702m |
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Global Markets income decreased 14% to £5,368m as a strong performance in Equities, representing the best Q3 YTD on a comparable basis1, was more than offset by FICC. Equities income increased 28% to £2,466m driven by strong client activity in derivatives and increased client balances in financing. FICC income decreased 33% to £2,902m due to tighter spreads and the non-recurrence of prior year client activity levels |
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Investment Banking fees income, representing the best Q3 YTD on a comparable basis1, increased 37% to £2,703m driven by a strong performance in Advisory and Equity capital markets reflecting an increase in the fee pool and an increased market share2 |
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Within Corporate, Transaction banking income increased 1% to £1,219m as deposit balance growth was partially offset by margin compression. Corporate lending income increased 2% to £412m driven by the non-recurrence of losses on the mark-to-market of lending and related hedge positions, partially offset by a current year write-off on a single name |
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CC&P income decreased 6% to £2,453m |
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International Cards and Consumer Bank income decreased 17% to £1,540m reflecting lower cards balances |
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Private Bank income increased 9% to £581m, reflecting client balance growth and a gain on a property sale |
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Unified Payments income increased 60% to £332m driven by the non-recurrence of a c.£100m valuation loss on Barclays' preference shares in Visa Inc. in Q220 and merchant acquiring turnover growth following easing of lockdown restrictions |
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Credit impairment net release of £311m (Q320 YTD: £2,989m charge) was driven by an improved macroeconomic outlook |
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CIB credit impairment net release of £400m (Q320 YTD: £1,507m charge) was supported by limited single name wholesale loan charges |
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CC&P credit impairment charges of £89m (Q320 YTD: £1,482m) was partially driven by lower delinquencies and higher customer repayments. As at 30 September 2021, 30 and 90 day arrears in US cards were 1.5% (Q320: 2.3%) and 0.7% (Q320: 1.1%) respectively |
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Total operating expenses increased 5% to £7,003m |
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CIB total operating expenses increased 3% to £5,260m due to higher performance costs that reflect an improvement in returns |
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CC&P total operating expenses increased 10% to £1,743m driven by the impact of higher investment spend, including marketing, and customer remediation costs related to a legacy portfolio |
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1 |
Period covering Q114 – Q321. Pre 2014 financials were not restated following re-segmentation in Q116. |
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2 |
Data source: Dealogic for the period covering 1 January to 30 September 2021. |
Barclays International (continued)
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Total assets increased to £1,076bn (December 2020: £1,042bn) primarily due to a £30bn increase in financial assets at fair value, due to an increase in secured lending, a £18bn increase in cash collateral and settlements balances, and a £17bn increase in trading portfolio assets, due to increased activity, partially offset by a £45bn decrease in derivative assets driven by an increase in major interest rate curves |
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RWAs increased to £222.7bn (December 2020: £222.3bn) |
Head Office
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Loss before tax was £517m (Q320 YTD: £639m) |
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Total income was an expense of £212m (Q320 YTD: £331m), which primarily reflected hedge accounting, funding costs on legacy capital instruments and treasury items, partially offset by mark-to-market gains on legacy investments and the recognition of dividends on Barclays' stake in Absa Group Limited |
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Total operating expenses were £519m (Q320 YTD: £217m), which included a charge of £266m relating to structural cost actions taken as part of the real estate review in Q221, as well as costs associated with the discontinued use of software assets |
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Other net income was £209m (Q320 YTD: £31m expense) driven by a fair value gain in Barclays' associate investment holding in the Business Growth Fund |
Group capital and leverage
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The CET1 ratio increased to 15.4% (December 2020: 15.1%) |
