Barclays PLC (BCS)
2012 Earnings Call
February 12, 2013 4:00 am ET
Executives
Christopher Lucas - Chief Financial Officer, Group Finance Director, Group Finance Director - Barclays Bank Plc, Executive Director and Chairman of Disclosure Committee
Robert Le Blanc - Chief Risk Officer and Member of Disclosure Committee
Rich Ricci - Co-Chief Executive and Chief Operating Officer of Investment Banking & Investment Management
Analysts
Chris Manners - Morgan Stanley, Research Division
John-Paul Crutchley - UBS Investment Bank, Research Division
Michael Helsby - BofA Merrill Lynch, Research Division
Andrew P. Coombs - Citigroup Inc, Research Division
Raul Sinha - JP Morgan Chase & Co, Research Division
Manus Costello - Autonomous Research LLP
Ian Gordon - Investec Securities (UK), Research Division
Andrew Lim - Espirito Santo Investment Bank, Research Division
Fiona Swaffield - RBC Capital Markets, LLC, Research Division
Chintan Joshi - Nomura Securities Co. Ltd., Research Division
Gary Greenwood - Shore Capital Group Ltd., Research Division
Christopher Wheeler - Mediobanca Securities, Research Division
Michael Trippitt - Numis Securities Ltd., Research Division
Jason Napier - Deutsche Bank AG, Research Division
Presentation
Operator
Ladies and gentlemen, welcome to the Barclays 2012 Full Year Results Analyst and Investor Conference Call. I would now hand you over to Chris Lucas, Group Finance Director.
Christopher Lucas
Good morning, and thank you for joining us. As you know, this is an important day for Barclays. We announced the key conclusions from our strategic review this morning, and Antony will give a presentation on them this afternoon. The Executive Committee will be there to answer questions, and the event will be webcast. The purpose of this call is to focus purely on the results for 2012. As usual, we're using adjusted numbers to give a better understanding of our underlying performance.
Turning now to the headlines. We've made good progress across most of our businesses during the year. Adjusted profits increased 26% to GBP 7 billion. Total income was up 2% at GBP 29 billion despite gilt gains of GBP 1.1 billion from the sale of hedging instruments in 2011. Impairment improved 5% to GBP 3.6 billion mainly as a result of favorable trends in our U.K. businesses. This resulted in net income growth of 3% to GBP 25.4 billion. We've continued to reduce costs, which decreased 3% to GBP 18.5 billion, and our capital liquidity and funding remained strong. Our Core Tier 1 ratio was 10.9%, and our total capital ratio was 17.1%.
Adjustment to the statutory numbers include a GBP 4.6 billion charge on own credit, a provision for PPI of GBP 1.6 billion, an GBP 850 million charge for redress on interest rate hedges, and the gain on BlackRock. As a result, statutory profits were GBP 246 million. The provisions, which include additional charges taken in the fourth quarter which we announced last week, GBP 400 million, was provided for redress on interest rate hedges. This is based on the FSA's report after a pilot exercise conducted in the fourth quarter. A charge of GBP 600 million was made for PPI. This is largely the result of higher than expected response rates from prior to be contacting customers ourselves. The PPI balance sheet provision at the end of the year was GBP 990 million.
Return on equity increased from 6.6% to 7.8%. We'll talk more about our plans to improve this later today. Our 4 largest businesses all increased returns. There were strong performances from U.K. RBB and Barclaycard, which reported return to 16% and 22.1%, respectively. The Investment Bank delivered returns of 13.7% and Corporate Banking continued its turnaround. Returns there were 5.5%, up from 1.7% in 2011. Returns by businesses are shown in an appendix in the slide pack. I've told you we'll be allocating more head office results to the businesses going forward. We'll issue details of this before our first quarter. The business returns we're reporting this morning exclude this allocation. So head office is reflected in our group returns. The group's cost-income ratio improved from 67% to 64%. Adjusted earnings per share increased to 34.5p, and we've announced a cash dividend for the fourth quarter of 3.5p, bringing the total to 6.5p for the full year. This is up from 6p in 2011. We understand the importance of dividends and aim to pursue a progressive policy, which Antony will talk about later. The decrease in net tangible asset value per share mainly reflects the own credit charge, provisions for PPI and interest rate hedges and other adverse reserve movement.
Turning now to the individual businesses. In the U.K. RBB, profits were up 4% to GBP 1.5 billion. Total income was down 5% to GBP 4.4 billion, reflecting the non-recurrence of gilt gains and a decline in the underlying contribution from structural hedges. Excluding these impacts, income was stabilize as growth from higher volumes in customer assets and deposits was offset by increased funding cost. Impairment charges halved to GBP 269 million. This reflects improvements across all portfolios, especially in personal and secured lending. The loan loss rate also halved to 21 basis points. 90-day arrears on unsecured personal loans improved by 33 basis points to 1.34%. Excluding PPI, costs reduced 1% to GBP 2.7 billion.
At Barclaycard, profits were up 25% to GBP 1.5 billion. Income grew 2% to GBP 4.2 billion. Impairments improved 22%, and the loan loss rate was 282 basis points compared to 391 in 2011. 30-day arrear rates improved in both the U.S. and the U.K.. Excluding PPI and goodwill impairments in 2011, costs grew 3%.
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