Barclays 2015 Annual Report Download - page 22

20 I Barclays PLC Annual Report 2015 home.barclays/annualreport
The activity in our business units reflects our progress
in becoming the partner of choice… continued
Our purpose
Barclaycard aspires to be the most recommended
brand to help consumers buy and clients sell,
every day. We provide funding to facilitate
payments and lend responsibly to customers and
clients based on their needs and our risk appetite.
We also enable retailers to accept payments
through a range of innovative point of sale
solutions.
How the business is structured and what we provide to the Group
Barclaycard serves consumers in both of Barclays’ core geographies, the
UK and the US, as well as in Germany and Southern Europe. We also
operate in Norway, Sweden and Denmark via our EnterCard joint venture.
We provide branded and co-branded consumer cards to our customers,
and business solutions to our clients, including commercial cards,
payment acceptance and point of sale finance. Our business model is
diversified by geography and product line and our scale helps us deliver
a strong financial performance through the economic cycle.
Environment in which the business operates
The consumer payments and lending environment is experiencing
considerable change, driven by new competitors and technology,
consumer behaviour and regulation. Competition from traditional and
non-traditional players is intensifying, adding further pressure to an
already crowded payments environment. Electronic and mobile
commerce are changing consumer expectations, driving a need for a
fast and seamless payments experience. Across the payments landscape
regulation is challenging existing business models but also enabling
increased card acceptance, as cash is replaced by electronic payments.
Many of the trends above provide opportunities for Barclaycard to help
its customers and clients achieve their goals. Our future business
strategy is focused on opportunities that represent the best interests of
our customers and clients and that help us deliver sustainable growth.
Risks to this business model
Managing risk is a critical element of our culture. Barclaycard faces risks
every day which, if they crystallise, could negatively impact our business,
our customers and clients and our colleagues.
Barclaycard is exposed to a series of risks and threats, including:
macroeconomic fluctuations, potential economic shocks, further
regulatory changes, fraud, increasingly sophisticated cyber crime and
the resilience of our core infrastructure.
We address risk by rigorous consideration of customer outcomes in the
way we define and execute our strategy and make decisions. We operate
within agreed risk appetites to ensure we maintain the planned risk
profile. Our lending strategy is supported by clear target market criteria,
ensuring we lend to those for whom credit is suitable.
We also address risk through our diversified business model; by
innovating to create new opportunities; by identifying ways to meet
changing customer demands in a more efficient way; and by continuing
to invest in technology, people and processes.
Examples of innovations/deals this year
Barclaycard achieved numerous industry accolades in 2015.
Our proprietary bPay wearable payments solution secured eight industry
awards, including “Best Alternative Payments” at the Card and Payments
Awards for UK and Ireland.
Since our deployment of contactless payment across London’s transport
network in 2014, over 250 million journeys have been completed using
over 8.7m unique cards from 80 countries.
Finally, our US business announced a partnership with JetBlue to launch
a new co-brand credit card program in early 2016, adding to our list of
prestigious partnerships.
Review of the year
Barclaycard delivered a record performance in 2015. Profit before tax
increased 22% to £1,634m. Strong growth was delivered through the
diversified consumer and merchant business model with asset growth
across all geographies. Cost to income ratio improved to 42% (2014:
43%), while investment in business growth continued. The business
focus on risk management was reflected in stable 30-day delinquency
rates and improved loan loss rates. This resulted in a return on average
equity of 17.7% (2014: 16.0%) and a return on average tangible equity of
22.3% (2014: 19.9%).
Total income increased 13% to £4,927m, driven primarily by growth in
US cards and the appreciation of the average USD rate against GBP.
Loans and advances to customers increased 9% to £39.8bn reflecting
growth across all geographies.
Customer deposits increased 40% to £10.2bn driven by the deposits
funding strategy in the US.
In 2015, the value of transactions increased by 14%, to reach £293bn.
We have also maintained the strong customer acquisition trend from
previous years, as we welcomed over 4 million new customers and
32,000 new clients in 2015, while reaching an important milestone in
Germany of over 1 million customers. We have also continued to
improve customer satisfaction by delivering products and services
important to our customers, enabling simplification of our proposition
and driving digital customer engagement.
We have made further progress in embedding Conduct Risk into our
business, by strengthening areas around governance and culture,
product design and customer servicing, and embedding a Conduct
focused culture throughout our business, thus striving to deliver the
right outcomes for our customers and clients.
Building on our commitment to make a positive difference to the
communities in which we live and work, 69% of colleagues used
Barclays support to volunteer, fundraise or donate. We are also making
Barclaycard an even better place to work, with over 93% of our high
performing employees retained, 56% of hires internal appointments and
34% of our senior leaders women.
In 2016, we are very excited to mark two significant milestones in our
history, celebrating Barclaycard’s 50th anniversary and the 25th year of
activity for our German operations. Since launching the UK’s first credit
card in 1966, Barclaycard has continued to push the boundaries and
challenge the status quo – creating the payment innovations of today
and defining the possibilities of how people will pay tomorrow.