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CET1 capital increased by £1.0bn to £47.3bn (December 2020: £46.3bn) as profit before tax of £6.9bn was partially offset by the removal of temporary regulatory supporting measures introduced in 2020, share buybacks, dividends and equity coupons paid and foreseen and pensions deficit contribution payments. The £1.1bn release of non-defaulted credit impairment was more than offset by the related reduction in IFRS 9 transitional relief which also decreased due to impairment migrations from Stage 2 to Stage 3 and the relief on the pre-2020 impairment charge reducing from 70% to 50% in 2021 |
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RWAs increased £1.3bn to £307.5bn (December 2020: £306.2bn) primarily due to a growth in mortgages within Barclays UK, partially offset by lower consumer lending |
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The average UK leverage ratio decreased to 4.9% (December 2020: 5.0%). The average leverage exposure increased by £52.9bn to £1,199.8bn (December 2020: £1,146.9bn) largely driven by an increase in securities financing transactions (SFTs), potential future exposure (PFE) on derivatives and trading portfolio assets (TPAs) |
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Group funding and liquidity
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The liquidity pool was £293bn (December 2020: £266bn) and the liquidity coverage ratio remained significantly above the 100% regulatory requirement at 161% (December 2020: 162%), equivalent to a surplus of £107bn (December 2020: £99bn). The increase in the pool is driven by deposit growth, borrowing from the Bank of England's Term Funding Scheme with additional incentives for SMEs and a seasonal increase in short-term wholesale funding, which were partly offset by an increase in business funding consumption |
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Wholesale funding outstanding, excluding repurchase agreements, was £165.2bn (December 2020: £145.0bn). The Group issued £8.2bn equivalent of minimum requirement for own funds and eligible liabilities (MREL) instruments from Barclays PLC (the Parent company) during the year. The Group is well advanced in its MREL issuance plans relative to the estimated 1 January 2022 requirement |
Capital distributions
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· |
Barclays understands the importance of delivering attractive total cash returns to shareholders. Barclays is therefore committed to maintaining an appropriate balance between total cash returns to shareholders, investment in the business and maintaining a strong capital position. Barclays pays a progressive ordinary dividend, taking into account these objectives and the earnings outlook of the Group. The Board will also continue to supplement the ordinary dividends with additional cash returns, including share buybacks, to shareholders as appropriate |
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Barclays paid a half year dividend of 2.0p per share on 17 September 2021 and initiated the share buyback of up to £500m announced with H121 results in August 2021, of which £279m was completed as at 30 September 2021. This was in addition to the £700m share buyback completed in April 2021 |
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· |
Dividends will continue to be paid semi-annually, with the half year dividend expected to represent, under normal circumstances, around one-third of the total dividend for the year |
Group outlook and targets
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Returns: expect to deliver a RoTE above 10% in 2021 |
|
· |
Impairment: the impairment run rate is expected to remain below historical levels in coming quarters given reduced unsecured lending balances and the improved macroeconomic outlook, acknowledging the continuing uncertainty |
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Costs: FY21 costs, excluding structural cost actions and performance costs, are expected to be c.£12bn1. The Group will continue to drive efficiencies in its franchises and is evaluating planned structural cost actions in Q421, including in Barclays UK |
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Capital: the CET1 ratio is expected to remain above the target range of 13-14% at 31 December 2021, given the uncertain economic environment and known capital headwinds in 2022 of c.75bps, which includes a c.40bps impact from the reversal of software amortisation benefit from 1 January 2022 |
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Capital returns: capital returns policy incorporates a progressive ordinary dividend, supplemented by additional cash returns, including share buybacks as appropriate. Dividends will continue to be paid semi-annually, with the half year dividend expected to represent, under normal circumstances, around one-third of the total dividend for the year |
Barclays continues to target the following over the medium term:
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· |
Returns: RoTE of greater than 10% |
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· |
Cost efficiency: cost: income ratio below 60% |
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· |
Capital adequacy: CET1 ratio in the range of 13-14% |
Tushar Morzaria, Group Finance Director
|
1 |
Group cost outlook is based on an average rate of 1.38 (USD/GBP) in H221 and subject to foreign currency movements |