Barclays Plc – Interim Results Announcement

Barclays PLC

 

Interim Results Announcement

 

30 June 2021

 

Table of Contents

 

Results Announcement		Page
Notes		1
Performance Highlights		2
Group Chief Executive Officer's Review		6
Group Finance Director's Review		7
Results by Business
·	Barclays UK	9
·	Barclays International	11
·	Head Office	16
Quarterly Results Summary		17
Quarterly Results by Business		18
Performance Management
·	Margins and Balances	24
Risk Management
·	Risk Management and Principal Risks	26
·	Credit Risk	28
·	Market Risk	49
·	Treasury and Capital Risk	50
Statement of Directors' Responsibilities		65
Independent Review Report to Barclays PLC		66
Condensed Consolidated Financial Statements		67
Financial Statement Notes		78
Appendix: Non-IFRS Performance Measures		104
Shareholder Information		109

 

BARCLAYS PLC, 1 CHURCHILL PLACE, LONDON, E14 5HP, UNITED KINGDOM. TELEPHONE: +44 (0) 20 7116 1000. COMPANY NO. 48839.

 

Notes

 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014 (as it forms part of Retained EU Law as defined in the European Union (Withdrawal) Act 2018).

 

The terms Barclays or Group refer to Barclays PLC together with its subsidiaries. Unless otherwise stated, the income statement analysis compares the six months ended 30 June 2021 to the corresponding six months of 2020 and balance sheet analysis as at 30 June 2021 with comparatives relating to 31 December 2020 and 30 June 2020. The abbreviations '£m' and '£bn' represent millions and thousands of millions of Pounds Sterling respectively; the abbreviations '$m' and '$bn' represent millions and thousands of millions of US Dollars respectively; and the abbreviations '€m' and '€bn' represent millions and thousands of millions of Euros respectively.

 

There are a number of key judgement areas, for example impairment calculations, which are based on models and which are subject to ongoing adjustment and modifications. Reported numbers reflect best estimates and judgements at the given point in time.

 

Relevant terms that are used in this document but are not defined under applicable regulatory guidance or International Financial Reporting Standards (IFRS) are explained in the results glossary that can be accessed at home.barclays/investor-relations/reports-and-events/latest-financial-results .

 

The information in this announcement, which was approved by the Board of Directors on 27 July 2021, does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2020, which contained an unmodified audit report under Section 495 of the Companies Act 2006 (which did not make any statements under Section 498 of the Companies Act 2006) have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

 

These results will be furnished as a Form 6-K to the US Securities and Exchange Commission (SEC) as soon as practicable following their publication. Once furnished with the SEC, a copy of the Form 6-K will be available from the SEC's website at www.sec.gov .

 

Barclays is a frequent issuer in the debt capital markets and regularly meets with investors via formal road-shows and other ad hoc meetings. Consistent with its usual practice, Barclays expects that from time to time over the coming quarter it will meet with investors globally to discuss these results and other matters relating to the Group.

 

Non-IFRS performance measures

 

Barclays management believes that the non-IFRS performance measures included in this document provide valuable information to the readers of the financial statements as they enable the reader to identify a more consistent basis for comparing the businesses' performance between financial periods and provide more detail concerning the elements of performance which the managers of these businesses are most directly able to influence or are relevant for an assessment of the Group. They also reflect an important aspect of the way in which operating targets are defined and performance is monitored by Barclays management. However, any non-IFRS performance measures in this document are not a substitute for IFRS measures and readers should consider the IFRS measures as well. Refer to the appendix on pages 97 to102 for further information and calculations of non-IFRS performance measures included throughout this document, and the most directly comparable IFRS measures.

