Barclays 2015 Annual Report Download - page 220

218 I Barclays PLC Annual Report 2015 home.barclays/annualreport
Financial review
Definition Why is it important and how the Group performed
CRD IV fully loaded Common Equity Tier 1
(CET1) ratio
Capital requirements are part of the regulatory
framework governing how banks and depository
institutions are supervised. Capital ratios express a
bank’s capital as a percentage of its risk weighted
assets (RWAs) as defined by the PRA.
In the context of CRD IV, the fully loaded CET1 ratio
is a measure of capital that is predominantly
common equity as defined by the Capital
Requirements Regulation.
The Group’s capital management objective is to
maximise shareholders’ value by prudently
optimising the level, mix, and distribution to
businesses of its capital resources, while
maintaining sufficient capital resources to: ensure
the Group is well capitalised relative to its
minimum regulatory capital requirements set by
the PRA and other regulatory authorities; support
its credit rating; and support its growth and
strategic objectives.
The Group’s CRD IV fully loaded CET1 ratio
increased to 11.4% (2014: 10.3%) due to a £44bn
reduction in RWAs to £358bn, demonstrating
continued progress on the Non-Core rundown
together with reductions in the Investment Bank,
which was partially offset by a decrease in CET1
capital to £40.7bn (2014: £41.5bn).
2015: 11.4%
2014: 10.3%
2013: 9.1%
Leverage ratio
The ratio is calculated as fully loaded Tier 1 Capital
divided by leverage exposure.
The leverage ratio is non-risk based and is intended
to act as a supplementary measure to the risk
based capital metrics such as the CET1 ratio.
The leverage ratio increased to 4.5% (2014: 3.7%),
reflecting a reduction in the leverage exposure of
£205bn to £1,028bn and an increase in Tier 1
Capital to £46.2bn (2014: £46.0bn). Tier 1 Capital
includes £5.4bn (2014: £4.6bn) of Additional Tier 1
(AT1) securities.
2015: 4.5%
2014: 3.7%
2013: n/a
Return on average shareholders’ equity (RoE)
RoE is calculated as profit for the year attributable
to ordinary equity holders of the parent, divided by
average shareholders’ equity for the year excluding
non-controlling and other equity interests.
Adjusted RoE excludes post tax adjusting items
for gains on US Lehman acquisition assets,
movements in own credit, the revision to the
Education, Social Housing and Local Authority
(ESHLA) valuation methodology, provisions for
UK customer redress, provisions for ongoing
investigations and litigation including Foreign
Exchange, the gain on valuation of a component of
the defined retirement benefit liability, impairment
of goodwill and other assets relating to businesses
being disposed, and losses on sale relating to the
Spanish, Portuguese and Italian businesses.
Average shareholders’ equity for adjusted
RoE excludes the impact of own credit on
retained earnings.
This measure indicates the return generated by the
management of the business based on
shareholders’ equity. Achieving a target RoE
demonstrates the Group’s ability to execute its
strategy and align management’s interests with the
shareholders’. RoE lies at the heart of the Group’s
capital allocation and performance management
process.
Adjusted RoE for the Group decreased to 4.9%
(2014: 5.1%) driven by a 3% reduction in Group
adjusted attributable profit, as average
shareholders’ equity remained in line at £56bn
(2014: £56bn).
Group adjusted RoE
2015: 4.9%
2014: 5.1%
2013: 4.3%a
Note
a 2013 adjusted total operating expenses and profit before tax have been revised to account for the reclassification of £173m of charges, relating to a US residential mortgage-related
business settlement with the Federal Housing Finance Agency, to provisions for ongoing investigations and litigation including Foreign Exchange to aid comparability.
In assessing the financial performance of the Group, management uses a range of Key
Performance Indicators (KPIs) which focus on the Group’s financial strength, the delivery
of sustainable returns and cost management.
Key performance indicators