Barclays : Results Call Management Speech Q3 2023 2023

Barclays PLC Q3 2023 Results

Analyst and Investor Conference Call Speech

C.S. Venkatakrishnan, Barclays Group Chief Executive

Anna Cross, Barclays Group Finance Director

Barclays PLC

Q3 2023 Results Presentation

24 October 2023

Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority

(Financial Services Register No. 122702).

Registered in England. Registered No. 1026167. Registered office: 1 Churchill Place, London E14 5HP.

i	ii	iii
C.S. Venkatakrishnan	Anna Cross	Appendix: Financials
Group CEO	Group Finance Director

Good morning. Thank you for joining Anna and me on today's third quarter results call.

Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority

(Financial Services Register No. 122702).

Registered in England. Registered No. 1026167. Registered office: 1 Churchill Place, London E14 5HP.

Q323 themes
	Income Statement	▪	Delivered Q323 RoTE of 11.0%
		Q323	Q323 YTD
	Income	£6.3bn	£19.8bn
				▪	Mixed market activity and competitive environment for UK retail deposits
	CIR	63%	61%
	LLR	42bps	43bps	▪	Evaluating material structural cost actions to help drive future returns
	PBT	£1.9bn	£6.4bn
	RoTE	11.0%	12.5%	▪	Ongoing prudent risk management and credit performance in-line with our
	EPS	8.3p	28.2p		expectations
		Capital		▪	Maintained strong capital position
	CET1 ratio	14.0%
3	| BarclaysQ3 2023 Results | 24 October 2023

Against a background of mixed market activity and a competitive environment for UK retail deposits, the Group generated income of £6.3 billion in the quarter, down modestly year-on-year1, excluding last year's impact from the over-issuance of securities.

Our Profit Before Tax was £1.9 billion, with Earnings Per Share of 8.3 pence.

We maintained a strong capital position with our CET1 ratio at 14%, up around 20 basis points on the second quarter and at the top of our target range.

In this context, we delivered a third quarter Return on Tangible Equity of 11%, taking us to 12.5% for the year-to-date and we continue to target above 10% for the full year.

We are managing credit well, with a year-to-date loan loss rate of 43 basis points, versus our through the cycle guidance of 50 - 60 basis points.

Costs reduced by 4% in Q3 year-on-year1, excluding over-issuance costs last year, and in Q4 we will continue to drive further efficiencies and greater productivity for the bank.

We expect this to continue to contribute to delivering enhanced returns for shareholders.

We will update you on these and other actions alongside our full year results in February.

Now turning to the business highlights.

We continued to grow our US cards business, with end net receivables up 11% year-on-year at $30 billion.

Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority

(Financial Services Register No. 122702).

Registered in England. Registered No. 1026167. Registered office: 1 Churchill Place, London E14 5HP.

And we announced a new partnership with Microsoft and Mastercard to issue Xbox's first ever co-branded card in the US.

The integration of our UK wealth business and our Private Bank is also progressing well.

We grew client assets and liabilities to nearly £180 billion and invested assets to around £105 billion, with this business making nearly £900 million of income in the year-to-date, and generating attractive returns.

In investment banking, we led some prominent transactions in this quarter including the ARM IPO in the US.

However, in the mixed market environment we had pockets of underperformance relative to US peers.

In part, this has reflected our business composition. We performed well in Equity Capital Markets, which is a smaller business for us relative to others.

We were also selective on leverage finance deals as a risk management matter, which has affected our Debt Capital Markets performance.

We continue to be cautious about the market backdrop, but are confident in the potential of our business.

And as an example, we are acting as sole financial advisor to Capri in their $8.5 billion acquisition by Tapestry, announced in the third quarter and expected to close in 2024.

In Markets, this was our second highest Q3 income print in a decade, with income up 4% quarter-on-quarter, better than the US peer average.

