Barclays PLC
Q3 2019 Results Announcement
30 September 2019
Performance Highlights
Resilient performance delivering a year-to-date
Group return on tangible equity of 9.7% (excluding litigation and conduct)
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The Group delivered a Q319 return on average tangible equity (RoTE) of 10.2%, resulting in a Q319 YTD RoTE of 9.7%1 |
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The Group continues to target a >9% RoTE for 2019 and >10% for 20201. However, given global macroeconomic uncertainty and the current low interest rate environment, it has become more challenging to achieve these targets, particularly with respect to 2020 |
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Continuing to improve returns on a sustainable basis remains a key priority for the Group, whilst also delivering attractive capital returns to shareholders and investing in key business growth initiatives |
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The strengthening of the USD/GBP foreign exchange rate in the third quarter, whilst increasing costs and impairment, provided a greater benefit to income and profits |
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Returns1
Group RoTE targets of >9% in 2019 and >10% in 2020 |
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Group profit before tax of £4.9bn (Q318 YTD: £5.3bn) and earnings per share (EPS) of 19.7p (Q318 YTD: 21.6p) |
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Group Q319 YTD RoTE of 9.7% (Q318 YTD: 11.1%) |
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Barclays UK RoTE of 17.2% (Q318 YTD: 18.9%) |
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Barclays International RoTE of 10.4% (Q318 YTD: 11.6%), with a Corporate and Investment Bank (CIB) RoTE of 9.3% (Q318 YTD: 9.7%) and Consumer, Cards and Payments (CC&P) RoTE of 15.8% (Q318 YTD: 21.7%) |
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Cost efficiency
Cost: income ratio of <60% over time |
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Group operating expenses were stable at £10.1bn, resulting in a cost: income ratio of 62%1 (Q318 YTD: 62%) and positive jaws, reflecting cost efficiencies offset by continued investment in the business |
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Cost control remains a priority given the challenging income environment experienced in the first three quarters of the year |
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Group cost guidance unchanged; management expects to reduce 2019 costs below £13.6bn2 |
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Capital and dividends
CET1 ratio target becomes c.13.5% following discussions with regulators on operational risk change |
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Common equity tier 1 (CET1) ratio of 13.4% (December 2018: 13.2%) |
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Following discussions with regulators, the Group has removed the operational risk Risk Weighted Assets (RWAs) floor which it had previously applied, resulting in a £14.2bn reduction in total RWAs. This increased the CET1 ratio by c.60bps. As a result, the target CET1 ratio has been revised to c.13.5%. The total capital requirement for operational risk remains unchanged |
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The Group paid a half year dividend of 3p which is expected to represent, under normal circumstances, around one-third of the total dividend for the year |
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Group profit before tax was £3.3bn (Q318 YTD: £3.1bn) and, excluding litigation and conduct, was £4.9bn (Q318 YTD: £5.3bn). The cost: income ratio was 62% (Q318 YTD: 62%), with Barclays International income up 4%. Credit impairment charges increased to £1.4bn (Q318 YTD: £0.8bn), due to the non-recurrence of favourable US macroeconomic scenario updates and single name recoveries in Q318 YTD. Credit metrics remained stable across both secured and unsecured lending |
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Barclays UK profit before tax was £0.4bn (Q318 YTD: £1.6bn). This included an additional provision for Payment Protection Insurance (PPI) of £1.4bn (Q318 YTD: £0.4bn). Excluding litigation and conduct, profit before tax was £1.9bn (Q318 YTD: £2.0bn). Income declined 2%, as ongoing margin pressure was partially offset by continued growth in mortgages and deposits. Operating expenses were stable as cost efficiency savings were offset by planned digital investment and inflation |
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Barclays International profit before tax was £3.5bn (Q318 YTD: £3.6bn) driven by 4% increases in both CIB and CC&P income. Operating expenses increased 1% due to continued investment in the business. Credit impairment charges increased from £0.3bn to £0.8bn, due to the non-recurrence of favourable US macroeconomic scenario updates and single name recoveries in Q318 YTD |
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Tangible net asset value (TNAV) per share was 274p (December 2018: 262p) as 10.4p of statutory EPS (which included the effect of the additional provision for PPI of 8p per share in Q319) and positive net reserve movements, were partially offset by dividend payments totalling 7p per share |
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Excluding litigation and conduct, with returns targets based on a Group CET1 ratio of c.13.5%. |
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Excluding litigation and conduct, calculated using a USD/GBP FX rate of 1.27 and subject to foreign currency movements. |
James E Staley, Group Chief Executive Officer, said:
“For the year to September our Group RoTE stands at 9.7%, including a 10.2% return in the third quarter.
Profit before tax was just under £5bn, excluding litigation and conduct, and earnings per share were 19.7 pence for the nine months.
These represent another set of consistent and resilient results, and they show the benefits of our diversified model – one which allows us to weather today's macro headwinds, and grow our businesses and profitability over time.
In Barclays UK, the business has delivered a robust year-to-date RoTE of 17.2%, including 21.2% in the third quarter, through mortgage and deposit balance growth.
The CIB has produced an RoTE of 9.3% for the first nine months, including 9.2% in the third quarter. This reflects a strong performance in Markets, with income up in the quarter by 13%, and in Banking, where income rose by 33%.
Our CC&P business produced an RoTE of 15.8%, and we are targeting further growth in US cards, with a particular focus on capturing new partnership opportunities, a core strength of the Barclays franchise in the States.
As we continue to invest in our digital capabilities across the bank, management's focus on cost control remains a priority. Our cost to income ratio was stable at 62%, and we continue to expect to see positive jaws across the Group over the remainder of the year, and for the full year.
These results show we remain on track to achieve our target of a group return of greater than 9% for 2019. We continue to target an RoTE of greater than 10% in 2020, though we acknowledge that the outlook for next year is unquestionably more challenging now than it appeared a year ago, in particular given the uncertainty around the UK economy and the interest rate environment.
Despite the impact to profitability of the £1.4bn PPI provision, our CET1 ratio of 13.4% continues to be within our target, which is revised to c.13.5%, now that our operational risk RWAs are accounted for more consistently with UK peers.”