Barclays PLC (LON:BARC) has announced its Q1 2024 Results Announcement.
Performance Highlights
In Q124 Barclays delivered a return on tangible equity (RoTE) of 12.3% and a tangible net asset value (TNAV) per share of 335p. RoTE target of greater than 10% in 2024 remains unchanged
C. S. Venkatakrishnan, Group Chief Executive, commented
“In Q124 Barclays delivered a RoTE of 12.3% as we progress towards our targets of >10% RoTE in 2024, and >12% in 2026. We are focused on disciplined execution of the plan that we presented at our Investor Update on 20th February. We have now announced the sale of our performing Italian mortgage book and are investing in our higher returning UK consumer businesses, including through the expected completion of the Tesco Bank acquisition in Q424. We continue to exercise cost discipline and remain well capitalised with a Common Equity Tier 1 (CET1) ratio at the end of the quarter of 13.5%.”
• Group cost: income ratio of 60%. Target of c.63% in 2024 remains unchanged
– Delivered £0.2bn of the c.£1bn 2024 gross cost efficiency savings
• Loan loss rate (LLR) of 51bps, within the expected through the cycle range of 50-60bps
• CET1 ratio of 13.5%, in the middle of the target range of 13-14%
• Announced acquisition of Tesco Bank’s retail banking business1, expected to complete in Q424
• Announced sale of the performing Italian mortgage portfolio, expected to complete in Q224
Key financial metrics:
| Income | Profit before tax | Attributable profit | Cost: income ratio | LLR | RoTE | EPS | TNAV per share | CET1 ratio | |
| Q124 | £7.0bn | £2.3bn | £1.6bn | 60% | 51bps | 12.3% | 10.3p | 335p | 13.5% |
Q124 Performance highlights:
• Group RoTE was 12.3% (Q123: 15.0%) with profit before tax of £2.3bn (Q123: £2.6bn)
• Group income of £7.0bn down 4% year-on-year, with Group net interest income (NII) excluding Barclays Investment Bank (IB) and Head Office of £2.7bn, of which Barclays UK NII of £1.5bn
– Barclays UK income decreased 7%, as higher structural hedge income was more than offset by adverse product dynamics in deposits and mortgages, in addition to the transfer of Wealth Management & Investments (WM&I) to Barclays Private Bank and Wealth Management (PBWM)2
– Barclays UK Corporate Bank (UKCB) income decreased 6%, reflecting lower liquidity pool income whilst maintaining stable average deposits
– PBWM income increased 20%, reflecting the transfer of WM&I from Barclays UK, partially offset by lower NII due to adverse deposit dynamics
– IB income decreased 7%. Within Global Markets, strong performance in Equities was more than offset by lower FICC income. In Investment Banking, increased fee income in Debt and Equity capital markets were more than offset by lower fee income in Advisory and lower income in Transaction banking
– Barclays US Consumer Bank (USCB) income increased 4%, reflecting higher cards balances
• Group total operating expenses were £4.2bn, up 2% year-on-year, including the £120m impact of the Bank of England (BoE) levy scheme
– Group operating costs decreased 3%, reflecting £0.2bn of efficiency savings, more than offsetting the impact of inflation, investment spend and business growth
• Credit impairment charges were £0.5bn (Q123: £0.5bn) with an LLR of 51bps (Q123: 52bps)
• CET1 ratio of 13.5% (December 2023: 13.8%), with Risk Weighted Assets (RWAs) of £349.6bn (December 2023: £342.7bn) and TNAV per share of 335p (December 2023: 331p)
| 1 | See Other matters on page 6 for further details on the acquisition of Tesco Bank’s retail banking business. |
| 2 | WM&I was transferred out of Barclays UK in Q223. |
Group Financial Targets and Outlook:
2024
• Returns: targeting RoTE of greater than 10% and c.10.5% excluding inorganic activity
• Income: targeting Barclays Group NII excluding IB and Head Office of c.£10.7bn, of which Barclays UK NII of c.£6.1bn1
• Costs: targeting Group cost: income ratio of c.63%, which includes c.£1bn of gross efficiency savings in 2024
• Impairment: expect an LLR of 50-60bps through the cycle
• Capital: expect to operate within the CET1 ratio target range of 13-14%
2026
• Returns: targeting a greater than 12% RoTE
• Capital returns: plan to return at least £10bn of capital to shareholders between 2024 and 2026, through dividends and share buybacks, with a continued preference for buybacks. Plan to keep total dividend stable at 2023 level in absolute terms, with progressive dividend per share growth driven through share count reduction as a result of increased share buybacks. Dividends will continue to be paid semi-annually. This multi-year plan is subject to supervisory and Board approval, anticipated financial performance and our published CET1 ratio target range of 13-14%
