Barclays 2014 Annual Report Download - page 225

barclays.com/annualreport Barclays PLC Annual Report 2014 I 223
Core and Non-Core Transform targets
Definition Why it is important and how the Group performed
Return on average shareholders’ equity (RoE)
RoE is calculated as profit for the year attributable
to ordinary equity holders of the parent, divided
by average shareholders’ equity for the year
excluding non-controlling and other equity
interests. Shareholders’ equity is made up of share
capital, retained earnings and other reserves.
Adjusted RoE excludes post tax adjusting items
for movements in own credit, gains on US Lehman
acquisition assets, the gain on disposal of the
investment in BlackRock, Inc., provisions for PPI
and interest rate hedging redress, goodwill
impairment, provision for ongoing investigations
and litigation relating to Foreign Exchange, the
loss on announced sale of the Spanish business
and the Education, Social Housing and Local
Authority (ESHLA) valuation revision. Average
shareholders’ equity for adjusted RoE excludes the
impact of own credit on retained earnings.
This measure indicates the return generated by
the management of the business based on
shareholders’ equity. Achieving a target RoE
demonstrates the organisation’s ability to execute
its strategy and align management’s interests with
shareholders’. RoE lies at the heart of the Group’s
capital allocation and performance management
process.
Adjusted RoE for the Group increased to 5.1%
(2013: 4.1%). RoE for the Core business decreased
to 9.2% (2013: 11.3%), while the RoE dilution on
the Group’s returns in the Non-Core business
decreased to 4.1% (2013: 7.2%).
RoE for the Core business excluding costs to
achieve Transform was 10.9% (2013: 12.7%).
Transform target: deliver a return on equity for
the Core business of > 12% by 2016, while
reducing the Non-Core dilution on the Group’s
RoE to < 3%.
Core
2014: 9.2%
2013: 11.3%
2012: 10.1%
2016 Core Target: >12%
Non-Core dilution
2014: 4.1%
2013: 7.2%
2012: 1.1%
2016 Non-Core dilution Target: < 3%
Group adjusted
2014: 5.1%
2013: 4.1%
2012: 9.0%
Operating expenses excluding costs to achieve
Transform
Defined as adjusted total operating expenses
excluding costs to achieve Transform.
Adjusted operating expenses exclude provisions
for PPI and interest rate hedging redress, provision
for ongoing investigations and litigation relating to
Foreign Exchange and goodwill impairment.
Barclays views operating expenses as a key
strategic battleground for banks over the next
decade. Those who actively manage costs and
control them effectively will gain a strong
competitive advantage.
Adjusted operating expenses excluding costs to
achieve Transform of £1,165m (2013: £1,209m)
decreased 10% to £16,904m. Operating expenses
in the Core business excluding costs to achieve
Transform of £953m (2013: £671m) decreased
8% to £15,105m.
Transform target: Core operating expenses
excluding costs to achieve Transform of
< £14.5bn in 2016.
Core
2014: £15,105m
2013: £16,377m
2012: £16,472m
2016 Core Target: <£14,500m
Group adjusted
2014: £16,904m
2013: £18,684m
2012: £18,562m
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