Barclays plc (LON:BARC) has announced its 2022 Annual Final Results.
Performance Highlights
In 2022 Barclays delivered a profit before tax of £7.0bn and return on tangible equity (RoTE) of 10.4%, with total capital distributions equivalent to c.13.4p per share
C. S. Venkatakrishnan, Group Chief Executive, commented
“Barclays performed strongly in 2022. Each business delivered income growth, with Group income up 14%. We achieved our RoTE target of over 10%, maintained a strong Common Equity Tier 1 (CET1) capital ratio of 13.9%, and returned capital to shareholders. We are cautious about global economic conditions, but continue to see growth opportunities across our businesses through 2023.”
Key financial metrics:
| Income | Cost: income ratio | Profit before tax | Attributable profit | RoTE | EPS | TNAV per share | CET1 ratio | Total capital return1 | |
| FY22 | £25.0bn | 67% | £7.0bn | £5.0bn | 10.4% | 30.8p | 295p | 13.9% | c.13.4p equivalent |
| Q422 | £5.8bn | 69% | £1.3bn | £1.0bn | 8.9% | 6.5p | 295p | 13.9% | c.13.4p equivalent |
Demonstrating execution against our three strategic priorities:
·Deliver next generation digitised consumer financial services: simplifying and upgrading online banking services – with over 10.5 million Barclays UK mobile banking app users, and log-ins up 8% year-on-year. c.220k ‘Rainy Day Saver’ accounts opened online since launch on 29 September 2022, 41% are new or re-joining Blue Rewards customers. In the US Consumer Bank, the Gap portfolio2 integration onto our platform doubled our US customer base to over 20 million
·Deliver sustainable growth in the Corporate and Investment Bank (CIB): 114bps of revenue share gain in Global Markets from 2019-20223; second fastest growth rate across the top 10 global peers. Investment in Financing businesses delivered more stable, high returning income of £2.9bn in 2022 reflecting a compound annual growth rate (CAGR) of 16% since 2019
·Capture opportunities as we transition to a low-carbon economy: new expanded target to facilitate $1 trillion of Sustainable and Transition Financing by the end of 2030. The Group’s Sustainable Impact Capital investment mandate is now £500m by the end of 2027
2022 Performance highlights4:
·Group attributable profit of £5.0bn and RoTE of 10.4%, with all operating divisions delivering double-digit returns
- Excluding the impact of Over-issuance of Securities in the US (Over-issuance of Securities)5, RoTE was 11.6%
·Group profit before impairment of £8.2bn, up 9% year-on-year
·Group income of £25.0bn, up 14% year-on-year with broad-based momentum across our operating divisions and the benefit from FX:
- CIB income increased by 8%; the best full year for both Global Markets and FICC6, and strong performance in Transaction banking, more than offsetting the impact of a reduced fee pool in Investment Banking7
- Consumer, Cards and Payments (CC&P) income increased by 35% supported by higher balances in US cards and Private Bank with turnover growth in Payments
- Barclays UK income increased by 11% primarily driven by the rising rate environment
·Group operating expenses were £16.7bn, reflecting £1.6bn of litigation and conduct charges, primarily driven by the Over-issuance of Securities
- Group operating expenses excluding litigation and conduct were £15.1bn, up 6% year-on-year, reflecting the impact of FX and inflation
·Credit impairment charges were £1.2bn, with a loan loss rate (LLR) of 30bps, reflecting macroeconomic deterioration, partially offset by the utilisation of post-model adjustments (PMAs) for macroeconomic uncertainty and the release of COVID-19 related adjustments informed by refreshed scenarios. Coverage ratios at the portfolio level remain strong
·CET1 ratio of 13.9% and tangible net asset value (TNAV) per share of 295p
·Capital distributions: total dividend for 2022 of 7.25p per share (2021: 6.0p), including a 5.0p per share 2022 full year dividend. Intend to initiate a share buyback of up to £0.5bn, bringing the total share buybacks announced in relation to 2022 to £1.0bn and total capital return equivalent to c.13.4p per share
1 Includes total dividend for 2022 of 7.25p per share and total share buybacks announced in relation to 2022 of £1.0bn.
2 The Gap portfolio refers to the Gap Inc. US credit card portfolio.
3 Barclays’ calculations using Peer reported financials.
4 2021 financial and capital metrics have been restated to reflect the impact of the Over-issuance of Securities. See Basis of preparation on page 55 and Restatement of financial statements (Note 1) on page 69 for more information.
5 Denotes the Over-issuance of Securities under Barclays Bank PLC’s (BBPLC) US shelf registration statements on Form F-3 filed with the SEC in 2018 and 2019. See page 5 for reconciliation of Barclays’ performance excluding the impact of the Over-issuance of Securities.