However, income was down 13%1, against a record Q3 last year, on a comparable basis, in which we supported clients through extreme volatility in gilts in our home UK market.

This quarter, we did not benefit to the same extent as our US peers did from the volatility in US rates.

As we have said previously, investment in our combined fixed income and equity financing business delivers stability to our overall Markets income.

Over the past four years, our ranking in equity prime brokerage has moved up from 7th rank to joint 5th, complementing our existing strength in fixed income financing where we rank joint 1st globally for the first half of 2023.

Turning now to Barclays UK, we delivered a RoTE above 20% for the quarter.

Both income and expenses were broadly stable, generating a cost income ratio of 56% and we intend to improve this over time as we continue to transform the business digitally.

There has been an impact on our deposits and margins from retail customers seeking a higher return on their savings, which Anna will cover in more detail.

However, at the Group level, deposits were up £7 billion quarter on quarter, demonstrating the strength of our diversified deposit and funding base.

Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority

(Financial Services Register No. 122702).

Registered in England. Registered No. 1026167. Registered office: 1 Churchill Place, London E14 5HP.

Reset level of Group returns in the last three years

	Group RoTE
										▪	Group returns level reset and stabilised since 2021
	10%									▪	Continue to target above 10% RoTE in 20231
						13.1%		12.5%
							10.4%			▪	Will set out our capital allocation priorities, as well as
											revised financial targets for costs, returns and
											shareholder distributions at an Investor Update at FY23
	FY16	FY17	FY18	FY19	FY20	FY21	FY22	Q323			results
								YTD
				Delivered total shareholderdistributions of £1.2bn in H1232, up over 30% YoY
1	The Group is evaluating actions to reduce structural costs to help drive future returns, which may result in material additional charges in Q423, target excludes any such structural cost actions | Note: Period covering Q221 to Q322 were impacted by the
over-issuance of securities under Barclays Bank PLC's US shelf registration statements on Form F-3 filed with the US Securities and Exchange Commission in 2018 and 2019. Please refer to the Barclays PLC Q3 2023 Results Announcement for the
period ended 30 September 2023 for details. This matter will be referred to as the "Over-issuance of Securities" hereafter |	2	Includes 2.7p dividend per share and announced share buyback of £750m |
4 | BarclaysQ3 2023 Results	| 24 October 2023

Our performance over the past three years compared to the previous five, shows that we have reset and stabilised Group returns, providing a solid foundation on which to build even further.

Anna and I look forward to providing an Investor Update in February alongside our full year results, where we will talk more about our plan to deliver further value to our shareholders.

This will include setting out our capital allocation priorities, as well as revised financial targets for costs, returns and shareholder distributions.

We have just completed the £750 million buyback announced at the half year, taking total shareholder distributions to around £1.2 billion so far this year including dividends and buybacks.

This is up over 30% on the first half of last year and reflects our commitment to returning capital to shareholders.

Thank you for listening and I'll pass it onto Anna now.

Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority

(Financial Services Register No. 122702).

Registered in England. Registered No. 1026167. Registered office: 1 Churchill Place, London E14 5HP.

i	ii	iii
C.S. Venkatakrishnan	Anna Cross	Appendix: Financials
Group CEO	Group Finance Director

Thank you, Venkat, and good morning, everyone.

Turning now to slide 6.

Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority

(Financial Services Register No. 122702).

Registered in England. Registered No. 1026167. Registered office: 1 Churchill Place, London E14 5HP.

Performance highlights
			Targets and guidance	Q323	Q323 YTD
		RoTE	>10% in 20231	11.0%	12.5%
		Cost: income ratio	Low 60s % in 20231	63%	61%
		Loan loss rate	50-60bps through the cycle	42bps	43bps
		CET1 ratio	13-14%			14.0%
		Average Liquidity Coverage	>100% regulatory minimum3			159%
		Ratio2
	The Group is evaluating actions to reduce structural costs to help drive future returns, which may result in material additional charges in Q423, target excludes any such structural cost actions |	Trailing average of the last 12 spot month end LCR ratios |
1	Liquidity Coverage Ratio >100% is a regulatory minimum, not a Barclays target |		2
3
6	| BarclaysQ3 2023 Results | 24 October 2023

Return on tangible equity for the third quarter was 11%, which takes us to 12.5% for the year to date.

