Barclays 2014 Annual Report Download - page 224

222 I Barclays PLC Annual Report 2014 barclays.com/annualreport
Financial review
Key Performance Indicators
Group Transform targets
Definition Why it is important and how the Group performed
CRD IV fully loaded Common Equity Tier 1
(CET1) ratio
Capital requirements are part of the regulatory
framework governing how banks and depository
institutions are supervised. Capital ratios express
a bank’s capital as a percentage of its RWAs as
defined by the PRA.
In the context of CRD IV, the fully loaded CET1
ratio is a measure of capital that is predominantly
common equity as defined by the Capital
Requirements Regulation.
The Group’s capital management objective is to
maximise shareholders’ value by prudently
optimising the level, mix and distribution to
businesses of its capital resources while
maintaining sufficient capital resources to: ensure
the Group is well capitalised relative to its
minimum regulatory capital requirements set by
the PRA and other regulatory authorities; meet the
Group’s risk appetite; and support the Group’s
credit rating.
The Group’s CRD IV fully loaded CET1 ratio
increased to 10.3% (2013: 9.1%) mainly driven
by a £40.6bn reduction in RWAs to £402bn,
demonstrating good progress on the Non-Core
run-down, and capital growth to £41.5bn (2013:
£40.4bn). Including the sale of the Spanish
business, completed on 2 January 2015, the fully
loaded CRD IV CET1 ratio would have increased
to 10.5% as at 31 December 2014.
Transform target:
>11.0% CRD IV CET1 ratio on a fully loaded basis
in 2016.
2014: 10.3%
2013: 9.1%
2016 Target: > 11.0%
BCBS 270 fully loaded leverage ratio
From 30 June 2014, Barclays adopted the January
2014 BCBS 270 rules for leverage exposure as the
primary measure to manage leverage exposure for
the Group, and ultimately derive the related
leverage ratio for the Group. These rules
supersede the previously recognised PRA leverage
basis, with the PRA also adopting the BCBS based
metric as the primary measure.
The ratio is calculated as fully loaded Tier 1 Capital
divided by BCBS 270 fully loaded leverage
exposure.
The leverage ratio is non-risk based and is
intended to act as a supplementary measure to
the risk-based capital metrics such as the CET1
ratio.
The BCBS 270 leverage ratio increased to 3.7%
(30 June 2014: 3.4%), reflecting a reduction in the
BCBS 270 leverage exposure of £120bn to
£1,233bn and an increase in Tier 1 Capital to
£46.0bn (30 June 2014: £45.4bn). Tier 1 Capital
includes £4.6bn of Additional Tier 1 (AT1)
securities.
Transform target:
BCBS 270 leverage ratio > 4.0% by 2016.
2014: 3.7%
2016 Target: > 4.0%
Dividend payout ratio
It is the Group’s policy to declare and pay
dividends on a quarterly basis. In a normal year,
there will be three equal payments in June,
September and December, and a final variable
payment in March.
The dividend payout ratio is the percentage of
earnings paid to shareholders in dividends and is
calculated as a proportion of dividends paid
relative to adjusted earnings per share as
determined by the Board.
The ability to pay dividends to shareholders
demonstrates the financial strength of the Group.
2014 dividend per share of 6.5p (2013: 6.5p)
resulted in a dividend payout ratio of 37.6%
(2013: 42.5%).
Transform target:
40%-50% dividend payout ratio over time.
We expect to target a 40% payout ratio in the
short term as we focus on capital accretion.
Adjusted dividend per share
2014: 6.5p
2013: 6.5p
2012: 6.5p
Adjusted dividend payout ratio
2014: 38%
2013: 42%
2012: 18%
2016 Target: 40%-50%
2016 Transform targets
On 8 May 2014, Barclays announced revised Transform targets based on the results of an updated strategic review.
There are six primary 2016 targets as outlined below. Three of these targets relate to performance of the Group with
regards to capital, leverage and dividends; two relate to the Core business, focusing on sustainable returns and cost
management; while the final target is specific to minimising the Non-Core dilution on the Group’s return on equity
(RoE). These measures formed the basis of the Key Performance Indicators (KPIs) in 2014 and are used by
management in order to assess financial performance. In addition, the Group adjusted RoE and CRD IV fully loaded
CET1 ratio are included as the Group Balanced Scorecard measures.