Barclays 2010 Annual Report Download - page 18

Chief Executive’s review
continued
2011 Execution Priorities
At the time my succession was announced, I made it clear that I had
no intention of materially altering the strategy that the Group has been
pursuing for some time. My attention has been, and will continue to be,
focused squarely on increasing the pace and intensity of execution of
that strategy. The level of uncertainty in the economic and regulatory
environment remains high, but we cannot allow that to distract us. We
must make clear commitments to the market, and then deliver against
them, in four areas.
1. Capital
We must remove the uncertainty associated with the impact of the
implementation of new Basel rules on our capital ratios. The combination
of where we finished 2010 and the continued demonstration of our ability
to generate substantial equity organically should go some way towards
this. While there are significant regulatory questions to be resolved in 2011
– especially the outcome of the Financial Stability Board’s deliberations
on so-called ‘G-SIFIs’ ( i.e. systemically important financial institutions
at a global level, one of which we expect to be Barclays) and, in the UK,
the recommendations of the Independent Commission on Banking –
we believe that we will be able to manage those impacts. But we
recognise that we must maintain a strict and pro-active focus on our
capital levels, leverage, balance sheet growth and utilisation and the
disposal of legacy assets.
2. Returns
The new environment will necessitate lower returns than the period just
preceding the recent crisis but I believe the difference in performance
between winners and losers by this vital measure will be stark. Our priority
is to ensure we are a winner. The returns we are currently generating will
not be acceptable to our shareholders over the medium term.
We must be in a position to deliver at least a 13% return on equity and a
15% return on tangible equity by the end of our planning cycle. We also
expect our cost of equity to decline towards 10% relative to a 12.5% cost
in 2010 and the 11.5% cost we have set for 2011 over this period as the
worst impacts of the credit crisis abate and the major economies in which
we operate return to growth.
We have instigated a disciplined, rigorous and continuous review of our
portfolio to ensure that we can achieve those levels of return. We have
already undertaken a strategic review of our operating model that should
take out considerable running costs over the medium-term, and you
should expect us to continue to act to adjust our business and asset
portfolio mix as required to achieve our return goals.
3. Top-line growth
While we are focused on improving returns, we cannot take our eye off the
top-line, so we will selectively invest for growth in business areas where
the return justifies it. There are clear examples across the Group, including:
Barclays Wealth (where our strategic investment programme, known as
our Gamma plan, is now one year into delivery); Barclaycard’s Global
Business Solutions activities which provides commercial payment services;
monetising the build-out of Equities and Investment Banking in Barclays
Capital; and capitalising on opportunities in Asia and Africa. We expect
that this continued investment in growth will be largely organic, as was
our development over the past decade of Barclays Capital and Barclays
Global Investors.
4. Citizenship
In general we as banks need to do more to help foster economic growth
and job creation as well as helping the public understand better the
significant role we already play in this regard. I take pride in the culture
at Barclays, where many of my colleagues work selflessly to help those in
need in their local communities and we apply our expertise to real world
issues. We must do a better job of helping those outside the organisation
see the scale of what we do and the impact it has as we seek to intensify
our efforts here. You can expect to hear much more from us in this space
later this year.
Job creation, stimulating economic growth and investing
in communities in which we work are at the core of our
citizenship agenda
Conclusion
I have 147,500 colleagues around the world who are focused on bringing
the best of Barclays to everything that they do, everyday. They have
delivered unfailingly over the past three years. We have many more
challenges ahead, but I know I have their support in tackling them. It is
my honour to lead them, and this great institution, as we look to deliver
against the expectations of all of our stakeholders, most importantly our
customers and clients, over the coming months and years.
Bob Diamond
Chief Executive
16 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10