6 Period covering 2014-2022. Pre 2014 data was not restated following re-segmentation in 2016.
7 Data source: Dealogic for the period covering 1 January to 31 December 2022.
Q422 Performance highlights1:
·Attributable profit was £1.0bn and RoTE was 8.9% with profit before impairment of £1.8bn, up 29% year-on-year with positive cost: income jaws of 6%
·Group income was £5.8bn, up 12% year-on-year including the benefit from FX, with strong performances in Barclays UK and CC&P. Within CIB, strong performances in Global Markets and Transaction banking were more than offset by reduced income in Investment Banking and Corporate Lending
·Group operating expenses were £4.0bn, up 6% year-on-year, reflecting the impact of FX, inflation and investment in the business
·Credit impairment charges were £0.5bn with an LLR of 49bps. The deteriorating macroeconomic forecast resulted in an increased charge, partially offset by utilising economic uncertainty PMAs
Outlook:
·Returns: targeting RoTE of greater than 10% in 2023
·Income: diversified income streams continue to position the Group well for the current economic and market environment including higher interest rates. In 2023, Barclays UK net interest margin (NIM) is expected to be greater than 3.20%2
·Costs: targeting a cost: income ratio percentage in the low 60s in 2023, investing for growth whilst progressing towards the Group’s medium-term target of below 60%
·Impairment: expect an LLR of 50-60bps in 2023, based on the current macroeconomic outlook
·Capital: expect to operate within the CET1 ratio target range of 13-14%
·Capital returns: capital distribution policy incorporates a progressive ordinary dividend, supplemented with buybacks as appropriate
1 2021 financial and capital metrics have been restated to reflect the impact of the Over-issuance of Securities. See Basis of preparation on page 55 and Restatement of financial statements (Note 1) on page 69 for more information.
2 Assumes the UK bank rate peaks at 4.25% in 2023.
Group Finance Director’s Review
2022 Group performance1
·Barclays delivered a profit before tax of £7,012m (2021: £8,194m), RoTE of 10.4% (2021: 13.1%) and earnings per share (EPS) of 30.8p (2021: 36.5p)
·The Group has a diverse income profile across businesses and geographies including a significant presence in the US. The 10% appreciation of average USD against GBP positively impacted income and profits and adversely impacted credit impairment charges and total operating expenses
·Group income increased to £24,956m (2021: £21,940m)
-Excluding the income benefit of £292m relating to hedging arrangements to manage the risks of the rescission offer in relation to the Over-issuance of Securities, total Group income was £24,664m, up 12% year-on-year
·Group operating expenses increased to £16,730m (2021: £14,659m) mainly due to higher litigation and conduct charges:
-Group operating expenses excluding litigation and conduct charges increased 6% to £15,133m, reflecting the impact of inflation and the appreciation of average USD against GBP
-Litigation and conduct charges were £1,597m (2021: £397m) including £966m from the Over-issuance of Securities
·Credit impairment charges were £1,220m (2021: £653m net release). The increase in charges reflect macroeconomic deterioration and a gradual increase in delinquencies, partially offset by the utilisation of macroeconomic uncertainty PMAs and the release of COVID-19 related adjustments informed by refreshed scenarios. Total coverage ratio decreased to 1.4% (December 2021: 1.6%) driven by changes in portfolio mix and write-offs. Coverage levels remain strong
·The effective tax rate (ETR) was 14.8% (2021: 13.9%). The tax charge included a £346m re-measurement of the Group’s UK deferred tax assets (DTAs) due to the enactment of legislation to reduce the UK banking surcharge rate. Excluding this DTAs downward re-measurement, the ETR was 9.9%, reflecting tax benefits in the current year, primarily arising from tax relief related to government bonds linked to the high prevailing rate of inflation in 2022, as well as beneficial adjustments in respect of prior years
·Attributable profit was £5,023m (2021: £6,205m)
·Total assets increased to £1,513.7bn (December 2021: £1,384.3bn) reflecting higher levels of activity as we supported our clients through a period of market volatility, growth in customer lending, and appreciation of USD against GBP
·TNAV per share increased to 295p (December 2021: 291p) with EPS of 30.8p and currency movements partially offset by net negative reserve movements due to higher interest rates, primarily in the cash flow hedging reserve
Capital distributions
·Barclays intends to pay a 2022 full year dividend of 5.0p per share, taking the total dividend for 2022 to 7.25p per share (2021: 6.0p). Barclays also intends to initiate a share buyback of up to £0.5bn, bringing the total share buybacks announced in relation to 2022 to £1.0bn and total capital return equivalent to c.13.4p per share
·Barclays is committed to maintaining an appropriate balance between delivering attractive total cash returns to shareholders, investment in the business and maintaining a strong capital position. Barclays pays a progressive ordinary dividend, taking into account these objectives and the earnings outlook of the Group. The Board will also continue to supplement the ordinary dividends as appropriate, including with share buybacks
·Dividends will continue to be paid semi-annually
Group capital and leverage1
·The reported CET1 ratio decreased by c.120bps to 13.9% (December 2021: 15.1%) as RWAs increased by £22.4bn to £336.5bn and CET1 capital decreased by £0.4bn to £46.9bn
-c.150bps increase from 2022 attributable profit
-c.80bps returned to shareholders including the 2.25p half year dividend paid in September 2022, £1.5bn of share buybacks announced with FY21 and H122 results and a FY22 dividend accrual
-c.80bps reduction due to the impact of regulatory change on 1 January 2022 as CET1 capital decreased £1.7bn and RWAs increased £6.6bn
-c.70bps reduction from decreases in the fair value of the bond portfolio through other comprehensive income and other capital deductions
-c.40bps reduction due to pension contributions, including the accelerated cash settlement to the UK Retirement Fund (UKRF) of earlier deficit reduction contributions and deficit reduction payments made in 2022
-A £14.1bn increase in RWAs as a result of foreign exchange movements was broadly offset by a £2bn increase in the currency translation reserve
·The UK leverage ratio increased to 5.3% (December 2021: 5.2%) primarily due to a decrease in the leverage exposure of £7.9bn to £1,130.0bn and an increase in Tier 1 Capital of £0.6bn to £60.1bn
1 2021 financial and capital metrics have been restated to reflect the impact of the Over-issuance of Securities. See Basis of preparation on page 55 and Restatement of financial statements (Note 1) on page 69 for more information.
