Barclays Full Year 2021 Results

C.S. Venkatakrishnan - Group Chief Executive Officer Review

Barclays demonstrated a clear and sustainable path to growth over the course of 2021, delivering double-digit RoTE across our operating businesses, and returning £2.5¹ billion of excess capital. Our strategic priorities will continue to develop the diversified business model that we have established, investing in advanced technology capabilities in our consumer businesses, delivering sustainable growth across our global Corporate and Investment Bank, and reinforcing our commitment to aiding the transition.

2021 is the year in which Barclays demonstrated the results of the strategy we set out in 2016. Having set out to build a bank able to deliver double-digit returns through the cycle, we delivered a double-digit RoTE of 13.4%, a resilient, growing and well-capitalised balance sheet with a CET1 ratio of 15.1%, and a strong profit before tax of £8.4 billion even amidst the uncertainty of the global COVID-19 pandemic. Barclays UK delivered a strong double-digit RoTE, as did the Corporate and Investment Bank (CIB) and our Consumer, Cards and Payments (CC&P) businesses within Barclays International. The CIB delivered its strongest ever profit before tax of £5.8 billion, whilst CC&P and Barclays UK significantly increased their profitability.

I am proud that we have delivered this resilient performance while continuing to support our clients and customers through another year of COVID-19 related challenges. Taken together, our 2021 performance has enabled us meaningfully to increase returns to our shareholders, with £2.5 billion of excess capital returned via a total dividend of 6.0 pence per share and £1.5 billion of announced share buybacks.

Looking ahead into 2022, we are focussed on delivering consistent performance and returns across our businesses, supported by robust management of our balance sheet, costs and controls. We recognise that the economic environment is more than usually uncertain, with rising inflation rates and tighter monetary policy, while many parts of society continue to recover from the severe social and economic effects of the COVID-19 pandemic.

In addition, we seek to manage through, and take advantage of, three long-term changes taking place in financial services. They are:

1. Next-generation consumer financial services

Digitisation has liberated finance, providing our customers and clients with an explosion of cheaper and better products and services, and a more seamless and efficient user experience. We see the dominant business challenge for the next decade as continuing to transform Barclays to deliver services digitally, with ease, flexibility and adaptability. We will need to compete not just with other banks for talent and ideas, but with well-funded, superbly equipped and lightly regulated – therefore more fleet-footed – technology firms. This is particularly true in our consumer businesses, where we have set a clear priority to deliver next generation, digitised consumer financial services. Across Barclays UK and CC&P, we will continue to invest heavily in our digital capabilities as a means of delivering better products and services, more efficiently, and with higher profitability. As an example, we have collaborated with the world’s largest retailer, Amazon, to bring a digital ‘Buy Now Pay Later’ product to users in Germany and the UK. We provide customers with accessible financing, backed by the consumer protection and trustworthiness of engaging with a regulated lender. This exemplifies for me how we should be operating: innovation, founded in trust and responsibility.

In the move to digitise finance, we must make provision for those who are not using technology to access services. That includes access to banking and cash in the UK, where our active participation has helped the Cash Action Group create shared solutions to this social challenge.

2. Growth of the public and private global capital markets

Barclays is the sixth largest global investment bank¹, and the largest not domiciled in the US. It is therefore a competitive strength for us that we are one of the few firms that can afford to offer these services and also be successful at it. The value of our franchise depends on the growth and health of the global capital markets. Combining the total market capitalisation of those securities around the world, we have seen roughly 50% growth in the value of equities and bonds outstanding over the last three years alone, increasing from $123 trillion in 2018 to over $193 trillion today².

As the public markets have grown significantly, so too have the private ones, at a greater pace. Since 2018, total assets under management in the private markets have grown more than 60% from $6.0 trillion to $9.8 trillion³. The largest private equity and credit funds dominate these markets. They are among our biggest clients, requiring innovative financial structures to support their own sophisticated needs.

Capital Markets are cyclical and can be volatile. We are focused on building a business that will deliver sustainable and diversified performance. Through 2021 we have been able to grow our revenues in Investment Banking fees and Equities. Our performance has benefited not just from higher market activity, but by hiring talented traders and bankers, investment in systems and technology, and a consistent commitment to Investment Banking, after a period of wavering a decade ago

1       Top 6 Global Investment Bank supported by #6 ranking in Investment Banking (Source: Dealogic) and #6 ranking in Global Markets (Source: Coalition Greenwich, FY21 Preliminary Competitor analysis).

2       Bonds represent debt issuance outstanding for Investment grade (Source: Bloomberg Barclays Global Aggregate Index LEGATRUU) and high yield (Source: Bloomberg Barclays Global High Yield Index LG30TRUU). Equities represents the market capitalisation from all shares outstanding (Source: Bloomberg WCAUWRLD Index).

3       Source: Preqin “Future of Alternatives 2025” data excluding Hedge Funds, period covering 2018 – H121.

Building on our culture of innovation and quality, we want to sustain and grow our market share and diversify our income to protect earnings even during weaker periods in the cycle. Our strategic priority is to deliver sustainable growth in the Corporate and Investment Bank. As in the consumer business, broad technological prowess is essential. We want to be a best-in-class electronic bank to our Global Markets clients. We will continue to expand in prime financing, to grow our share in securitised products and take our Investment Banking strength into growing sectors such as Technology and Healthcare. In the Corporate Bank, we want to diversify our revenue by growing our market share in Europe and the US, and by growing Transaction Banking.

3. Transition to a low-carbon economy

We may now be on the threshold of an era of innovation that aims to halt and negate the deleterious effects on the earth of greenhouse gas emissions. This is the drive to net-zero, limiting the use of fossil fuels, emphasising renewable energy and reversing the post-industrial growth in greenhouse gas emissions. Financial firms have a central role to play in this transition, providing credit and intermediating investment. The scale of the investment needed is vast, estimated to be over $3-5 trillion¹ per year over the next 30 years, drawing on global capital markets.

Our strategic priority is to capture opportunities as we transition to a low-carbon economy. Barclays must have a constructive role in managing the transition. As this fundamental re-organisation of the global economy takes place, affecting every business in every sector, we want to capture opportunity for our company in meeting the demand for climate change related financing. That means being the trusted partner for our customers and clients as they transition, advising and supporting them as they adapt their business models and lifestyles to become more sustainable. It requires us to use our investment banking and capital markets expertise to help build low-carbon energy capacity. It necessitates developing banking products that help consumers and small businesses make greener choices, and invest our own equity capital in the young companies that are inventing the low-carbon emission technologies of tomorrow.

As we look forward, there also remains a continuing need for Barclays to support inclusion in all its forms, educating and employing the disadvantaged, improving financial literacy, protecting the vulnerable from financial exploitation, and sustaining the economic life of the societies we serve.

With a clear strategy and demonstrable resilience, we are well-positioned to take advantage of these changes that will shape our industry through 2022 and beyond. In doing so we seek to remain faithful to the principles of our Quaker founders in 1690 - integrity, community and stewardship.