Barclays(BCS) - 2023 Q4 - Annual Report

Financial Performance - Group FY23 RoTE of 10.6% and EPS of 32.4p, excluding £0.9bn of Q423 structural cost actions[12] - Group statutory RoTE was 9.0% (2022: 10.4%) with profit before tax of £6.6bn (2022: £7.0bn), including £0.9bn of structural cost actions in Q423[14] - Group RoTE was 5.1% in Q423, down from 8.9% in Q422, with profit before tax of £1.0bn compared to £1.3bn in Q422[16] - Attributable profit decreased to £4,274m, with a return on tangible equity (RoTE) of 9.0% and earnings per share (EPS) of 27.7p[23] - Profit before tax for Q423 was £110 million, significantly lower than £1,885 million in Q323[53] - Profit before tax for Q423 was £568 million, compared to £765 million in Q323[55] - Profit after tax decreased to £5.3 billion (December 2022: £5.9 billion)[180] - Profit after tax for 2023 was £5,259m, a decrease of 11.3% compared to £5,928m in 2022[188] - Total comprehensive income for 2023 was £6,315m, a significant increase from £1,567m in 2022[188] - Basic earnings per ordinary share decreased to 27.7p in 2023 from 30.8p in 2022[192] Capital Distribution and Shareholder Returns - Total capital distributions of £3.0bn announced for 2023, up c.37% on 2022, including a total dividend of 8.0p and share buybacks of £1.75bn[12] - Barclays plans to return at least £10bn of capital to shareholders between 2024 and 2026 through dividends and share buybacks[18] - Share buybacks totaled £1.25bn, with £1.2bn in ordinary share dividends paid and foreseen[169] - The company plans to initiate a share buyback of up to £1.0bn in the first quarter of 2024[194] - Total dividends paid in 2023 were £1,210m, an increase of 17.7% from £1,028m in 2022[194] Net Interest Income and Margins - Group net interest income (NII) of £12.7bn, up 20% year-on-year, with Barclays UK NII of £6.4bn, up 9% year-on-year, delivering a Barclays UK net interest margin (NIM) of 3.13%[12] - Barclays UK net interest income increased 9% to £6,431m, with a NIM of 3.13% (2022: 2.86%)[29][36] - Barclays Group net interest income increased to £12,709m in 2023, up from £10,572m in 2022, driven by higher interest rates and structural hedge income[68] - Barclays Group net interest margin (NIM) rose by 44bps to 3.98% in 2023, compared to 3.54% in 2022, supported by higher balances in Consumer, Cards and Payments (CC&P) and the Gap Inc. portfolio acquisition[69] - Consumer, Cards and Payments net interest income grew to £3,646m in 2023, up from £2,979m in 2022, with a net interest margin of 8.50%, compared to 7.60% in 2022[68] - Corporate and Investment Bank net interest income rose to £1,991m in 2023, up from £1,796m in 2022, with a net interest margin of 3.65%, compared to 3.21% in 2022[68] - Barclays International net interest income increased to £5,637m in 2023, up from £4,775m in 2022, with a net interest margin of 5.78%, compared to 5.02% in 2022[68] Credit Impairment and Loan Losses - Group FY23 loan loss rate (LLR) of 46bps[12] - Credit impairment charges increased to £1.9bn in 2023, up from £1.2bn in 2022, with an LLR of 46bps compared to 30bps in 2022[15] - Barclays UK credit impairment charges remained stable at £0.3bn in 2023, with an LLR of 14bps, consistent with low delinquencies in UK cards and a high-quality mortgage lending portfolio[15] - CC&P credit impairment charges rose to £1.5bn in 2023 from £0.8bn in 2022, with an LLR of 354bps, driven by higher delinquencies in US cards[15] - Credit impairment charges rose to £1,881m, driven by higher delinquencies in US cards, with a total coverage ratio remaining strong at 1.4%[23] - Loan loss rate for Q423 was 54 bps, compared to 42 bps in Q323[53] - The annualised loan loss rate is 46 basis points (bps) after applying the total impairment charge of £1,881 million[80] - Retail credit cards in the UK had a gross exposure of £10,420 million, with an impairment allowance of £710 million[80] - Corporate loans in the UK had a gross exposure of £64,622 million, with an impairment allowance of £751 million[80] - Total Rest of the World loans and advances at amortised cost amounted to £98,142 million, with an impairment allowance of £3,711 million[80] - Retail credit cards in the Rest of the World had a gross exposure of £27,287 million, with an impairment allowance of £2,776 million[80] Cost Management and Efficiency - Group cost: income ratio of 63% excluding Q423 structural cost actions[12] - Targeting Group cost: income ratio of c.63% in 2024 and high 50s in percentage terms in 2026, with total Group operating expenses of c.