Barclays 2015 Annual Report Download - page 236

234 I Barclays PLC Annual Report 2015 home.barclays/annualreport
Financial review
Analysis of results by business
2015 compared to 2014
Profit before tax increased 17% to £1,611m. Income remained flat
despite reductions in RWAs. Focusing on its home markets of the UK and
US, the business continued to build on existing strengths in the face of
challenging market conditions. Costs decreased as a result of improved
cost efficiency and a reduction in costs to achieve.
Total income was broadly flat at £7,572m (2014: £7,588m), including the
appreciation of the average USD rate against GBP.
Banking income was flat at £2,529m (2014: £2,528m). Investment
Banking fee income reduced 1% to £2,093m driven by lower equity
underwriting fees, partially offset by higher financial advisory and debt
underwriting fees. Lending income increased to £436m (2014: £417m)
due to lower losses on fair value hedges.
Markets income was broadly flat at £5,030m (2014: £5,040m). Credit
income decreased 5% to £995m driven by lower income in securitised
products as a result of the accelerated strategic repositioning in this
asset class and lower income from distressed credit. This was partially
offset by higher income as a result of client driven credit flow trading.
Equities income decreased 2% to £2,001m driven by lower client activity
in EMEA in equity derivatives, partially offset by higher performance in
cash equities. Macro income increased 4% to £2,034m due to higher
income in rates and currency products reflecting increased market
volatility and client activity.
Credit impairment charges of £55m (2014: release of £14m) arose from
a number of single name exposures.
Total operating expenses decreased 5% to £5,906m reflecting a 5%
reduction in compensation costs to £3,423m and lower costs to achieve.
Further cost savings were achieved from strategic cost programmes,
including business restructuring, operational streamlining and real estate
rationalisation, partially offset by the appreciation of the average USD
rate against GBP.
Derivative financial instrument assets and liabilities decreased 25% to
£114.3bn and 24% to £122.2bn respectively, due to net trade reduction
and increases in major interest rate forward curves.
Trading portfolio assets decreased 31% to £65.1bn primarily driven by
balance sheet deleveraging, resulting in lower securities positions.
Total assets decreased 18% to £375.9bn due to a decrease in derivative
financial instrument assets, trading portfolio assets, and settlement and
cash collateral balances within loans and advances to banks and
customers.
RWAs decreased 12% to £108.3bn mainly due to a reduction in
securities and derivatives, and improved RWA efficiency.
2014 compared to 2013
Profit before tax decreased 32% to £1,377m. The Investment Bank
continues to make progress on its origination-led strategy, building on
leading positions in its home markets of the UK and US, while driving
cost savings and RWA efficiencies. The business is focused on a simpler
product set in Markets, which will enable it to build on existing strengths
and adapt to regulatory developments. The business continued to
execute this strategy despite difficult market-making conditions and
continued low levels of activity. This has particularly impacted credit and
interest rate products, resulting in an income decline across the Markets
businesses. This decline was partially offset by improved banking
performance and significant cost reductions as a result of savings from
strategic cost programmes.
Total income decreased 12% to £7,588m, including the impact of
depreciation of average USD against GBP. Banking income increased 2%
to £2,528m. Investment Banking fee income decreased 2% to £2,111m
driven by lower debt underwriting fees, partially offset by higher financial
advisory and equity underwriting fees. Lending income increased to
£417m (2013: £325m) due to lower fair value losses on hedges and
higher net interest and fee income.
Markets income decreased 18% to £5,040m. Credit decreased 17% to
£1,044m driven by reduced volatility and client activity, with lower
income in distressed credit, US high yield and US high grade products.
Equities decreased 11% to £2,046m due to declines in cash equities and
equity derivatives, reflecting lower client volumes, partially offset by
higher income in equity financing. Macro decreased 24% to £1,950m
reflecting subdued client activity in rates and lower volatility in currency
markets in the first half of the year.
Net credit impairment release of £14m (2013: £22m) arose from a
number of single name exposures.
Total operating expenses decreased 6% to £6,225m reflecting a 9%
reduction in compensation costs to £3,620m, savings from strategic
cost programmes, including business restructuring, continued
rationalisation of the technology platform and real estate infrastructure,
and depreciation of average USD against GBP. This was partially offset
by increased costs to achieve of £374m (2013: £190m) and litigation and
conduct charges.
Loans and advances to customers and banks increased 2% to £106.3bn
driven by an increase in cash collateral and lending, partially offset by a
reduction in settlement balances due to reduced activity.
Derivative financial instrument assets and liabilities increased 40% to
£152.6bn and 38% to £160.6bn respectively, driven by decreases in
predominantly GBP, USD and EUR forward interest rates, and
strengthening of USD against major currencies.
Reverse repurchase agreements and other similar secured lending
decreased 18% to £64.3bn due to decreased match book trading and
funding requirements.
Total assets increased 4% to £455.7bn due to an increase in derivative
financial instrument assets, partially offset by a decrease in reverse
repurchase agreements and other similar secured lending, and financial
assets at fair value.
RWAs decreased 2% to £122.4bn primarily driven by risk reductions in
the trading book, partially offset by the implementation of a revised
credit risk model for assessing counterparty probability of default.
£7,572m total income
£1,611m profit before tax
Investment Bank