• Income: targeting Group total income of c.£30bn
• Costs: targeting total Group operating expenses of c.£17.0bn and a Group cost: income ratio of high 50s in percentage terms. This includes total gross efficiency savings of c.£2bn by 2026
• Impairment: expect an LLR of 50-60bps through the cycle
• Capital: expect to operate within the CET1 ratio target range of 13-14%
– Targeting IB RWAs of c.50% of Group RWAs in 2026
– Impact of regulatory change on RWAs in line with prior guidance, expected to be at lower end of 5-10% of Group RWAs. This includes c.£16bn RWAs expected in H224 due to USCB moving to Internal Ratings-Based (IRB) models
Prior period segmental comparators:
• Barclays segmental reporting now reflects five operating divisions, in addition to Head Office:
– Barclays UK
– Barclays UK Corporate Bank
– Barclays Private Bank and Wealth Management
– Barclays Investment Bank
– Barclays US Consumer Bank
• Prior period segmental comparators shown in this document were re-presented in the 2023 Results Resegmentation Document, which may be accessed via the Barclays website at home.barclays/investor-relations
| 1 | This excludes the impact of the acquisition of Tesco Bank’s retail banking business, which is expected to generate annualised NII of c.£400m in the first year post-completion. See Other Matters on page 6 for further details of the acquisition. |
Group Finance Director’s Review
Group performance
• Barclays delivered a profit before tax of £2,277m (Q123: £2,598m), RoTE of 12.3% (Q123: 15.0%) and earnings per share (EPS) of 10.3p (Q123: 11.3p)
• Group income decreased 4% to £6,953m as higher structural hedge income, strong performance in Equities and balance growth in USCB were more than offset by lower FICC income in IB, lower inflation linked income as well as adverse product dynamics in Barclays UK deposits and mortgages
• Group total operating expenses increased to £4,175m (Q123: £4,110m) including the £120m impact of the BoE levy scheme
– Group operating costs decreased 3% to £3,998m, reflecting efficiency savings, partially offset by the impact of inflation, investment spend and business growth
• Credit impairment charges were £513m (Q123: £524m), driven by the anticipated higher delinquencies in USCB, which led to a higher coverage ratio of 11.0% in that portfolio. Total coverage ratio remains stable at 1.4% (December 2023: 1.4%)
• The effective tax rate (ETR) was 20.4% (Q123: 21.6%)
• Attributable profit was £1,550m (Q123: £1,783m)
• Total assets increased to £1,577.1bn (December 2023: £1,477.5bn) driven by an increase in trading securities and secured lending in IB, and an increase in the liquidity pool due to increased deposits
• TNAV per share increased to 335p (December 2023: 331p) as EPS of 10.3p was partially offset by negative cash flow hedge reserve movements of 2p, and net negative other reserve movements
Group capital and leverage
• The CET1 ratio decreased to 13.5% (December 2023: 13.8%) as RWAs increased by £6.9bn to £349.6bn and CET1 capital decreased by £0.2bn to £47.1bn:
– c.40bps increase from attributable profit generated in the quarter
– c.40bps decrease driven by shareholder distributions including the £1.0bn share buyback announced with FY23 results and an accrual towards the FY24 dividend
– c.30bps decrease as a result of a £6.9bn increase in RWAs primarily driven by expected seasonal activity in the Investment Bank and regulatory model changes in Barclays UK which are expected to be partially offset for the full year
• The UK leverage ratio decreased to 4.9% (December 2023: 5.2%) primarily due to a £58.2bn increase in leverage exposure to £1,226.5bn, largely driven by an increase in trading securities and secured lending in Global Markets
Group funding and liquidity
• The liquidity metrics remain well above regulatory requirements, underpinned by well-diversified sources of funding, a stable global deposit franchise and a highly liquid balance sheet
• The liquidity pool was £323.5bn (December 2023: £298.1bn). The increase in the liquidity pool was driven by the expected increase in short term bank deposits after a drop at the year-end and a strong deposit growth in International Corporate Bank which is partially offset by a slight seasonal decline in Barclays UK deposits
