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Barclays PLC

Barclays PLC Resilient performance with Group return on tangible equity of 9.6%

Barclays PLC (LON:BARC), today announced 1st quarter results ending 31 March 2019.

Performance Highlights
· Barclays has continued to implement its strategy in pursuit of improved returns for shareholders

· Financial targets remain unchanged. Barclays is focused on achieving the 2019 and 2020 Group return on tangible equity (RoTE) targets of >9% and >10% respectively

· The income environment in the quarter was challenging and if this were to persist for the remainder of the year Barclays expects to reduce costs below the Group cost guidance of £13.6-13.9bn for 2019

Returns1

 

Group RoTE targets of >9% in 2019 and >10% in 2020

·

Profit before tax of £1.5bn (Q118: £1.7bn) and earnings per share (EPS) of 6.3p (Q118: 7.1p)

·

Group RoTE of 9.6% (Q118: 11.0%)

Barclays UK RoTE of 16.4% (Q118: 15.7%)

Barclays International RoTE of 10.6% (Q118: 13.6%), with the Corporate and Investment Bank (CIB) RoTE of 9.5% (Q118: 13.2%), in the challenging income environment, and Consumer, Cards and Payments of 15.4% (Q118: 15.7%)

Cost efficiency

 

Group cost guidance of £13.6-13.9bn1 in 2019

Cost: income ratio of <60% over time

·

Group operating expenses1 decreased 3% to £3.3bn, resulting in a cost: income ratio of 62% (Q118: 63%) and positive cost: income jaws for the Group

·

2019 Group cost guidance remains unchanged at £13.6-13.9bn. However, should the challenging income environment experienced in Q119 continue, management expect to reduce 2019 costs below £13.6bn

Capital and dividends

 

At end-state CET1 ratio target of c.13%

·

Common equity tier 1 (CET1) ratio of 13.0% (December 2018: 13.2%), as 39bps of organic capital generation from profits was offset by a £7.8bn increase in Risk Weighted Assets (RWAs) primarily due to seasonality, 14bps from dividends paid and foreseen, and 8bps relating to employee share awards

·

Maintain our capital returns policy, incorporating a progressive ordinary dividend, supplemented by share buybacks as and when appropriate

 

· Barclays Group profit before tax was £1.5bn (Q118: loss of £0.2bn). Excluding litigation and conduct, Group profit before tax was £1.5bn (Q118: £1.7bn). Income was down 2% and operating expenses were reduced by 3%. The cost: income ratio was 62% (Q118: 63%). Credit impairment charges increased to £0.4bn (Q118: £0.3bn) and were £0.2bn lower than in Q418, which included a £150m specific charge for the impact of the anticipated economic uncertainty in the UK

· Barclays UK profit before tax increased to £0.6bn (Q118: £0.2bn). Excluding litigation and conduct, profit before tax increased 1% to £0.6bn reflecting a 5% reduction in credit impairment charges due to a reduced risk appetite and continued benign economic environment. Operating expenses decreased 1% reflecting improved operating efficiency, partially offset by continued investment in digital. Income declined 1%, as continuing margin pressures were partially offset by sustainable growth in mortgages and deposits

· Barclays International profit before tax decreased to £1.1bn (Q118: £1.4bn), reflecting challenging markets for the CIB. Income was down 6%, as growth in Consumer, Cards and Payments was more than offset by the reduction in CIB, reflecting reduced client activity, lower volatility and a smaller banking fee pool across the industry2. Operating expenses reduced by 4% as variable compensation accruals were reduced, reflecting income performance in the CIB. Credit impairment charges increased by £0.2bn, due to the non-recurrence of a favourable US macroeconomic forecast update in Q118

· Attributable profit was £1.0bn (Q118: loss of £0.8bn). This reflected the non-recurrence of Q118 litigation and conduct charges of £2.0bn, principally relating to the Residential Mortgage Backed Securities settlement and Payment Protection Insurance (PPI). Basic earnings per share was 6.3p (Q118: 7.1p) excluding litigation and conduct

· Tangible net asset value (TNAV) per share increased 4p in Q119 to 266p as 6.3p of EPS, excluding litigation and conduct, was partially offset by reserve movements, including the impact of changes in FX, the pension re-measurement and employee share awards

1 Excluding litigation and conduct, with returns targets based on a Barclays Group CET1 ratio of c.13%.

2 Source: Dealogic.

James E Staley, Group Chief Executive Officer, said:

“Today we have announced that Barclays earned just over £1bn of attributable profit in the first quarter of 2019, or 6.1 pence per share.

Group RoTE was 9.2% in spite of a mixed environment for global banks. TNAV increased 4p to 266p, which has now grown in each of the last four quarters.

Group profits before tax were £1.5bn, with positive jaws driven by a 3% reduction in costs, excluding litigation and conduct, versus a 2% reduction in revenues.

Barclays UK produced a strong RoTE of 16.4%, excluding litigation and conduct – an improvement on an increased equity base compared to Q1 of 2018, which included a 12% increase in Business Banking income.

Barclays International also delivered a double digit RoTE of 10.6%, excluding litigation and conduct, though this was down from a very profitable comparable period last year.

Within Barclays International, our Consumer Cards & Payments business had another good quarter, with improved performance in our US franchise in particular, driving a RoTE of 15.4%.

Our Corporate and Investment Bank achieved a RoTE of 9.5%, compared to 13.2% in Q1 of 2018. From a revenue perspective, we had a weak quarter in investment banking fees.

Our Markets business outperformed US peer average for the sixth consecutive quarter, and like Q1 last year, generated a double-digit return on tangible equity.

Our total operating expenses in the first quarter were £3.3bn. Three years ago, we took a charge of just under £400m to allow us to better align variable compensation accruals with the firm’s revenues.

What you see in the first quarter is Barclays using this discretion around variable compensation to manage our costs and deliver expected profitability.

A 9.6% RoTE, excluding litigation and conduct, in the first quarter of this year is a good step towards our objective of delivering a RoTE of greater than 9% in 2019 and greater than 10% in 2020.”

James E Staley, Group Chief Executive Officer