£17.0bn in 2026[18] - Group total operating expenses increased to £16,931m, with structural cost actions of £927m in Q423 and total structural cost actions for FY23 reaching £1,046m[23] - Cost: income ratio for Q423 was 88%, up from 63% in Q323[53] - Total staff costs for Barclays Group increased to £10,017m in 2023, up from £9,252m in 2022, with group compensation costs as a percentage of total income at 34.4%[72] Capital and Liquidity Ratios - CET1 ratio of 13.8% and tangible net asset value (TNAV) per share of 331p[12] - CET1 ratio stood at 13.8% in 2023, slightly down from 13.9% in 2022, with risk-weighted assets (RWAs) of £342.7bn[15] - CET1 ratio decreased to 13.8%, with RWAs increasing by £6.2bn to £342.7bn, partially offset by a £0.4bn increase in CET1 capital[24] - Liquidity pool decreased to £298.1bn, with the average Liquidity Coverage Ratio (LCR) increasing to 161%, representing a surplus of £117.7bn[25] - Total deposits remained stable at £538.8bn, with the average Net Stable Funding Ratio (NSFR) at 138%, representing a surplus of £167.1bn[26] - Liquidity Coverage Ratio (LCR) increased to 161% in December 2023 from 156% in December 2022, with eligible liquid assets exceeding 100% of net stress outflows[145][147] - Net Stable Funding Ratio (NSFR) was 138% as of December 2023, with a surplus above requirements of £167bn[148][149] - Group liquidity pool decreased to £298bn in December 2023 from £318bn in December 2022, driven by reductions in wholesale funding and deposits[152] Business Segment Performance - Barclays UK income increased 5% to £7.6bn, driven by NII growth from higher rates, including higher structural hedge income[14] - Corporate and Investment Bank (CIB) income decreased 4% to £12.6bn, driven by lower client activity in both Global Markets and Investment Banking[14] - Consumer Cards and Payments (CC&P) income increased 18% to £5.3bn reflecting higher balances in US cards and favourability from higher rates and client balance growth in Private Bank[14] - Barclays UK's total income increased 5% to £7,587m, driven by higher interest rates and structural hedge benefits[29][36] - Barclays UK's Personal Banking income increased 4% to £4,729m, driven by higher interest rates[36] - Barclays UK's Business Banking income increased 16% to £1,894m, driven by higher interest rates[36] - Barclays International's net interest income increased by 26% to £6,197m (December 2022: £4,927m), while net trading income decreased by 24% to £5,878m (December 2022: £7,709m)[38] - Barclays International's total income remained flat at £17,918m (December 2022: £17,867m), with operating costs increasing by 12% to £11,578m (December 2022: £10,361m)[38] - Consumer, Cards and Payments total income increased by 18% to £5,308m (December 2022: £4,499m), driven by a 22% increase in net interest income to £3,646m (December 2022: £2,979m)[43] - CIB income decreased 4% to £12,610m in 2023 from £13,076m in 2022, while CC&P income increased 18% to £5,308m[46] - Global Markets income decreased 16% to £7,218m in 2023, with FICC income down 15% to £4,845m and Equities income down 17% to £2,373m[46] - Investment Banking fees decreased 12% to £1,960m in 2023, with Advisory fees down 23% and Debt capital markets down 10%, while Equity capital markets increased 32%[46] Risk and Capital Management - Barclays expects an LLR of 50-60bps through the cycle and aims to operate within the CET1 ratio target range of 13-14%[18] - The Group's MREL ratio stands at 33.6%, exceeding the regulatory requirement of 30.1% plus a PRA buffer[26] - The Group's CET1 target ratio is 13-14%, with an Overall Capital Requirement of 12.0%[164][165] - The Group issued £14.1bn of MREL eligible instruments in 2023[158] - The UK leverage ratio requirement is 4.1%, comprising a 3.25% minimum requirement and additional buffers[166] - The Group's Pillar 2A requirement increased by 25bps to 4.6%, with at least 56.25% needing to be met with CET1 capital[165] - The Group's MREL requirement is the higher of 25.2% of RWAs or 6.75% of leverage exposures[167] - CET1 capital increased to £47.3bn as of 31.12.23, up from £46.9bn in December 2022[169] - Total regulatory capital stood at 20.1% as of 31.12.23, compared to 20.8% in December 2022[168] - MREL ratio as a percentage of total RWAs was 33.6% as of 31.12.23, slightly up from 33.5% in