• The average1 Liquidity Coverage Ratio (LCR) increased to 163% (December 2023: 161%), equivalent to a surplus of £117.8bn (December 2023: £117.7bn)
• Total deposits increased by £13.5bn to £552.3bn (December 2023: £538.8bn)
• The average2 Net Stable Funding Ratio (NSFR) was 136% (December 2023: 138%), which represents a £160.4bn (December 2023: £167.1bn) surplus above the 100% regulatory requirement
• Wholesale funding outstanding, excluding repurchase agreements, was £190.6bn (December 2023: £176.8bn)
• The Group issued £5.4bn equivalent of minimum requirement for own funds and eligible liabilities (MREL) instruments from Barclays PLC (the Parent company) in Q124. The Group has a strong MREL position with a ratio of 33.4%, which is in excess of the regulatory requirement of 30.1% plus a confidential, institution specific, Prudential Regulation Authority (PRA) buffer
| 1 | Represents average of the last 12 spot month end ratios. |
| 2 | Represents average of the last four spot quarter end ratios. |
Other matters
• Acquisition of Tesco Bank’s retail banking business: on 9 February 2024, Barclays entered into an agreement with Tesco Personal Finance plc (operating using the trading name “Tesco Bank”) to acquire its retail banking business. The acquisition is expected to reduce Barclays’ CET1 ratio by c.30bps on completion, which is expected to occur in Q424, subject to court sanction and regulatory approvals
• FCA motor finance review: in January 2024, the UK Financial Conduct Authority (FCA) announced that it was appointing a skilled person to undertake a review of the historical use of discretionary commission arrangements and sales in the motor finance market across several firms. The FCA plans to set out next steps on this matter by the end of September 2024. Clydesdale Financial Services Limited (CFS), a member of the Group, ceased operating in the motor finance market in late 2019 but is co-operating fully with the FCA’s skilled person review, the outcome of which is unknown, including any potential financial impact. The FCA intervention followed two final decisions by the UK Financial Ombudsman Service (FOS), including one upholding a complaint against CFS in relation to commission arrangements and disclosure in the sale of motor finance products and a number of complaints and court claims, including some against CFS. We have commenced a judicial review challenge to the FOS in the High Court in relation to this decision
• BoE levy scheme: following parliamentary approval, the new levy process commenced in Q124 replacing the Cash Ratio Deposit scheme as a means of funding the Bank of England’s monetary policy and financial stability operations. This change in scheme moves the charge from negative income recognised over the course of the year to an annual operating expense at the start of the levy year (running from 1 March to 28 February). Barclays’ estimated contribution for the 2024/2025 financial year is £120m, reported in the UK regulatory levies account line, reducing Q124 Group RoTE by c.0.7%. This will be partially offset by increased income of c.£75m through lower funding costs during 2024, with an expected overall net full year Group RoTE impact of c.0.1%. The final charge is expected to be confirmed during Q324
• Disposal of Italian retail mortgages: on 24 April 2024, Barclays announced a transaction under which Barclays Bank Ireland PLC intends to dispose of its performing Italian retail mortgage book currently held in Head Office. The sale is expected to complete in Q224. It is expected to generate a pre-tax loss of c.£225m for the year to 31 December 2024 and reduce RWAs by c.£0.8bn at completion. The transaction is expected to be broadly neutral to Barclays’ CET1 ratio
– In addition, Barclays is in discussion with respect to the disposals of the remaining non-performing and Swiss-Franc linked Italian retail mortgage portfolios. Should such sales occur, they are together expected to generate a small pre-tax loss on sale, but also be broadly neutral to Barclays’ CET1 ratio
• Sale of German consumer finance business: Barclays is currently engaged in a process to sell its German consumer finance business (comprising credit cards, unsecured personal loans and deposits), held in Head Office, as part of our ambition to simplify Barclays and support our focus on growing our key businesses. The sale is expected to complete in H224, and be accretive to Barclays’ CET1 ratio
Anna Cross, Group Finance Director
