Barclays PLC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Progress on Three-Year Plan: Achieved all 2024 financial targets, return on tangible equity 10.5% (in line with target >10%). Announced £3 billion capital distributions, including £1.2 billion dividends and £1.75 billion buybacks. Deployed £30 billion additional RWAs in highest returning U.K. businesses; investment bank RWAs fell from 58% to 56% of group RWAs.
• Barclays U.K. Acquisition of Tesco Bank: Completed on 1st November, gained strategic relationship with U.K.'s largest retailer, expected to leverage expertise in partnership credit cards.
• Cost Efficiency: Delivered £1 billion gross efficiency savings in 2024, including £0.3 billion in Q4. Cost-to-income ratio for full-year 2024 was 62%, better than guidance circa 63%.
• Credit Performance: Strong, group loan loss rate 46 basis points (below through-the-cycle target range 50-60 basis points), particularly strong in U.K.

Segment Performance

• Barclays U.K.: Delivered a return on tangible equity of 23% for the year. Completed acquisition of Tesco Bank on 1st November, adding strategic relationship with U.K.'s largest retailer. Deposit balances stabilized, lending trends encouraging with organic balance sheet growth in Q4.
• Investment Bank: 8.5% RoTE in 2024, up 1.5% YoY. Aimed to improve returns via regaining market share, RWA productivity, and cost efficiency. Income grew 7% YoY with initiatives to enhance productivity and industry wallet.
• U.S. Consumer Bank: RoTE improved to 9% from 4% in 2023. Impairment charges normalized, cost-to-income ratio 49%. Divested non-strategic businesses like Italian mortgage portfolios and German consumer finance business.
• U.K. Corporate Bank: Q4 RoTE 12.3%, NII up 31% YoY, loan loss rate 29 basis points within guidance.
• Private Bank and Wealth Management: Q4 RoTE 23.9%, client assets and liabilities grew £7 billion QoQ, net new assets under management £3.7 billion for the year.

Guidance

• 2026 Targets: Reiterated group targets for 2026, targeting RoTE >12%, £10 billion+ to shareholders by 2026.
• 2025 Guidance: Expect group RoTE to improve to around 11%, group NII to around £12.2 billion, cost-income ratio to circa 61%. Anticipate further income growth from structural hedge and balance sheet growth in U.K. businesses.
• Capital Allocation: Prioritize prudent capital levels, distribute to shareholders, and invest in highest returning divisions. Announced £1 billion share buyback to be initiated in coming days.

Risks

• Regulatory and Macro Risks: Uncertainty around Basel 3.1 implementation, potential impact on capital and RWAs.
• Market and Operational Risks: Volatility in fixed income markets, potential headwinds from regulatory changes affecting consumer and corporate banking.
• Integration Risks: Challenges in integrating Tesco Bank, including cost management and system onboarding.

Question and Answer

Q: On income assumptions for Barclays U.K., why is the guidance conservative?

A: Anna Cross explained that the guidance is based on realistic assumptions including macro factors, structural hedge momentum, and balance sheet growth, with some offset in margin considered.

Q: On U.S. Consumer Bank RoTE, how does the exit of American Airlines affect future performance?

A: Venkat and Anna discussed that while there's a short-term gain on sale, the business will focus on diversifying, improving credit mix, and organic growth opportunities.

Q: What are the key drivers of cost efficiency for Barclays?

A: Delivered £1 billion gross efficiency savings in 2024, with targeted actions in people, property, and infrastructure, including decommissioning legacy applications and rationalizing branch networks.

Q: How is the acquisition of Tesco Bank expected to impact Barclays U.K. in the long term?

A: Expected to gain strategic customer base, leverage expertise in partnership credit cards, and drive growth, with integration and improvement phases planned over 2025-2027.