• March 01, 2016
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Barclays publishes 2015 full year results and strategy update

In addition to our financial results for 2015 released today, I am announcing initiatives to accelerate our strategy and simplify the Group, as we prepare for regulatory ring-fencing requirements.

• 2015 results show our Core business is a strong base on which to build, with Core adjusted earnings per share of 25.7p, as detailed in the rest of this results release
• Barclays has a clear path to deliver strong returns to shareholders whilst maintaining focus on our values
• Simplification of the Group to focus on two core divisions – Barclays UK and Barclays Corporate & International
• Package of measures to deliver our strategy and manage through remaining legacy headwinds:
• Intention to sell down stake in Barclays Africa Group Limited (BAGL) to a level which permits accounting and regulatory deconsolidation over the next two to three years
• One-time enlargement of Non-Core, with transfer of approximately £8bn risk weighted assets (RWAs): accelerated run down particularly in 2016, reconfirming guidance of around £20bn RWAs for Non-Core by end of 2017 despite perimeter enlargement
• Full year 2015 dividend of 6.5p; intention to pay 3.0p dividend for 2016 and 2017. Expect to pay out a significant proportion of earnings in dividends to shareholders over time
• Cost guidance for 2016 of £12.8bn for new core (excluding BAGL)
• New Group financial targets focused on Return on Tangible Equity, Common Equity Tier 1 ratio, and Cost:Income ratio

Barclays - Transatlantic Consumer, Corporate and Investment Bank
At the heart of Barclays strategy is to build on our strength as a transatlantic Consumer, Corporate andInvestment bank anchored in the two financial centres of the world, London and New York.

We continue to optimise our geographic footprint as we pursue improved returns, while strengthening our capital ratios still further. Barclays recently announced that the Investment Bank is closing offices in nine countries, and we are now announcing our intention to move to a non-controlling, non-consolidated investment in BAGL over time, subject to regulatory and shareholder approvals if and as required.

The proposed reduction in the stake in BAGL and accelerated rundown of Barclays Non-Core over 2016 and 2017 will result in a dramatically simplified Group, clearly focused on its key operating businesses, which from today will be run in two divisions:

1. Barclays UK
Barclays UK is a personal and business banking franchise with true scale, built around our customers’ needs with innovation at its core. It comprises our UK retail banking operations, our UK consumer credit cards business, our UK-based wealth offering, and corporate banking for smaller businesses.

With around 22 million retail customers, and almost one million business banking clients, we are a preeminent UK financial services provider. This division will become our UK ring-fenced bank by 2019. On an indicative basis we estimate that this division would have approximately £70bn of RWAs, £200bn of leverage exposure and a loan to deposit ratio of around 95% as at 31 December 2015.

2. Barclays Corporate & International
Barclays Corporate & International is a diversified transatlantic business comprising our corporate banking franchise, which is market leading in the UK with strong international growth opportunities, our top-tier investment bank, a strong and growing US and international cards business, our international wealth offering, and leading payments capability through both corporate banking and the Barclaycard merchant acquiring expertise.

Barclays Corporate & International has scale in wholesale banking and consumer lending, strength in our key markets, excellent growth potential, and good balance in its revenue streams, delivering further resilience and diversification. On an indicative basis we estimate that this division would have approximately £195bn of RWAs, £575bn of leverage exposure, and a loan to deposit ratio of around 85% as at 31 December 2015.

We expect that both divisions, when separately assessed, would support solid investment grade credit ratings; and both generated double digit returns on tangible equity on a proforma adjusted basis for 2015. We will be publishing a restatement document reflecting the new divisional structure ahead of our first quarter results in April.

Their creation as sibling divisions, which will become our ring fenced and non-ring fenced legal entities in due course, simplifies the Group and concentrates Barclays’ competitive advantages in the right places. The simplified structure will allow investors to see much more clearly the opportunity for us to generate sustainable returns and growth in the near future.

Proposed selldown of BAGL
We are today announcing our intention to sell down our 62.3% interest in our African business, BAGL, over the coming two to three years, to a level which will permit us to deconsolidate it from an accounting and regulatory perspective, subject to shareholder and regulatory approvals if and as required.

BAGL is a well-diversified business and a high quality franchise. However the stake in BAGL presents specific challenges to Barclays as owners, such as the level of capital held in respect of BAGL, the international reach of the UK Bank Levy, the GSIB buffer, and MREL/TLAC and other regulatory requirements. BAGL is today reporting a 17% return on equity for 2015 in its standalone local currency results versus the 8.7% return reported for Africa Banking in Barclays’ results.

Non-Core rundown
We have more than halved the size of Barclays Non-Core from its starting point in 2013 of £110bn of RWAs to £47bn.

We are leveraging the track record and expertise of our Non-Core management team by making a one-time expansion of the Non-Core perimeter with further businesses we plan to exit over 2016 and 2017, principally those from the Investment Bank recently announced, our Egypt and Zimbabwe businesses (which are not owned by BAGL), our Southern European cards businesses, and our Asian Wealth business. This adds around £8bn of RWAs to Non-Core as at the end of 2015.

Despite the enlargement of the Non-Core perimeter we are still guiding to Non-Core RWAs of £20bn at the end of 2017. As we accelerate the Non-Core rundown we anticipate incurring restructuring costs in Non-Core of close to £400m in 2016 and are guiding to negative income for 2016 broadly in line with the quarterly run rate of around £200m reported in Q4, excluding any incremental Education, Social Housing, and Local Authority (ESHLA) portfolio mark-to-market movements. The Non-Core perimeter enlargement adds approximately £600m to underlying Non-Core costs, but we expect to exit the majority of these in the course of 2016.

Dividends
We have declared a final dividend of 3.5p per share, making 6.5p in total for 2015. However, we intend to pay a dividend of 3.0p for 2016 and 2017. We expect to set appropriate dividends as Core and Group earnings become aligned through Non-Core run down and reduction of legacy headwinds, and we expect to pay out a significant proportion of earnings in dividends to shareholders over time. We will pay dividends semi-annually from 2016 rather than quarterly.

Financial Progress and Targets
We expect the combination of this dividend reduction and the BAGL sell-down will contribute at least 100 basis points of proforma accretion to the Group’s CET1 ratio over the next two to three years, supplementing organic capital ratio accretion.

We will continue to manage down our Non-Core costs and the Core cost base, and are guiding to 2016 costs for the new core (excluding BAGL) – of £12.8bn, excluding conduct and litigation and other notable items.

We are also simplifying our financial targets for the Group going forward to focus on three key metrics, and will be aiming to achieve these targets in a reasonable timeframe, in order to deliver shareholder value:

• Return on Tangible Equity (RoTE): As we reduce the Non-Core drag on Group returns, the Group’s RoTE will converge towards the Core RoTE, and achieve attractive returns for shareholders
• CET1 ratio: Our target will be to run the Group’s CET1 ratio at 100-150 basis points above our regulatory minimum level
• Cost:Income ratio: Our target is to reduce the Group’s Cost:Income ratio to below 60%

Jes Staley, Group Chief Executive Officer

Access the full report here.

Re-disseminated by The Asian Banker