Barclays releases Q1 2017 results

March 30, 2017
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Barclays releases Q1 2017 results

Core returns:

Strong Core Return on Tangible Equity (RoTE) of 11.0% (Q116: 9.9%), on an average allocated tangible equity base that was £5bn higher year-on-year, as 12% income growth drove a 20% increase in profit before tax
Barclays UK RoTE increased to 21.6% and Barclays International RoTE improved to 12.5%

Non-Core rundown:

Good progress on the rundown, with a materially lower loss before tax of £241m (Q116: £815m)
Risk weighted assets (RWAs) reduced £5bn to £27bn in Q117, and on track to close Non-Core at 30 June 2017 with approximately £25bn of RWAs

Cost efficiency:

Group cost: income ratio improved to 62% (Q116: 76%) driven by a reduction in NonCore costs to £157m (Q116: £555m) and positive cost: income jaws in Core
Core cost: income ratio reduced to 59% (Q116: 62%)
Remain on track to deliver Group cost: income ratio below 60% over time

Barclays Africa Group Limited (BAGL)
discontinued operation:

Impairment of Barclays’ holding in BAGL allocated to acquisition goodwill of £884m, primarily driven by the 17% decline in BAGL’s share price in the quarter. This had no impact on the Group’s Common Equity Tier1 (CET1) capital and tangible net asset value (TNAV)
On track to achieve regulatory deconsolidation, with further selldown subject to regulatory approval. Estimate c.75bps Group CET1 ratio accretion on regulatory deconsolidation, based on the 31 March 2017 BAGL share price and ZAR exchange rate

Common Equity Tier 1
(CET1) ratio:

CET1 ratio increased to 12.5% (December 2016: 12.4%), with strong organic capital generation partially offset by the redemption of USD preference shares, purchase of shares for employee share awards and pension contributions
On track to meet end-state capital ratio level

Holding Company
(HoldCo) transition:

Further progressed the transition to HoldCo funding with £6.3bn equivalent of issuance
Q117 included the redemption of $1.375bn 7.1% Series 3 USD preference shares

Group profit before tax more than doubled to £1,682m driven by improved profitability in the Core and materially lower losses in Non-Core of £241m (Q116: £815m). Core basic earnings per share increased to 7.2p (Q116: 5.8p)

Barclays UK RoTE improved to 21.6% (Q116: 20.5%), with 2% income growth driving an improved cost: income ratio of 52% (Q116: 53%). Net interest margin (NIM) improved 7bps to 3.69% with net interest income increasing 1% to £1,511m

Barclays International RoTE improved to 12.5% (Q116: 9.5%) as profit before tax increased 32% to £1,356m. Consumer, Cards and Payments RoTE was 36.4% (Q116: 23.4%) while the Corporate and Investment Bank RoTE improved to 8.2% (Q116: 7.3%)

Basic earnings per share in respect of continuing operations increased to 6.1p (Q116: 2.2p)

Attributable loss in respect of discontinued operation of £801m due to an impairment of Barclays’ holding in BAGL allocated to acquisition goodwill of £884m

Group RoTE decreased to 1.8% (Q116: 3.8%) due to a 7.2% dilutive impact from the impairment of Barclays’ holding in BAGL allocated to acquisition goodwill

Tangible net asset value per share increased to 292p (December 2016: 290p) primarily due to profits generated in the period

James E Staley, Group Chief Executive Officer, said:

“This has been another quarter of strong progress towards the completion of the restructuring of Barclays. Group profit before tax more than doubled compared to Q1 of 2016, and our Core businesses continued to perform very well, producing a combined Return on Tangible Equity of 11%, on an average tangible equity base that is £5bn higher yearon-year. Within that, Barclays UK’s and Barclays International’s RoTEs both improved to 21.6% and 12.5% respectively.

Non-Core rundown carries on apace, with materially lower losses, and RWAs reducing by a further £5bn to £27bn in the quarter. We remain well on track to close the unit on the 30th of June. Crucially, in this quarter, as we reduce that Non-Core drag, we can see more clearly than ever before the growing convergence between our Core RoTE of 11%, and the Group RoTE of 9%, excluding the one-off impairment in respect of our African operations. That convergence has been the central strategic objective in the accelerated strategy we have been pursuing over the past year.

Our Group cost to income ratio has improved to 62%, compared to 76% for the first quarter of 2016, driven by a marked reduction in Non-Core costs and positive jaws in the Core. On Africa, we await approval for the separation arrangements already agreed with local management, following which we will be able to make further progress towards regulatory deconsolidation.

The earnings power of Barclays enabled us to take actions in the quarter including the redemption of US dollar preference shares, the purchase of shares for employee awards, and pension contributions, while still improving our CET1 ratio to 12.5% through organic capital generation, and that is pleasing. We are now just two months away from completing the restructuring of Barclays as a Transatlantic Consumer, Corporate and Investment Bank and there is further good reason in this quarter’s performance to feel optimistic for our prospects.”

Re-disseminated by The Asian Banker