Barclays 2014 Annual Report Download - page 34

32 I Barclays PLC Annual Report 2014 barclays.com/annualreport
Running the company well
This page details a number of metrics the Group used to monitor financial performance.
2014 income statement review
In order to provide a more consistent basis for comparing business
performance between periods, management assess performance on
both an adjusted and statutory basis. Adjusted measures exclude items
considered to be significant but not representative of the underlying
business performance.
2014
£m
2013
£m
Core profit before tax 6,682 6,470
Non-Core loss before tax (1,180) (1,562)
Group Adjusted profit before tax 5,502 4,908
Own credit 34 (220)
Goodwill impairment –(79)
Provisions for PPI and interest rate hedging
redress (1,110) (2,000)
Gains on US Lehman acquisition assets 461 259
Provision for ongoing investigations and
litigation relating to Foreign Exchange (1,250) –
Loss on announced sale of the Spanish
business (446) –
ESHLA valuation revision (935) –
Statutory profit before tax 2,256 2,868
Adjusted profit before tax increased 12% to £5,502m:
Q Core income decreased 4% to £24,678m, reflecting a reduction in
the Investment Bank and adverse currency movements in Africa
Banking, partially offset by growth in Barclaycard and PCB. Non-Core
income reduced to £1,050m (2013: £2,293m) following run-down
and business disposals
Q Core impairment charges decreased 8% to £2,000m, reflecting the
improved economic environment in the UK and reduced impairment
in South African mortgages. Non-Core impairment charges reduced
£732m to £168m
Q Total adjusted operating expenses were down 9% to £18,069m,
driven by savings from Transform programmes, including a 5%
net reduction in headcount, and currency movements
Statutory profit before tax decreased to £2,256m (2013: £2,868m)
including the following material adjusting items:
Q A valuation revision of £935m (2013: nil) has been recognised
against the Education, Social Housing, and Local Authority (ESHLA)
loan portfolio held at fair value in Barclays Non-Core. This is due to
changes in discount rates applied in the valuation methodology
Q An additional PPI redress provision of £1,270m based on an updated
best estimate of future redress and associated costs, resulting in a
full year net charge of £1,110m (2013: £2,000m) in relation to PPI
and interest rate hedging redress
Q A £1,250m (2013: nil) provision for ongoing investigations and
litigation relating to Foreign Exchange
Q A £461m gain (2013: £259m) on US Lehman acquisition asset
Q A loss on the announced sale of the Spanish business of £446m,
(2013: nil) which completed on 2 January 2015. Additional
accumulated currency translation reserve losses of approximately
£100m will be recognised on completion in the first quarter of 2015
Transform financial targets
2014
£m
2013
£m
Barclays Group
CRD IV FL CET1 ratio >11.0% in 2016 10.3% 9.1%
Leverage ratio > 4.0% by 2016 3.7% n/a
Dividend payout ratio of 40-50% of adjusted
earnings over time 38% 42%
Barclays Core
Adjusted RoE >12% in Barclays Core by 2016 9.2% 11.3%
Adjusted operating expenses excluding costs
to achieve Transform of less than £14.5bn in
2016 £15,105m £16,377m
Barclays Non-Core
Drag on adjusted RoE <(3%) in the Non-Core
division by 2016 4.1% 7.2%
BCBS 270 fully loaded leverage ratio
In line with regulatory requirements, from 30 June 2014 Barclays
adopted the January 2014 BCBS 270 rules for leverage exposure to
derive the related leverage ratio for the Group. The ratio is calculated as
fully loaded Tier 1 Capital divided by BCBS 270 fully loaded leverage
exposure.
The ratio increased to 3.7% (30 June 2014: 3.4%), reflecting a reduction
in the leverage exposure of £120bn to £1,233bn and an increase in Tier
1 Capital to £46.0bn (30 June 2014: £45.4bn).
Dividend payout ratio
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. The 2014 dividend per share of 6.5p (2013: 6.5p)
resulted in a dividend payout ratio of 38% (2013: 42%).
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. Adjusted operating expenses excluding costs to achieve
Transform decreased 10% to £16,904m for the Group, and decreased
8% to £15,105m for the Core.
The Barclays Core and Non-Core adjusted RoE and CRD IV fully loaded
CET1 ratio financial commitments are included as the Group Company
Balanced Scorecard measures. Refer to page 16 for further details.
Becoming ‘Go-To’
These financial highlights provide
an overview of 2014 performance.
For further information on the
results of the Group, please see
our Financial review on page 221
A focus on sound financial footings
To make sure our capital, liquidity and funding remain strong
Lorem ipsum Implementing fair and appropriate financial reward