Barclays 2013 Annual Report Download - page 14

Group Finance Director’s review
Reflecting on the 2013 financial results for Barclays,
I believe progress has been made and momentum is
building around the Transform Programme. This was the
first year of the Programme, which necessitated a
substantial investment in future cost reduction and
repositioning of our balance sheet and capital base.
Financial review
Overview
Within the results, there are two areas that I felt were particularly
noteworthy. First, the breadth and diversity of income in the Group,
underpinned by our traditional consumer and commercial banking
franchises. Similarly, within the Investment Bank, growth in Equities
and Investment Banking income provided an offset to the market-led
weakness in certain FICC businesses. Second, demonstration of strong
financial fundamentals across funding and liquidity, capital, credit risk
management and margins should stand the bank in good stead for
generating sustainable returns going forward.
Income statement review
2013 profits were impacted by £1.2bn of costs to achieve Transform
which drove a 32% reduction in adjusted profit before tax to £5.2bn,
while statutory profit before tax improved from £0.8bn to £2.9bn due
to a significant reduction in the own credit charge.
Adjusted income was down 4% to £28.2bn reflecting reductions in
Investment Bank FICC, partially offset by impressive performances
in Investment Bank Equities and Investment Banking and growth in UK
RBB, Barclaycard and Corporate.
Impairment charges improved 8% to £3.1bn reflecting lower impairments
in the wholesale businesses, with increases in UK RBB and Barclaycard
due to business growth and non-recurrence of prior year releases.
Adjusted operating expenses increased £1.3bn to £19.9bn reflecting
£1.2bn of costs to achieve Transform, £220m provisions for litigation
and regulatory penalties in Q413 in the Investment Bank, mainly
relating to the US residential mortgage-related business and UK bank
levy of £504m (2012: £345m). The Group’s cost target for 2015
remains at £16.8bn excluding costs to achieve Transform.
I am pleased by the strong results in UK RBB, Barclaycard and
Corporate Banking, whilst noting 2013 was a tough year for Investment
Bank income. Moreover, following restructuring and de-risking activity
we completed during the year, Europe RBB, Africa RBB and Wealth and
Investment Management now have clear paths to shareholder value
creation in the medium term. Importantly, the resilience of the
underlying customer and client franchises across the Group allowed us
to maintain dividends of 6.5p per share for full year 2013 despite a 25%
increase in the total number of shares following the rights issue.
Balance sheet review
In October, I began conducting a detailed balance sheet review, specifically
focused on meeting leverage ratio requirements as a priority. We have
made strong and quick progress on this. Our Prudential Regulation
Authority (PRA) leverage exposure reduced by nearly £200bn from June
2013 which, combined with the £5.8bn rights issue and issuance of £2.1bn
of AT1 securities, strengthened our PRA leverage ratio to just under 3%.
Our focus on Risk Weighted Asset (RWA) management continued
throughout the year, resulting in a 7%, or over £30bn, reduction in CRD IV
RWAs. Looking ahead, the balance sheet review will continue but with
increased focus on optimising the balance sheet, considering both risk
weights and leverage, in order to generate improved returns.
Tushar Morzaria
Group Finance Director
‘We have made quick
progress on leverage, but
focusing on balance sheet
optimisation for sustainable
returns is now the priority
going forward.’
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12 Barclays PLC Annual Report 2013