Barclays 2014 Annual Report Download - page 22

20 I Barclays PLC Annual Report 2014 barclays.com/annualreport
Barclaycard is a leading consumer payments business
offering a broad array of products and services to
consumers and merchants.
What we do
Barclaycard provides solutions enabling consumers to buy and pay in
the way they want, businesses to sell and accept payments in the way
they want, and connects the two in a way which adds value to both.
Operating across multiple geographies and distribution channels, we
are one of the few consumer payments businesses that is able to serve
both buyers and sellers. Our diversified business model allows us to
deliver consistent returns across the economic cycle.
As consumers and businesses adopt more secure digital and online
solutions, we continue to innovate – an area where Barclaycard delivers
upon its heritage of being a leader. Examples include:
Q Our collaboration with Transport for London (TfL) which, in
September 2014, enabled TfL to accept any contactless card or
device for payment across the whole of London’s transport network
Q The launch of our wearable bPay band, an ‘open market’ payment
product that can be linked to any UK credit or debit card and used
at over 300,000 contactless payment terminals across the UK
Q Barclaycard Anywhere – an app linked to a mobile card-acceptance
terminal using smartphone technology to enable SMEs and larger
Corporates with distributed workforces to take card payments
remotely
In addition we have focused on delivering value to our cardholders
by offering sector-leading products to our global customer and client
base, including:
Q Barclaycard Arrival, our award-winning US travel rewards product,
with over 250k active customers and more than $825m in loans only
21 months after launching
Q Leading the ‘best-buy’ tables for balance transfers in the UK for the
whole of 2014, giving consumers the best offer in the market daily
By providing simple solutions that offer clear value, work reliably and
create emotional engagement we can become the ‘Go-To’ bank for
consumer payments.
Market environment and risks
Barclaycard operates in multiple geographies and is therefore exposed
to the benefits and risks of each. Changes in the environment of these
various markets can cause headwinds as a result of fluctuations in
interest and foreign currency rates, or because of competitor activity
in our different product and geographical offerings. These headwinds
could increase impairment on our books or result in reduced income
and impact our credit and market risk appetite. We ensure we maintain
our risk appetite at an appropriate level across each of the risk
categories while reflecting the current environment. For example
we continue to lend responsibly and only to those for whom credit
is suitable.
While our future growth plans may pose some execution risk, as we
expand and deliver our strategy, our diversified business model limits
the potential impact from the risks described above and can open up
new lines of opportunity.
2014 performance review
Profit before tax increased 13% to £1,339m. Strong growth in 2014
was delivered through a diversified consumer and merchant business
model, with customer numbers increasing to 30m (2013: 26m) and
asset growth across all geographies. Growth has been managed on a
well-controlled cost base, with the business focusing on scale through
insourcing of services, consolidation of sites and digitalisation,
resulting in an improvement in the cost to income ratio to 43%.
The business focus on risk management is reflected in stable 30 day
delinquency rates and falling loan loss rates. The diversified and scaled
business model has allowed the business to deliver a strong return on
average equity of 16.0% (2013: 15.5%).
Total income increased 6% to £4,356m reflecting growth in the UK
consumer and merchant, Germany and US businesses, partially offset
by depreciation of average USD against GBP.
Q Net interest margin decreased to 8.75% (2013: 8.99%) due to a
change in product mix and the impact of promotional offers, partially
offset by lower funding costs
Q Net fee and commission income increased 2% to £1,286m due to
growth in payment volumes
Credit impairment charges increased 8% to £1,183m due to asset
growth and enhanced coverage for forbearance.
Total operating expenses increased 1% to £1,874m driven by costs
to achieve Transform, partially offset by depreciation of average USD
against GBP, and savings from insourcing of services, consolidating
of sites and digitalisation.
Loans and advances grew 16% to £36.6bn reflecting growth across all
geographies. RWAs increased 12% to £39.9bn as a result. Customer
deposits increased 43% to £7.3bn, reflecting the deposit funding
strategy in the US.
Our future priorities for Barclaycard
Barclaycard’s strategic intent is to go on delivering strong growth
and contribute to Barclays becoming the ‘Go-To’ bank. We seek to
achieve this through:
Q Selective expansion where we can generate efficiencies and
economies of scale
Q Investing to accelerate momentum in market sectors and
geographies where we already have acknowledged strength
Q Creating sustainable relationships and using our skills to support
our communities
Q Ensuring our products and services lead the industry in transparency
Q Continuing to be pioneers in the payments industry, offering
consumers and retailers innovative ways to buy and sell
How we are doing
Becoming ‘Go-To’
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