The cost income ratio was 63% in Q3, and 61% for the nine months, in-line with our low 60's guidance for the full year.

We continued to see limited signs of credit stress, as the loan loss rate for the quarter was 42 basis points, and 43 for the nine months.

And we have maintained strong capital and liquidity positions.

As you just heard from Venkat, we will update you with revised financial targets at an Investor Update alongside our full year results.

As part of this update, we are evaluating actions to reduce structural costs, which may result in material additional charges in Q4, impacting this year's statutory performance.

Excluding any such charges, we continue to target a RoTE above 10% for the full year.

Focusing now on Q3, starting on slide 7.

Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority

(Financial Services Register No. 122702).

Registered in England. Registered No. 1026167. Registered office: 1 Churchill Place, London E14 5HP.

Q323: Group RoTE of 11.0% with profit before tax of £1.9bn
Performance	Profit before tax (£bn) excluding the impact of the Over-issuance of Securities in Q3221
£6.3bn	£3.9bn
Income	Costs
Q322: £6.4bn1	Q322: £4.1bn1

63%	£2.3bn
Cost: income	Profitbefore
ratio	impairment
Q322: 64%1	Q322: £2.3bn1

£0.4bn	42bps
Impairment	Loan loss rate
Q322: £0.4bn	Q322: 36bps

8.3p	11.0%
EPS	RoTE
Q322: 9.4p	Q322: 12.2%1
14.0%	316p
TNAV per
CET1 ratio
share
Jun-23: 13.8%
Jun-23: 291p

1.9

Q322

(0.2)		0.2	(0.1)
(0.0)

1.9

Income	Operating costs	Litigation and Conduct	Impairment	Q323
		(L&C)

1	Excludes the impact of the Over-issuance of Securities (Q322 financial impacts: Equities income reduction of £466m, litigation and conduct reduction of £503m) | Note: Charts may not sum due to rounding |
7	| BarclaysQ3 2023 Results |	24 October 2023

There was no impact from the over-issuance of securities this quarter, but given the largely offsetting impacts to income and costs in Q3 last year, I will again use the adjusted numbers for the prior period1.

Group profit before tax was around £50 million lower at £1.9 billion, with income down 2% and costs down 4% year-on-year.

Within total costs, operating costs were stable, and there were no litigation and conduct charges this quarter, compared to £164 million in Q3 last year.

Impairment charges were up £52 million to £433 million, with the charge and business mix as we expected, largely driven by growth in US cards.

TNAV increased 25 pence to 316 pence, reflecting our profits, and positive cash flow hedge reserve movements broadly offsetting last quarter's downward move.

As usual, I will now cover the three key drivers of our returns, namely income, costs and credit risk management. Starting on slide 8.

Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority

(Financial Services Register No. 122702).

Registered in England. Registered No. 1026167. Registered office: 1 Churchill Place, London E14 5HP.

Q323 Group income down 2%1 YoY Group income (£bn) excluding the impact of the Over-issuance of Securities in Q3221

5.5

1.8

1.1

2.6

(0.1) Q319

5.2

1.6

0.9

2.9

(0.1) Q320

5.5

1.6

0.8

3.1

(0.1) Q321

		-£159m | -2%1	Group
6.4	6.3
	-£43m | -2% Barclays UK2
1.9	1.9	▪	c.£60m transfer of UK Wealth to CC&P
		▪	Rates and structural hedge benefits partially offset by product dynamics
1.2	1.4	+£116m | +9% Consumer, Cards & Payments3,5
	▪	Higher US cards balances +11% YoY
		▪	c.£60m transfer of UK Wealth from Barclays UK
		-£205m | -6%		Corporate& Investment Bank
3.3				1	4,5
3.1

