Barclays 2015 Annual Report Download - page 26

24 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
Barclays Non-Core
“Barclays Non-Core is responsible for
the divestment of Barclays’ non-strategic
assets and businesses.”
How the business is structured and what we provide to the Group
Barclays Non-Core (BNC) was formed to oversee the divestment of
Barclays’ non-strategic assets and businesses, releasing capital to
support strategic growth in our Core business.
BNC brings together businesses and assets that do not fit our client
strategy, remain sub-scale with limited growth opportunities, or are
challenged by the regulatory capital environment. Non-Core assets have
been grouped together in BNC, comprising three main elements:
Principal Businesses, Securities and Loans, and Derivatives. Several of
the businesses managed within BNC are profitable and will be attractive
to other owners.
BNC will be reduced over time, through sale or run-off. Reducing the
capital and cost base will help improve Group returns and deliver
shareholder value.
Criteria for BNC
Two criteria were used to determine which businesses should be placed
in BNC:
 Strategic fit: businesses either not client-driven or operate in areas
where we do not have competitive advantage
 Returns on both a CRD IV capital and leverage exposure: capital and/
or leverage-intensive businesses, unlikely to meet our target returns
over the medium term
At the creation of BNC, almost 80% of BNC RWAs related to the
non-core Investment Bank. It included the majority of our commodities
and emerging markets businesses, elements of other trading businesses
including legacy derivative transactions, and non-strategic businesses.
The key non-core portfolios outside the Investment Bank comprised the
whole of our European retail business, some European corporate
exposures and a small number of Barclaycard and Wealth portfolios.
BNC is run by a dedicated management team operating within a clear
governance framework to optimise shareholder value and preserve
maximum book value as businesses and assets are divested.
Market environment and risks
To divest BNC successfully we are partly dependent on external market
factors. The income from our businesses and assets, the quantum of
associated RWAs and finally market appetite for BNC components are all
influenced by market environment. In addition, regulatory changes in the
treatment of RWAs can significantly impact the ‘stock’ of RWAs. These
factors mean the market environment in which BNC operates can have
positive or negative consequences for our planned rundown profile.
BNC maintains a robust risk management framework to mitigate the
risks inherent in our businesses and assets. However we may need to
take further, currently unforeseen, actions to achieve our rundown
objectives which may include incurring additional costs of exit, or a
change in direction to our planned rundown trajectory.
Although the emphasis is on bringing down RWAs, reducing costs in
BNC is also critical. We are strongly focused on ensuring we reduce both,
although this may not always happen simultaneously.
Review of the year
Loss before tax increased 24% to £1,459m driven by continued progress
in the exit of businesses, securities and loans, and derivative assets.
RWAs reduced £29bn to £47bn including a £10bn reduction in
Derivatives, £9bn reduction in Securities and Loans, and Business
reductions from the completion of the sales of the Spanish and UK
Secured Lending businesses. The announced sales of the Portuguese
and Italian retail businesses, which are due to be completed in H116, are
expected to result in a further £2.5bn reduction in RWAs.
Total income net of insurance claims reduced to an expense of £164m:
 Businesses income reduced 44% to £613m due to the impact of the
sale of the Spanish business and the sale and rundown of legacy
portfolio assets
 Securities and Loans income reduced to an expense of £481m
primarily driven by fair value losses and funding costs on the ESHLA
portfolio, the active rundown of securities, exit of historical investment
bank businesses and the non-recurring gain on the sale of the UAE
retail banking portfolio in 2014
 Derivatives income reduced 76% to an expense of £296m reflecting
active rundown of the portfolios and funding costs
Credit impairment charges improved 54% to £78m due higher
recoveries in Europe and the sale of the Spanish business.
Total operating expenses improved 40% to £1,199m reflecting savings
from the sale of the Spanish, UAE retail, commodities, and several
principal investment businesses, as well as a reduction in costs to
achieve, and conduct and litigation charges.
Total assets decreased 36% to £303.1bn with reduced reverse
repurchase agreements and other similar secured lending, and lower
derivative financial instrument assets.
Non-Core
Contribution to the Group 2015 2014
Income (£m) (164) 1,050
Loss before tax (£m) (1,459) (1,180)
Adjusted RoE drag (%) (5.1%) (5.4%)
Risk Weighted Assets (£bn) 46.6 75.3
BUSINESS SEGMENT PERFORMANCE