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Strategy

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Our Strategy

In March 2016 we set out our strategy: to build on our strength as a transatlantic consumer and wholesale bank, anchored in our two home markets of the UK and US, with global reach.

When developing our strategy in March 2016, the management team of Barclays considered four major changes that will transform the banking landscape.

• Firstly – the re-regulation of banks following the financial crisis of 2008, which has included new minimum levels of capital which banks are required to hold against assets on balance sheets, and the maximum leverage banks can use. New UK regulation also requires that retail banking (individual and small business banking) is “ring-fenced” from wholesale banking.

• As a consequence of re-regulation, the 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 have grown significantly in the last decade and are set to continue. Scale, breadth and market share are critical to successfully accessing those capital markets, which are centred in New York and London, where we are located.

• Third – the rapid digitisation of banking is fundamentally transforming how we serve every customer and client from personal banking right through to the largest institutions. Success requires deep investment, strategic partnerships with technology providers, and protection of intellectual property to maintain a competitive advantage.

• Fourth – the acceleration in payments technology and the ability to move money for businesses and people faster with lower friction and cost. As all forms of transaction are digitised, the technology and innovation enabling those transactions are an increasingly critical part of a bank’s capability.

With 328 years’ experience Barclays has a very strong history as retail bank and a lender to business. 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 UK, European and US investment banking franchise. Our strategy is designed to build on those successful assets to meet the needs of our customers and clients, compete in a changing environment, and deliver for shareholders.

Our Strategy

In March 2016, after careful consideration of all the options, we set out our strategy: to build on our strengths as a transatlantic consumer and wholesale bank, anchored in our two home markets of the UK and US, with global reach.

Our two operating divisions, Barclays UK and Barclays International, 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 volatility of income and earnings, helping to deliver consistent and sustainable returns through the economic cycle. Both operating companies are supported by a single service company, Barclays Execution Services (BX), which provides lower operating costs overall and greater efficiency.
Since March 2016, the Board has reviewed our strategy regularly to ensure that we continue to make progress and the strategy remains suitable for the sector we operate in.

 

Accelerated restructuring

To achieve our new strategic shape, and deliver increased stability and improved performance, we accelerated the restructuring process, bringing forward completion so we could once more generate attractive and distributable returns, with strong growth potential for the future.

We set stretching targets to complete the run-down of Barclays Non-Core to less than £25bn of risk-weighted assets (RWAs) by the end of 2017, funded by a reduction in the dividend in 2016/17. As a result of new regulation requiring us to hold capital against 100% of the assets of Barclays Africa Group Limited, we set the target of reducing our shareholding within three years to a non-controlling, deconsolidated position which would allow us to release that capital.

Between March 2017 and March 2018, we made considerable progress with our strategic restructuring of Barclays, including the following:

Strategic actions completed by 2018
Africa sell down completed from 66% to 14.9% Reduced headcount by 56,000
Non-Core unit closed, June 2017 30% reduction in headcount in Investment Bank since 2013
Reduced RWAs by £95bn – 80% from IB Combined Corporate and Investment Banks
Sold > 20 businesses inc all retail in continental Europe Continued to reduce costs, down £6bn since the peak in 2013
Created new ring-fenced bank in UK Resolved material legacy conduct issues
Barclays Execution Services (BX) launched Created new Intermediate Holding Company in US
Exited investment banking in nine countries Reduced our end-state CET 1 Capital range

Now focused on profitability and returning capital to shareholders

These actions have significantly simplified the group and reduced drag from Non-Core assets on Group profitability. This allowed us to reach our regulatory capital target range without raising more capital from shareholders. The actions have laid the foundation for Barclays to deliver greater, sustainable, returns in all businesses and return a greater proportion of earnings to shareholders, starting with restoring the 2018 dividend to 6.5p.

In 2017 we set the following Group targets:

Group targets
RoTE1

>9% in 2019
>10% in 2020
CET 1 ratio

c.13%
150-200 bps above regulatory minimum level
Costs

£13.6-13.9bn in 20192
Cost: income ratio <60% over time

1 Excluding litigation and conduct and based on a CET1 ratio of c.13%
2 Excluding litigation and conduct

Our position today

Barclays today is through that period of necessary restructuring. It has a stable management team delivering an improving performance and returns, led by an experienced Board.

Today, Barclays is delivering improved returns and is on track reach our ROTE, Capital and Cost targets in 2019 and beyond. Our diversified business is stable, positioned for current and future market conditions, and with the costs of restructuring behind us, we are beginning to generate improved and sustainable returns and excess capital to distribute to shareholders. The quality and diversification of our earning streams is a deliberate and strategic choice, based on understanding of structural changes in our sector, and the ability to not just weather cyclical forces but also help our clients to navigate them.

Through our creation of a service company with its lower operating costs, we are increasing our investment in key areas including technology, security and controls while simultaneously reducing our costs and our cost to income ratio. Our earnings per share (EPS) have grown from 3.8p in 2014 to a forecast 20p in 2018.

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