• Lower volatility and client activity in Markets and weaker Banking fees wallet partially offset by Corporate income growth

(0.0)	(0.1)	-£27m | Head Office
Q322	Q323
		c.40% of Group income in USD6

1	Excludes the impact of the Over-issuance of Securities (Q322 financial impacts: Equities income reduction of £466m) |	2	Barclays UK (BUK) |	3	Consumer, Cards & Payments (CC&P) |	4	Corporate & Investment Bank (CIB) |	5	Including the impact of FX |
6	Based on an average of FY21, FY22 and H123 income. Percentage may vary depending on business mix and macroeconomic environment and historical outcomes may not be indicative of future currency mix | Note: Charts may not sum due to
rounding |
8 | BarclaysQ3 2023 Results |	24 October 2023

Group income was down 2% at £6.3 billion.

The 8% stronger Sterling / US dollar rate in Q3 year-on-year reduced our reported income, around 40% of which is in dollars.

CIB income fell 6%, with lower activity in the investment bank, partially offset by corporate income growth year-on-year.

Consumer Cards & Payments income was up 9%, driven by growth in US cards receivables, and the UK wealth business transfer from Barclays UK in Q2.

Excluding the transfer, CC&P income was up 5%, and Barclays UK income was up 1%.

Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority

(Financial Services Register No. 122702).

Registered in England. Registered No. 1026167. Registered office: 1 Churchill Place, London E14 5HP.

Q323 Group NII of £3.2bn; NIM1 of 3.98%
Group net interest income (£bn)
		Group NIM1
3.44%	2.89%	2.90%	3.85%	3.98%	+£179m | +6% Group	NIM: 3.98% (+13bps YoY)
				3.2		1
			3.1
2.4				1.6	+£17m | +1% BUK	NIM: 3.04%(+3bps YoY)
	2.1		1.6
	1.9
1.5					+£64m | +7% CC&P2	NIM: 8.88%(+47bpsYoY)

1.3 1.3

0.9	1.0

	0.7									+£94m | +16% CIB
												2	1
													NIM: 3.65% (+9bpsYoY)
			0.5		0.5			0.7
	0.3							0.6
	0.3		0.3
			0.0	0.0
				(0.0)			(0.1)
		(0.1)							+£4m | Head Office
		Q319		Q320		Q321	Q322	Q323
									Barclays UK NII is c.25% of Group Incomeand c.50% of Group NII
	Excludes NII from Markets within Barclays International and Head Office including Hedge Accounting (Q323: £223m) |	Including the impact of FX |
1											2
9	| BarclaysQ3 2023 Results	| 24 October 2023

Net interest income across the bank grew by £179 million or 6% year-on-year, driving a 13 basis points increase in Group NIM to 3.98%.

Barclays UK contributed around half of Group NII this quarter, with approximately 20% from CIB and 30% from CC&P, mostly US cards and the Private Bank.

BUK NII was £17 million higher year-on-year, with NIM of 304 basis points, below where we anticipated at Q2, which I will come back to when I cover Barclays UK.

CC&P NII increased by £64 million mainly from US cards balance growth, partially offset by private client deposit migration to our higher yielding products.

This generated NIM of c.8.9% in Q3, which was up from c.8.3% at Q2 and included a small one-off increase in the Private Bank, so we would expect NIM to step back a little in Q4.

CIB NII increased £94 million year-on-year, which included an improvement of 9 basis points to 3.65% in NIM driven by the benefit of rate rises in Transaction Banking.

Moving onto costs on slide 10.

Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority

(Financial Services Register No. 122702).

Registered in England. Registered No. 1026167. Registered office: 1 Churchill Place, London E14 5HP.