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Barclays(BCS) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The return on tangible equity (RoTE) for 2023 was 10.6%, in line with the target of above 10% [2][5] - Group profit before tax was £7.5 billion, down 3% year-on-year, while total income increased by £0.7 billion [6] - The cost-to-income ratio was 63%, consistent with guidance for the low 60s [2][10] - Tangible book value per share increased by £0.36 year-on-year to £0.331, and the CET1 ratio was 13.8%, at the top end of the target range [3][23] Business Line Data and Key Metrics Changes - Barclays UK income was up 5%, driven by net interest income growth from rate increases, despite lower card income [6][15] - Consumer cards and payments income grew 18%, supported by higher margins and balanced growth in US cards and the Private Bank [7][19] - Corporate and Investment Bank income decreased by 4%, impacted by lower market volatility and a record low banking wallet [7][20] Market Data and Key Metrics Changes - Net interest income across the bank grew by £2.1 billion or 20% year-on-year, with a group net interest margin (NIM) increase to 3.98% [7][8] - The structural hedge generated £3.6 billion in gross hedge income in 2023, up from £2.2 billion in the prior year [8][9] - The US cards portfolio showed elevated loan loss rates, with a full-year charge of £1.5 billion in consumer cards and payments [12][13] Company Strategy and Development Direction - The company aims to improve RoTE from 9% in 2023 to above 12% by 2026 and plans to distribute at least £10 billion to shareholders between 2024 and 2026 [52][53] - The strategy includes simplifying the business structure and enhancing operational performance while maintaining a strong capital position [46][47] - The company is focused on growing its UK presence and expanding its role in the US market, particularly in unsecured lending [46][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving financial targets and highlighted the importance of operational excellence to preserve reputation and protect shareholder interests [50][51] - The outlook for 2024 includes expectations for a reduction in deposits and mortgages, with a gradual return to growth anticipated in the second half of the year [17][39] - Management acknowledged the challenges in the market environment but emphasized reasonable assumptions for revenue growth [28][29] Other Important Information - The company announced a £1 billion share buyback, which will reduce the CET1 ratio to 13.5% [23] - Structural cost actions in Q4 amounted to £927 million, aimed at improving efficiency and productivity [11] - The company is in advanced discussions to sell its German consumer business and Italian mortgage book, completing its exit from European retail outside the UK [54] Q&A Session Summary Question: Market performance in Q4 and guidance for 2024 - Management indicated that assumptions for the market environment in 2024 are reasonable, with no expected increase in the market wallet [28] Question: Tesco acquisition versus share buyback - The Tesco acquisition is seen as a way to accelerate growth in unsecured lending, balancing shareholder returns with investments [29] Question: UK NIM volatility - Management expects the volatility in the UK NIM to smooth out over 2024, with no significant reversals anticipated [31] Question: UK mortgages and US cards capital requirements - The UK mortgage market is experiencing negative net trends due to refinancing activity, while the US cards business is undergoing an IRB conversion, which was anticipated [34][35] Question: Deposit dynamics in Q4 - The stabilization of deposits in Q4 was attributed to slower customer migration and stabilization in pricing, leading to a better-than-expected NIM [37] Question: Equities business performance - The equities business performed adequately in Q4, with no specific issues highlighted [41] Question: Non-NII in UK and corporate revenues in CIB - Non-NII in the UK was impacted by the transfer of the UK Wealth business, while corporate lending income remains stable despite some costs [44]