Barclays 2010 Annual Report Download - page 30

Key performance indicators
Capital KPIs
Definition Why it’s important to the business and management
Core Tier 1 ratio
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 Core Tier 1 and Tier 1 capital
resources are defined by the UK FSA. Core Tier 1
is broadly tangible shareholders’ funds less
certain capital deductions from Tier 1.
The Group’s capital management activities seek to maximise
shareholders’ value by prudently optimising the level and mix of
its capital resources. The Group’s capital management objectives
are to maintain sufficient capital resources to: ensure the financial
holding company is well capitalised relative to the minimum
regulatory capital requirements set by the UK FSA and US Federal
Reserve; ensure locally regulated subsidiaries can meet their
minimum regulatory capital requirements; support the Group’s risk
appetite and economic capital requirements; and support the
Group’s credit rating.
During 2010, the Group’s Core Tier 1 ratio improved 0.8% to 10.8%,
largely through £3.6bn of attributable profits, demonstrating the
Group’s ability to generate capital organically.
10 – 10.8%
09 – 10.0%
08 – 5.6%
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.
Barclays believes that there will be more capital and less leverage in
the banking system and that lower levels of leverage are regarded
as a key measure of stability going forward. This is consistent with
the views of our regulators and investors.
In 2010, adjusted gross leverage remained stable at 20 times
principally as a result of a £3.9 billion increase in Tier 1 Capital
to £53.5 billion offset by the impact of a £84.6 billion increase
in adjusted total tangible assets.
10 – 20x
09 – 20x
08 – 28x
Returns KPIs
Definition Why it’s important to the business and management
Return on average shareholders’ equity (RoE) is
calculated as profit after tax attributable to equity
holders of the parent divided by the average
shareholders’ equity for the year. Shareholders’
equity is made up of share capital, retained
earnings and other reserves.
Return on average tangible equity (RoTE) is
calculated as profit after tax attributable to
equity holders of the parent divided by average
shareholders’ equity for the year, excluding
non-controlling interests, goodwill and
intangible assets.
These measures indicate the returns generated by the
management of business based on the allocation of shareholders’
equity to each component business. Achieving target returns
demonstrates the organisation’s ability to execute its strategy
and align interests of management and shareholders. We allocate
capital to business units based on an assumed Core Tier 1 ratio
of 9% and we retain excess capital at Group Centre as a buffer.
Returns lie at the heart of our capital allocation. All of our
businesses except Western Europe Retail Banking and Barclays
Corporate had returns on tangible equity in excess of the 2010
cost of equity of 12.5%. By 2013 the Group has committed to a
return on equity of 13% and a return on tangible equity of 15%.
RoE
10 – 7.2%
09 – 6.7%
08 – 14.3%
RoTE
10 – 8.7%
09 – 9.0%
08 – 21.3%
28 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10