 

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 the Group. Barclays cautions readers that no forward-looking statement is a guarantee of future performance and that actual results or other financial condition or performance measures could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as 'may', 'will', 'seek', 'continue', 'aim', 'anticipate', 'target', 'projected', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', 'achieve' or other words of similar meaning. Forward-looking statements can be made in writing but also may be made verbally by members of the management of the Group (including, without limitation, during management presentations to financial analysts) in connection with this document. Examples of forward-looking statements include, among others, statements or guidance regarding or relating to the Group's future financial position, income growth, assets, impairment charges, provisions, business strategy, capital, leverage and other regulatory ratios, capital distributions (including dividend pay-out ratios and expected payment strategies), projected levels of growth in the banking and financial markets, projected costs or savings, any commitments and targets, estimates of capital expenditures, plans and objectives for future operations, projected employee numbers, IFRS impacts and other statements that are not historical fact. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. The forward-looking statements speak only as at the date on which they are made. Forward-looking statements may be affected by changes in legislation, the development of standards and interpretations under IFRS, including evolving practices with regard to the interpretation and application of accounting and regulatory standards, the outcome of current and future legal proceedings and regulatory investigations, future levels of conduct provisions, the policies and actions of governmental and regulatory authorities, the Group's ability along with governments and other stakeholders to measure, manage and mitigate the impacts of climate change effectively, geopolitical risks and the impact of competition. In addition, factors including (but not limited to) the following may have an effect: capital, leverage and other regulatory rules applicable to past, current and future periods; UK, US, Eurozone and global macroeconomic and business conditions; the effects of any volatility in credit markets; market related risks such as changes in interest rates and foreign exchange rates; effects of changes in valuation of credit market exposures; changes in valuation of issued securities; volatility in capital markets; changes in credit ratings of any entity within the Group or any securities issued by such entities; direct and indirect impacts of the coronavirus (COVID-19) pandemic; instability as a result of the UK's exit from the European Union (“EU”), the effects of the EU-UK Trade and Cooperation Agreement and the disruption that may subsequently result in the UK and globally; the risk of cyber-attacks, information or security breaches or technology failures on the Group's reputation, business or operations; and the success of future acquisitions, disposals and other strategic transactions. A number of these influences and factors are beyond the Group's control. As a result, the Group's actual financial position, future results, capital distributions, capital, leverage or other regulatory ratios or other financial and non-financial metrics or performance measures may differ materially from the statements or guidance set forth in the Group's forward-looking statements. Additional risks and factors which may impact the Group's future financial condition and performance are identified in Barclays PLC's filings with the SEC (including, without limitation, Barclays PLC's Annual Report on Form 20-F for the fiscal year ended 31 December 2020 and Interim Results Announcement for the six months ended 30 June 2021 filed on Form 6-K), which are available on the SEC's website at www.sec.gov .

 

Subject to Barclays' obligations under the applicable laws and regulations of any relevant jurisdiction, (including, without limitation, the UK and the US), in relation to disclosure and ongoing information, we undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Performance Highlights

 

Group return on tangible equity (RoTE) of 16.4% for H121. Announced increased capital distributions, with half year dividend of 2.0p per share and intend to initiate a further share buyback of up to £500m

 

Barclays delivered a strong Group profit before tax in H121 of £5.0bn (H120: £1.3bn) and attributable profit of £3.8bn (H120: £0.7bn). This delivered a RoTE of 16.4% (H120: 2.9%) and earnings per share (EPS) of 22.2p (H120: 4.0p)

 

Income	Group income of £11.3bn down 3% versus prior year reflecting currency headwinds
	·	Barclays International income of £8.2bn, down 5% versus prior year
Resilient income as the Group continues to benefit from diversified income streams		–	Corporate and Investment Bank (CIB) income of £6.6bn, down 5% with strong Equities and Investment Banking fees performance, up 38% and 27% respectively, whilst FICC was down 37% versus a strong H120
		–	Consumer, Cards and Payments (CC&P) income of £1.6bn, down 4% primarily reflecting lower interest earning US cards balances
	·	Barclays UK income of £3.2bn increased 1% reflecting strong mortgages performance with record net balance growth of £6.9bn, partially offset by lower interest earning UK cards balances and the effect of lower interest rates
	·	Excluding the impact of the 10% depreciation of average USD against GBP, Group income was up versus prior year
Credit impairment	Group credit impairment net release of £0.7bn (H120: £3.7bn charge)
Improved macroeconomic outlook and benign credit environment	·	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 £0.4bn, reflecting reduced unsecured lending balances and the benign credit environment
Costs	Group total operating expenses of £7.2bn up 10% versus prior year, resulting in a cost: income ratio of 64% (H120: 57%)
Investing for income growth whilst taking structural cost actions	·	Total operating expenses included structural cost actions of £321m (H120: £78m), primarily related to the real estate review in Q221, higher performance costs reflective of improved returns, and continued investment and business growth, partially offset by the benefit from the depreciation of average USD against GBP and efficiency savings
Capital / capital distributions	Common equity tier 1 (CET1) ratio of 15.1%, in line with December 2020
Announced increased capital distributions	·	Half year dividend of 2.0p (H120: 0p) per share to be paid on 17 September 2021
	·	Completed £700m share buyback in April
	·	Intend to initiate a further share buyback of up to £500m, which would have an effect of 17bps on the CET1 ratio