Group funding and liquidity
·The liquidity pool was £318bn (December 2021: £291bn) and the liquidity coverage ratio (LCR) remained significantly above the 100% regulatory requirement at 165% (December 2021: 168%), equivalent to a surplus of £117bn (December 2021: £116bn). The increase in the liquidity pool over the year was driven by continued deposit growth and an increase in wholesale funding, partly offset by an increase in business funding consumption. An increase in net stress outflows and trapped liquidity within Barclays’ subsidiaries led to a modest reduction in the LCR ratio. The Net Stable Funding Ratio (NSFR) (average of last four quarter ends) was 137%, which represents a £155bn surplus above the 100% regulatory requirement
·Wholesale funding outstanding, excluding repurchase agreements, was £184.0bn (December 2021: £167.5bn). The Group issued £15.3bn equivalent of minimum requirement for own funds and eligible liabilities (MREL) instruments from Barclays PLC (BPLC) (the Parent company) in 2022. The Group has a strong MREL position with a ratio of 33.5% of RWAs, which is in excess of the 28.9% regulatory requirement excluding a confidential, institution specific Prudential Regulation Authority (PRA) buffer
Other matters
·Over-issuance of Securities: Barclays recognised a net attributable loss of £0.6bn in 2022 (£nil in Q422, £0.7bn total loss including 2021). This included a monetary penalty of $200m (£165m1) following the resolution of the SEC’s investigation of BPLC and BBPLC relating to the Over-issuance of Securities
As previously disclosed, Barclays has a contingent liability in relation to current and potential private civil claims and other potential enforcement actions relating to the Over-issuance of Securities. For further details see Restatement of financial statements (Note 1a) in the BPLC 2022 Annual Report on page 428.
·SEC and Commodity and Futures Trading Commission (CFTC) devices investigation: in Q322, the SEC and CFTC announced the final settlement terms relating to their investigations of compliance with record-keeping obligations in connection with business-related communications over unapproved electronic messaging platforms. Under these settlements, BBPLC and Barclays Capital Inc. paid a combined $125m (£103m1) civil monetary penalty to the SEC and a $75m (£62m1) civil monetary penalty to the CFTC
·Legacy Loan Portfolio: a customer remediation provision of £282m was recognised during 2022, relating to a legacy timeshare loan portfolio brokered by Azure Services Limited and other legacy loan portfolios
·Financial Conduct Authority (FCA) proceedings: a provision of £50m was recognised in Q322 in relation to the FCA investigation into disclosure-related matters arising out of BPLC’s June and November 2008 capital raisings
·Gap portfolio acquisition: in Q222, Barclays completed the acquisition of a US credit card portfolio of $3.3bn (£2.7bn2) of receivables, in partnership with Gap Inc.
·Kensington Mortgage Company (KMC) acquisition: in Q222, BPLC announced that Barclays Bank UK PLC had agreed to acquire UK specialist mortgage lender KMC and a portfolio of UK mortgages. Regulatory approval has been obtained and the transaction is now expected to complete in Q123
·Absa Group Limited (Absa) sale: during 2022 Barclays fully disposed of its shareholding in Absa, raising aggregate gross sale proceeds of ZAR 21.0bn (c.£1.1bn3)
·UK Corporation Tax: an increase in the UK Corporation Tax rate from 19% to 25% was enacted in 2021 and a reduction in the UK banking surcharge from 8% to 3% was enacted in 2022, both to be effective from 1 April 2023. The future statutory tax rate applied to UK banking profits will therefore be 28% from 1 April 2023
Group targets
Barclays continues 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%
Anna Cross, Group Finance Director
1 Exchange rate GBP/USD 1.22 as at 30 June 2022.
2 Exchange rate GBP/USD 1.22 as at 17 June 2022.
3 On 21 April 2022, ZAR 10.3bn at exchange rate GBP/ZAR 20.04 and on 1 September 2022, ZAR 10.7bn at exchange rate GBP/ZAR 19.93.
