Barclays Plc (LON:BARC) today announced Q3 2018 results
Strong financial performance with Group return on tangible equity of 11.1% and earnings per share of 21.6p for the nine months, excluding litigation and conduct charges
· Group return on tangible equity (RoTE) of 11.1%, with profit before tax up 23% to £5.3bn, and double digit returns in both Barclays UK and Barclays International
· Remain on track to achieve Group RoTE targets of greater than 9% in 2019 and greater than 10% in 2020
· Cost efficiency1:
· Group operating expenses decreased 3% to £10.0bn, driving an improved cost: income ratio of 62% (Q317 YTD: 64%)
· Remain on track for Group operating expenses in the region of £13.9bn in 2018, and guidance of £13.6-13.9bn in 2019. Targeting a cost: income ratio of below 60% over time
· Capital and dividends:
· Common equity tier 1 (CET1) ratio was 13.2% (December 2017: 13.3%), at the end-state target of c.13%, principally reflecting organic capital generation from profits offset by a c.65bps impact from litigation and conduct charges and c.40bps from dividends paid and foreseen
· Following regulatory approval, proceeding with the redemption of the $2.65bn 8.125% Series 5 Non-Cumulative Callable Dollar Preference Shares and $2bn 8.25% Additional Tier 1 (AT1) securities, to be effected on 15 December 2018. This will result in a pro-forma decrease of 33bps to the 30 September 2018 CET1 ratio, but an ongoing earnings benefit
· Intention to pay a dividend of 6.5p per share for 2018, subject to regulatory approvals. Interim dividend of 2.5p per share paid in Q318
·Barclays Group profit before tax was £3,120m (Q317 YTD: £3,448m), which included litigation and conduct charges of £2.1bn (Q317 YTD: £0.8bn) principally related to a £1.4bn settlement with the US Department of Justice (DoJ) with regard to Residential Mortgage-Backed Securities (RMBS) and charges of £400m (Q317 YTD: £700m) due to Payment Protection Insurance (PPI) in Q118
·Excluding litigation and conduct charges, Group profit before tax increased 23% to £5,267m despite the adverse effect of the 5% depreciation of average USD against GBP. This increase in profit before tax was driven by a 53% improvement in credit impairment charges, primarily reflecting improved consensus-based macroeconomic forecasts in the UK and US, single name recoveries in wholesale banking and portfolio adjustments as IFRS 9 continues to embed, and a 3% reduction in operating expenses
·Barclays UK profit before tax increased to £1,566m (Q317 YTD: £1,295m). Excluding litigation and conduct, profit before tax increased 2% to £2,034m reflecting a 12% reduction in impairment charges and stable income, partially offset by a 2% increase in operating expenses reflecting continued investment in digitisation. RoTE was 18.9% (Q317 YTD: 19.8%) excluding litigation and conduct
·Barclays International profit before tax increased to £3,560m (Q317 YTD: £3,269m), driven by a 73% decrease in credit impairment charges, while income declined 2%, mainly due to prior year one-offs in Consumer, Cards and Payments. RoTE excluding litigation and conduct was 11.6% (Q317 YTD: 10.1%), reflecting improved returns in both the Corporate and Investment Bank (CIB) and Consumer, Cards and Payments of 9.7% and 21.7% (Q317 YTD: 8.4% and 19.4%) respectively
·Attributable profit was £1,470m (Q317 YTD: loss of £628m) and basic earnings per share was 9.4p (Q317 YTD: loss per share of 3.0p). Excluding litigation and conduct, earnings per share was 21.6p (Q317 YTD: 1.7p)
·Tangible net asset value (TNAV) per share was 260p (December 2017: 276p) as 21.6p of earnings per share, excluding litigation and conduct, was more than offset by 4.5p per share paid in dividends, the impact of the implementation of IFRS 9 and litigation and conduct charges. TNAV per share increased 1p in the quarter
·The CET1 ratio was 13.2% (December 2017: 13.3%), principally reflecting capital generation from profits offset by a c.65bps impact from litigation and conduct charges and c.40bps from dividends paid and foreseen. The CET1 ratio increased 20bps in the quarter from 13.0% at June 2018
1 Excluding litigation and conduct, with returns targets based on a Barclays Group CET1 ratio of c.13%.
James E Staley, Group Chief Executive Officer, said:
“I am pleased to report another quarter which demonstrates that we are firmly on track to produce improved returns for shareholders as our strategy continues to deliver.
Our Group RoTE for the nine months of 11.1%, and 10.2% in the third quarter, excluding litigation and conduct, demonstrates we are well placed to meet our targets of a greater than 9% Group RoTE for 2019, and greater than 10% for 2020, based on a CET1 ratio of c.13%.
Earnings per share (EPS) of 6.6p, delivered in this quarter brings our year-to-date EPS to 21.6p excluding litigation and conduct. Year to date profits before tax, excluding litigation and conduct, increased 23% to £5.3bn, and in the quarter, Group PBT increased 32% to £1.6bn. Both Barclays UK and Barclays International delivered double digit returns for the nine months.
During the third quarter our Corporate and Investment bank outperformed peers again in Markets, with a 19% increase in income, and, in Banking, while we saw a dip in income, we have seen strong completion activity in October. Barclays was advisor on three of the largest M&A transactions executed in the period. Barclays UK PBT, excluding litigation and conduct, grew 18% in Q3 to £794m, on revenues up 2% to £1.9bn compared with last year, resulting in positive jaws of 1%.
Having completed the restructuring of Barclays in 2017, our transatlantic consumer and wholesale bank is now delivering. We are prudently managing risk and our balance sheet, and benefitting from our diversified model with earnings resilience.
Our performance means we are also able to maintain a strong capital position, posting a 13.2% CET1 ratio as at the end of September, as well as investing in growth for the future.
It remains our intention to pay a dividend for 2018 of 6.5p, and I am particularly pleased that the Prudential Regulatory Authority has granted us permission to call the outstanding retail dollar preference shares dating from 2008. This will drive a reduction in financing costs and further demonstrates confidence in the strength of our capital position today, as well as our capital generating capacity going forward.
In spite of macro-economic uncertainty, and particularly concerns over Brexit which weigh heavily on market sentiment, 2018 is proving to be a year of delivery on our strategy at Barclays. We remain focussed on generating improved returns, and on distributing a greater proportion of excess capital to shareholders over time.”