 

Q221 performance

 

Q221 performance       Robust performance, with profitability benefiting from a credit impairment net release and the upwards re-measurement of UK DTAs	Q221 Group profit before tax of £2.6bn (Q220: £0.4bn), RoTE of 18.1% (Q220: 0.7%) and EPS of 12.3p (Q220: 0.5p)
	·	Q221 Group income of £5.4bn, up 1% versus prior year despite currency headwinds . Barclays International income of £3.8bn was down 5% versus prior year, reflecting CIB income of £3.0bn, down 10% versus prior year and CC&P income of £0.8bn, up 21% versus prior year driven by a valuation loss in 2020. Barclays UK income of £1.6bn was up 11% versus prior year
	·	Q221 Group credit impairment net release of £0.8bn (Q220: £1.6bn charge) , reflecting a reversal of £1.0bn in non-default charges, primarily reflecting the improved macroeconomic outlook. Excluding this reversal, the charge was £0.2bn, which is broadly aligned with prior quarter
	·	Q221 Group total operating expenses of £3.7bn, up £0.3bn versus prior year , reflecting structural cost actions
	·	Q221 attributable profit of £2.1bn (Q220: £0.1bn), which included an income statement tax benefit of £0.4bn on the upwards re-measurement of UK deferred tax assets (DTAs)
	·	The CET1 ratio as at June 2021 was 15.1%, up 50bps in the quarte r, driven by profits and lower Risk Weighted Assets (RWAs)

 

Group outlook and targets

 

Outlook Whilst the macroeconomic environment has improved, the outlook remains uncertain and subject to change depending on the evolution and persistence of the COVID-19 pandemic	Returns
	·	Expect to deliver a RoTE above 10% in 2021
	Impairment
	·	The quarterly 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
	Costs
	·	FY21 costs, excluding structural cost actions and performance costs, are expected to be broadly in line with FY201
	·	Total full year 2021 costs are expected to be above 2020, due to higher structural cost actions, including a real estate charge in Q221, and higher performance costs, reflecting improved returns
	Capital
	·	FY21 CET1 ratio is expected to remain above the target range of 13-14%, given the economic environment remains uncertain and capital headwinds in 2022, including the c.40bps impact from the reversal of software amortisation benefit from 1 January 2022
	Capital returns
	·	Barclays' capital returns policy incorporates a progressive ordinary dividend, supplemented by additional cash returns, including share buybacks as and when 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
Targets	Continue to target the following over the medium term:
	·	Returns: RoTE of greater than 10%
	·	Cost efficiency: Cost: income ratio below 60%
	·	Capital adequacy: CET1 ratio in the range of 13-14%

 

1	Group cost outlook is based on an average rate of 1.38 (USD/GBP) in H221 and subject to foreign currency movements.

 