December 2022[168] - Total RWAs increased to £342.7bn as of 31.12.23, up from £336.5bn in December 2022[168] - Credit risk RWAs for Barclays UK were £73.5bn as of 31.12.23, up from £73.1bn in September 2023[170] - Barclays International's RWAs were £259.1bn as of 31.12.23, compared to £254.8bn in December 2022[171] - Head Office RWAs increased to £10.2bn as of 31.12.23, up from £8.6bn in December 2022[171] - Overall RWAs increased by £6.2 billion to £342.7 billion (December 2022: £336.5 billion)[172] - Credit risk RWAs decreased by £2.2 billion, driven by a £1.3 billion decrease in book size and a £2.6 billion decrease in model updates[173] - Counterparty credit risk RWAs increased by £2.8 billion, primarily due to a £2.1 billion increase in book size and a £2.7 billion increase in methodology and policy[173] - Market risk RWAs increased by £3.9 billion, largely due to a £3.3 billion increase in book size and a £1.2 billion increase in model updates[173] - Operational risk RWAs increased by £1.7 billion, driven by higher 2023 CC&P and Barclays UK income[173] Economic and Market Outlook - UK GDP growth is projected to be 0.5% in 2023, 0.3% in 2024, and 1.2% in 2025, with unemployment rising to 4.8% by 2024[107] - US GDP growth is forecasted at 2.4% in 2023, 1.3% in 2024, and 1.7% in 2025, with unemployment stabilizing at 4.3% from 2024 onwards[107] - The Downside 2 scenario assumes UK GDP could drop to -1.5% in 2024 and -2.6% in 2025, with unemployment peaking at 7.9% in 2025[108] - The Baseline scenario reflects weak GDP growth in the UK and US, with UK house prices declining in 2024 before stabilizing and resuming growth from 2025[109] - US unemployment projected at 3.7% in 2023, rising to 4.7% by 2026 under baseline scenario[114] - UK GDP growth forecasted at -0.8% in 2023, recovering to 1.9% by 2026 under baseline scenario[114] - UK HPI (Halifax House Price Index) expected to decline by 4.7% in 2023, with a recovery to 2.2% by 2026[114] - US federal funds rate projected at 4.8% in 2023, decreasing to 3.0% by 2026 under baseline scenario[114] - Downside 2 scenario shows UK GDP declining by 3.4% in 2023 and 3.8% in 2024, with a recovery to 2.3% by 2026[114] - Upside 2 scenario projects UK GDP growth of 2.8% in 2023, peaking at 3.7% in 2024, and stabilizing at 2.4% by 2026[115] - Scenario probability weighting as of 31.12.23: Upside 2 at 13.8%, Upside 1 at 24.7%, Baseline at 32.7%, Downside 1 at 18.3%, Downside 2 at 10.8%[116] - US HPI (FHFA House Price Index) expected to grow by 1.8% in 2023, increasing to 2.4% by 2026 under baseline scenario[114] - UK GDP growth for 2023 shows a baseline of 1.1%, with upside scenarios reaching up to 13.4% and downside scenarios dropping to -4.1%[117] - US GDP growth for 2023 has a baseline of 1.8%, with upside scenarios peaking at 15.1% and downside scenarios falling to -1.7%[117] - UK unemployment rate for 2023 is projected at 4.7% baseline, with upside scenarios as low as 3.5% and downside scenarios rising to 8.3%[117] - US unemployment rate for 2023 is expected at 4.2% baseline, with upside scenarios at 3.4% and downside scenarios reaching 7.5%[117] - UK HPI (House Price Index) for 2023 shows a baseline growth of 0.1%, with upside scenarios up to 23.8% and downside scenarios dropping to -35.0%[117] - US HPI for 2023 has a baseline growth of 3.7%, with upside scenarios reaching 27.4% and downside scenarios falling to -7.6%[117] Asset and Liability Management - Total assets decreased to £1,477.5bn, reflecting lower derivatives and liquidity pool, partially offset by increased trading securities and client balances[23] - Total assets decreased to £1,477.5 billion (December 2022: £1,513.7 billion)[186] - Total assets increased to £709,930 million in 2023 from £714,828 million in 2022, showing a slight decrease[197] - Trading portfolio assets grew significantly to £174,605 million in 2023 from £133,813 million in 2022, an increase of 30.5%[197] - Financial assets at fair value through the income statement decreased to £206,651 million in 2023 from £213,568 million in 2022, a decline of 3.2%[197] - Derivative financial instruments decreased to £256,836 million in 2023 from £302,380 million in 2022, a drop of 15.1%[197] - Financial assets at fair value through other comprehensive income increased to £71,836 million in 2023 from £65,062 million in 2022, a rise of 10.4%[197] - Total liabilities decreased to £606,252 million in 2023 from £634,181 million in