Barclays 2009 Annual Report Download - page 28

26 Barclays PLC Annual Report 2009 www.barclays.com/annualreport09
Key performance indicators
Financial KPIs
Definition
Profit before tax
Profit before tax is one of the two primary
profitability measures used to assess
performance and represents total income less
impairment charges and operating expenses.
Economic profit
Economic Profit (EP) is the other primary
profitability measure used by Barclays. EP is
profit after tax and non-controlling interests less
a capital charge (average shareholders’ equity
and goodwill excluding non-controlling interests
multiplied by the Group’s cost of equity).
Shareholder returns
Total shareholder return (TSR) is defined as the
value created for shareholders through share
price appreciation, plus reinvested dividend
payments. We compare Barclays performance
with a group of international peers and aim for
top quartile performance. Return on average
shareholders’ equity is calculated as profit after
tax divided by the average shareholders’ equity
during the year, which is made up of share
capital, retained earnings and other reserves.
Capital ratios
Capital requirements are part of the regulatory
framework governing how banks and
depository institutions are managed. Capital
ratios express a bank’s capital as a percentage
of its risk weighted assets. Both Tier 1 and Core
Tier 1 capital resources are defined by the UK
FSA. Core Tier 1 is broadly tangible shareholders’
funds less the capital deductions from Tier 1.
In the 2008 accounts, we showed Equity Tier 1
ratio which was broadly representative of the
Core Tier 1 ratio. In 2009, the UK FSA formalised
a definition for Core Tier 1 which is now
published consistently by the industry in the UK.
Adjusted gross leverage
Adjusted gross leverage is defined as the
multiple of adjusted total tangible assets over
total qualifying Tier 1 capital. Adjusted total
tangible assets are total assets less derivative
counterparty netting, assets under management
on the balance sheet, settlement balances,
goodwill and intangible assets. Tier 1 capital is
defined by the UK FSA.
Why it’s important to the business and management
Profit before tax is a key indicator of financial performance
to many of our stakeholders.
Excluding movement on own credit, gains on acquisitions and
disposals and gains on debt buy-backs, Group profit before
tax increased 243% to £5,634m from £1,643m.
Total Group profit before tax is represented here alongside
profit before tax from continuing operations to aid
comparison.
Barclays believes that economic profit encourages both
profitable growth and the efficient use of capital.
These measures indicate the returns shareholders are
receiving for their investment in Barclays both in terms
of relative share price movements and the business
performance. These metrics demonstrate the alignment
of Barclays strategy and operations with the interests of
shareholders.
Peer group: Banco Santander, BBVA, BNP Paribas, Citigroup,
Deutsche Bank, HSBC, JP Morgan Chase, Lloyds Banking
Group, Royal Bank of Scotland, Unicredit and UBS.
The Group’s capital management activities seek to maximise
shareholders’ value by optimising the level and mix of its
capital resources.
The Group’s capital management objectives are to:
– Maintain sufficient capital resources to meet the minimum
regulatory capital requirements set by the UK FSA and the
US requirements that a financial holding company be
‘well capitalised’
– Maintain sufficient capital resources to support the Group’s
Risk Appetite and economic capital requirements
– Support the Group’s credit rating
– Ensure locally regulated subsidiaries can meet their
minimum capital requirements
– Allocate capital to businesses to support the Group’s
strategic objectives, including optimising returns on
economic and regulatory capital.
We expect to maintain our Core Tier 1 and Tier 1 ratios at
levels which significantly exceed the current minimum
requirements of the UK FSA.
Barclays believes that there will be more capital and less
leverage in the banking system and that lower leverage will
be regarded as a key measure of stability going forward. This
is consistent with the views of our regulators and investors.
Total shareholder return
2007 2008 2009
3rd 2nd 1st
quartile quartile quartile
Return on average
shareholders’ equity
2007 2008 2009
20.3% 16.5% 23.8%
2007 2008 2009
33x 28x 20x
Total profit before tax
2007 2008 2009
£7,076m £6,077m £11,642m
Profit before tax from
continuing operations
2007 2008 2009
£6,223m £5,136m £4,585m
£4,875m
£1,760m
£2,290m
07 08
09
07
08
09 10.0
5.6
4.7
13.0
8.6
7.6
— Tier 1
— Core Tier 1
Ratios (%)
Core Tier 1 and Tier 1