Our strategy is to deliver strong returns, by building on our strength as a British universal bank: a bank with a proud history and deep roots in the UK, but also with the scale and diversity to help our customers and clients across the broadest range of financial needs, all around the world. Our businesses include consumer banking and payments operations around the world, as well as a top-tier, full service, global corporate and investment bank, all of which are supported by our service company which provides technology, operations and functional services across the Group.
Q3 2020 Results
Group Chief Executive Officer’s Review
In this historically challenging year for our customers and clients we have continued to provide huge support to help people through the social and economic impact of the COVID-19 pandemic. This remains a priority alongside maintaining the financial integrity of the firm and keeping our colleagues safe.
Barclays’ roots as a retail bank and a business lender go back 329 years. Over the last 50 years, with the creation and development of Barclaycard, we have built a market-leading payments business. And in the last 20 years, we have developed a strong investment banking franchise.
In March 2016 we set out our current strategy: to build on our strength as a diversified transatlantic consumer and wholesale bank, anchored in our two home markets of the UK and US, with global reach. This is how we will meet the needs of our customers and clients, compete in a changing environment, and deliver for shareholders.
When Barclays’ management team developed that strategy, they considered four major changes that are transforming the banking landscape.
- Regulatory landscape: the programme of regulatory reform following the financial crisis of 2008, which has increased the minimum levels of capital which banks are required to hold against assets on balance sheets, and reduced the maximum leverage banks can use. Recent UK regulation also requires that retail banking (individual and small business banking) is “ring-fenced” from wholesale banking – which led to the creation of Barclays UK and Barclays International as two separate legal entities.
Capital Markets: as a consequence of changing regulation, the increased cost of borrowing from bank balance sheets has led to a shift of corporate lending towards capital markets. As a result, the role and size of capital markets in supporting economic growth has grown significantly in the last decade and that growth is set to continue. Supporting our corporate clients effectively therefore requires us to maintain the scale, breadth and market share necessary to successfully access those capital markets, which are centred in New York and London (where our investment banking operations are focused).
- Digital: the rapid digitisation of banking is fundamentally transforming how we serve every customer and client, from individual personal banking customers right through to the largest institutions. To succeed in this new digital world requires extensive investment, strategic partnerships with technology providers, and protection of intellectual property to maintain and gain a competitive advantage.
- Payments and transactions: the acceleration in payments technology has made it possible to move money for businesses and people faster, with less friction, and at lower cost. As more forms of transaction become digitised, the technology that enables those transactions is becoming an increasingly critical part of a bank’s capability.
Our diversification gives us significant strength and resilience. We service the needs of retail customers and business clients from the newest start-ups to global institutions and governments. They operate across business lines and geographies, which reduces the risk of operating in just one country or just one customer segment. Through economic cycles, wholesale and consumer banks are subject to stress and recovery at different points. Operating both wholesale and retail banks reduces the volatility of our income and earnings, helping to deliver consistent and sustainable returns through the economic cycle.
Within this framework, we retain the flexibility to align our resources to maximise opportunities and support growth in different parts of our business at any given point in the cycle.
In addition, Barclays Execution Services (BX), the service company which supports both operating companies, allows us to run Barclays with lower costs, greater efficiency and increased investment in technology, security and controls.
Barclays’ Board and management team continue to review, test and evolve our strategy to ensure that it remains right for the times, and is executed effectively.
Since 2016, we delivered considerable progress with our strategic restructuring of Barclays, including the following:
|Africa sell down completed from 66% to 14.9%||Continued to reduce costs, down £6bn|
|Reduced headcount by 56,000||Created new ring-fenced bank in UK|
|Non-Core unit closed, June 2017||Resolved material legacy conduct issues|
|30% reduction in headcount in Investment Bank||Barclays Execution Services (BX) launched|
|Reduced RWAs by £95bn – 80% from IB||Created new Intermediate Holding Company in US and received FRB non-objection to CCAR capital plan|
|Combined Corporate and Investment Banks||Exited investment banking in nine countries|
|Sold > 20 businesses in continental Europe||Reduced our end-state CET 1 Capital range|
Our position today
>9% in 2019
CET 1 ratio
£13.6-13.9bn in 20192
1 Excluding litigation and conduct and based on a CET1 ratio of c.13%
2 Excluding litigation and conduct
Barclays is now through the period of necessary restructuring and the significant associated costs. Our diversified business is stable and well positioned for current and future market conditions, and we have a seasoned management team delivering improving performance and returns. With the costs of restructuring behind us, we are beginning to generate improved and sustainable returns and distribute excess capital to shareholders. The quality of our earnings is the result of a deliberate choice to maintain diversity in our revenue streams, based on an understanding of structural changes in our sector, and the need to weather cyclical economic forces.
Through our creation of Barclays Execution Services (BX) with its lower operating costs, we are able to increase our investment in key areas including technology, security and controls, while simultaneously reducing our costs and our cost to income ratio. We are also able to flex our investment to a degree to support our RoTE targets if the environment requires us to do so.
Returning capital to shareholders continues to be a priority for us and we will pay a dividend for 2018 of 6.5p, which is more than double the amount paid in 2016 and 2017.
It is our firm intent to return a greater proportion of our earnings to shareholders over time, and we believe that the effective application of our strategy is critical to achieving this.
Our Growth Stories
Delivering a single corporate banking platform to new countries
Collaborating with teams around the firm, Barclays Corporate Banking is busy rolling out our standardised corporate banking platform across Europe. We have already reached five European countries, and we intend to keep this momentum going during 2019 by extending the platform to Belgium, the Netherlands and Luxembourg. By enhancing our European footprint in Corporate Banking, we will be able to deliver a best-in-class single, seamless and coordinated service to our multinational clients. It will enable us to better service our corporate clients’ banking needs across multiple European locations – supporting their ambitions and strengthening our relationships with them.
Delivering payment technology that helps our clients go further
As our customers’ operations become more global, we too are expanding our horizons. Colleagues in our Cards & Payments business have been closely collaborating with business development and commercial teams across the Group to extend our payment capabilities across Europe.
In 2019, Barclays has been focusing on delivering end-to-end payment solutions beyond the UK and across Europe; we will be reaching into seven countries including France, Germany, Italy, Poland, Ireland, Portugal and Spain. By giving customers payment solution choices that span Europe and the US, we are creating a truly transatlantic capability. Payments matter to Barclays as a strategic asset, and with this extended capability and positive momentum, we’re aiming to significantly increase payment solutions’ contribution to the firm over the next five years.