Barclays 2010 Annual Report Download - page 17

Summary
Barclays delivered a significant increase in profit before tax in 2010
on both a headline and underlying basis. This was despite continued
economic challenges in our principal markets: historically low interest
rates; sluggish volumes in many market segments; and considerable
regulatory uncertainty. In light of those circumstances, I am proud of
what my colleagues have achieved.
We have much more to do to ensure that we can continue to deliver on
our goal to produce top quartile total shareholder returns (TSR) over time.
Over 2010, we ranked in the top quartile of our global peer groupa against
which we measure our relative TSR performance with a performance of
minus 4% reflecting difficult market conditions for bank stocks globally.
I focus the latter half of this review on the commitments against which
I believe we must deliver to continue to achieve our TSR goal.
We continue to believe that our integrated model provides
superior benefits to our customers, clients and broader
stakeholders because of its diversity by business, geography,
customer and client type and funding source
2010 Performance
In his review a year ago, John Varley reiterated our focus on the three
priorities that had guided us through the financial and economic crises to
that point: staying close to customers and clients; managing our risks, and
maintaining strategic momentum. That is where we focused our energy
throughout 2010, so I will use these priorities for my review of the year.
Staying Close to Customers and Clients
Many of our customers and clients faced continued challenges throughout
2010. Our responsibility was clear – to be there for them, whatever their
needs, whenever those needs arose. Our income performance in 2010
provides a good indication of the health of those customer and client
relationships, with overall income up 8% to another new record. Our
success by business was more mixed than I would like, reflecting either
specific market dynamics or purposeful rebalancing on our part. I was
particularly pleased with our income performance in UK Retail Banking,
Barclays Africa and Absa, the non-US parts of our Barclaycard portfolio,
the core UK arm of Barclays Corporate and Barclays Wealth. In Barclays
Capital, while the absolute revenues are not yet where we want them, our
progress in Equities and Investment Banking was demonstrably better in
the latter half of the year and I am pleased by the way we outperformed
most of our peers in the final quarter of the year.
Lending is a fundamental part of what we do to support economic
growth and our customers and clients. In the UK, there remains significant
political and media attention on the banks’ lending delivery. In 2010, we
provided £43bn of gross new lending to UK households and businesses
including £7.5bn of UK loans when we acquired Standard Life Bank at the
beginning of the year. We are open for business.
Managing Our Risks
I believe the outcomes on key risk-related metrics demonstrate clearly
our success here over the past year.
– We ended 2010 with even stronger positions on capital (10.8% Core
Tier 1 ratio) and liquidity (£154bn) than we started the year, whilst
maintaining our adjusted gross leverage at 20x;
– Balance sheet growth was modest, particularly on a risk-weighted
asset basis; and
– Impairment was down considerably, and our 2010 loan loss rate of
118bps was materially lower than the 156bps charge in 2009, though
still above our long term average of around 90bps over the last two
decades.
Maintaining Strategic Momentum
We will continue to pursue the same strategic priorities under my
leadership in 2011 that we have pursued under John Varley in 2010.
We remain focused on ensuring that we capitalise on the value that
our universal banking model brings to our customers and clients. A key
part of that remains the diversification of our business by geography,
business line, client and customer types, and funding sources.
Compensation
In making decisions around compensation for 2010, we have sought
to balance the responsibility to be sensitive to the external environment
with the commercial necessity of ensuring that our decisions allow us
to attract and retain the talent we need to deliver for all our stakeholders.
This was not an easy task. Our decisions are also fully compliant with
the significantly altered regulations that now govern discretionary pay
awards, especially the re-written FSA Remuneration Code, and with our
commitments made under Project Merlin. As a result, the amount of
discretionary compensation awards that are deferred has increased further;
the proportion of equity in the deferral structures has increased; and
we have developed an innovative structure for a deferred compensation
scheme for our most senior employees that links future pay-outs under
the scheme to the Group’s core capital position at the time. In total, and
against a backdrop of a 32% increase in Group profit before tax for 2010,
our performance awards (which exclude charges relating to prior year
deferrals but include current year awards vesting
in future years) were down 7% on 2009.
Our focus is on execution, which means delivering on our
commitments in four key areas: maintaining a strong capital
base; improving returns; delivering selective income growth;
and demonstrating our credentials as a global citizen
Chief Executive’s review
Bob Diamond
Note
a 2010 Peer group: Bank of America, BBVA, BNP Paribas, Credit Suisse, Deutsche Bank,
HSBC, JPMorgan, Morgan Stanley, Santander, Société Générale and UniCredit.
Barclays PLC Annual Report 2010 www.barclays.com/annualreport10 15
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