Barclays Group results for the half year ended
	30.06.21	30.06.20
	£m	£m	% Change
Net interest income	3,903	4,223	(8)
Net fee, commission and other income	7,412	7,398
Total income	11,315	11,621	(3)
Credit impairment releases/(charges)	742	(3,738)
Net operating income	12,057	7,883	53
Operating expenses	(7,132)	(6,563)	(9)
Litigation and conduct	(99)	(30)
Total operating expenses	(7,231)	(6,593)	(10)
Other net income/expenses	153	(18)
Profit before tax	4,979	1,272
Tax charge	(759)	(113)
Profit after tax	4,220	1,159
Non-controlling interests	(19)	(37)	49
Other equity instrument holders	(389)	(427)	9
Attributable profit	3,812	695
Performance measures
Return on average tangible shareholders' equity	16.4%	2.9%
Average tangible shareholders' equity (£bn)	46.5	48.6
Cost: income ratio	64%	57%
Loan loss rate (bps)	–	207
Basic earnings per share	22.2p	4.0p
Dividend per share	2.0p	–
Basic weighted average number of shares (m)	17,140	17,294
Period end number of shares (m)	16,998	17,345
Share buyback announced (£m)	500	–
Total payout equivalent per share	4.9p	–
	As at 30.06.21	As at 31.12.20	As at 30.06.20
Balance sheet and capital management1	£bn	£bn	£bn
Loans and advances at amortised cost	348.5	342.6	354.9
Loans and advances at amortised cost impairment coverage ratio	1.8%	2.4%	2.5%
Deposits at amortised cost	500.9	481.0	466.9
Tangible net asset value per share	281p	269p	284p
Common equity tier 1 ratio	15.1%	15.1%	14.2%
Common equity tier 1 capital	46.2	46.3	45.4
Risk weighted assets	306.4	306.2	319.0
Average UK leverage ratio	4.8%	5.0%	4.7%
UK leverage ratio	5.0%	5.3%	5.2%
Funding and liquidity
Group liquidity pool (£bn)	291	266	298
Liquidity coverage ratio	162%	162%	186%
Loan: deposit ratio	70%	71%	76%

 

1	Refer to pages 54 to 60 for further information on how capital, RWAs and leverage are calculated.

 

Group Chief Executive Officer's Review

 

“This has been a strong first half, clearly demonstrating the benefits of our resilient and diversified universal bank in supporting the growth of capital markets, our corporate clients and retail customers. Barclays UK, and the CIB and CC&P businesses within Barclays International have all delivered strong double-digit RoTE. Our investment banking fees and equities businesses have delivered record income¹, and we are seeing encouraging signs of recovery in consumer banking. Our profitability, strong capital position and balance sheet have enabled us to increase capital distributions to shareholders.

 

We are starting to see the resurgence of activity across our businesses, with Group income up on the same period last year when excluding the impact of FX movements. Our CIB business is well-positioned to benefit from continued growth in debt and equity capital markets, with Global Markets and Investment Banking fees income up 36% since 2019, and our strong retail businesses are poised to support and benefit from a consumer recovery.

 

We are also continuing to build our presence where we see further opportunities to scale, by organically growing our own products and service, and by partnering. Whilst we continue to develop our leading payments services including our new Barclays Cubed platform, we are also able to partner with major businesses in our US consumer banking business. In CIB, we are enhancing our ability to compete for client business with a stronger product and service set, from transaction banking to our equity franchise, alongside a build-out of our sectoral expertise in healthcare, technology and sustainability.

 

We will continue to invest behind those opportunities we see for growing income and returns across our businesses, whilst also driving efficiencies and savings across Barclays. Excluding performance costs and structural cost actions, costs in 2021 will be broadly in line with 2020².

 

Against this backdrop of economic recovery, our robust approach to risk management means we are making a net impairment release of £0.7bn versus a charge of £3.7bn in H120. We also delivered a CET1 ratio of 15.1%, and increased capital distributions, with the announcement of a half year dividend of 2 pence per share, alongside the intention to initiate a share buyback of up to £500m. This is in addition to the £700m share buyback completed in April.

 

Alongside the role we play in supporting economic growth, we are firmly focused on our wider societal responsibilities. We continue to drive hard on our ambition to be a net zero bank, and support the aims of the Paris Agreement, already having provided nearly half of our £100bn green financing commitment through our capital markets and lending expertise. We continue to develop our ability to measure our financed emissions and track them at a portfolio level through our unique BlueTrack ^TM methodology.

 

We have also demonstrated our ability, and willingness, to support customers and clients through the pandemic, and we are mindful that this support will need to continue as we see the pandemic subside.

 

Taken together, we continue to invest behind opportunities for growth, manage our capital and balance sheet conservatively, and focus on our role in society. With a first half profit before tax of £5bn, quadruple the same period last year, and a RoTE of 16.4%, this is a good first half performance. It provides a strong platform on which to build in the second half, and to deliver a full year RoTE in excess of 10%.”

 

James E Staley, Group Chief Executive Officer