Barclays PLC's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Barclays PLC (BCS)

Q3 2011 Earnings Call

October 31, 2011 5:00 am ET

Executives

Christopher Lucas - Chief Financial Officer, Group Finance Director, Executive Director, Chairman of Disclosure Committee, Member of Executive Committee and Group Finance Director of Barclays Bank PLC

Robert Edward Diamond - Group Chief Executive Officer, President, Chief Executive Officer of Corporate, Investment Banking & Wealth Management, Executive Director, Member of Executive Committee and Executive Director of Barclays Bank PLC

Analysts

Rahul Sinha

Andrew Lim - Matrix

John-Paul Crutchley - UBS Investment Bank, Research Division

Andrew Coombs - Citigroup Inc, Research Division

Peter Toeman - HSBC, Research Division

Ian Gordon - Exane BNP Paribas, Research Division

James Alexander - Jefferies

Bruce Packard - Seymour Pierce Limited, Research Division

Robert Law - Nomura Securities Co. Ltd., Research Division

Christopher Wheeler - Mediobanca Securities, Research Division

Ian Gordon - Evolution Securities Limited, Research Division

Thomas Rayner - Exane BNP Paribas, Research Division

Michael Trippitt - Oriel Securities Ltd., Research Division

Manus Costello - Autonomous Research LLP

Fiona Swaffield - RBC Capital Markets, LLC, Research Division

Jon Kirk - Redburn Partners LLP, Research Division

Chris Manners - Morgan Stanley, Research Division

Presentation

Operator

Ladies and gentlemen, welcome to the Barclays quarter three interim management statement, analyst and investors conference call. I will now hand over to the speakers to begin today's presentation.

Robert Edward Diamond

Good morning. Thanks for being with us. I'm here with Chris, and Chris is going to take you through the details in a moment. I would like to share a few headlines before he does that.

I think of our performance on the first 9 months is reassuring. It has been a period of considerable challenge and uncertainty. I think all of you have been able to see that. We've delivered a solid financial performance despite significant economic and market pressures. Our adjusted profit before tax of GBP 5 billion is up 18% over the 9 months last year, that includes GBP 1.3 billion of adjusted profit in the third quarter. One of the things that really pleases me is that the profit delivery was very, very balanced. So if you look at RBB, the Retail and Business Bank, with wealth, that was about the same, 55th [ph] to roughly 1/2 the PBT, as it was in the Corporate and Investment Bank. And I think the power of the diversification truly comes through in the first 9 months of this year.

Another thing that I really like is that all -- one of our businesses performed better in this quarter, the third quarter, than in the second quarter, and performed better in the third quarter this year than the third quarter last year. The exception, of course, is Barclays Capital. It's performance was impacted by the market environment as you would expect, but it does stand out on a relative basis. We've always said that our model will outperform in difficult markets. And I think the BarCap performance in this quarter again demonstrates that.

Most importantly, we've continued to make progress against the 4 key execution priorities that I've shared with all of you in February. Capital, returns, income growth and citizenship. Let me just touch on each of those quickly, before Chris takes over.

Our core Tier 1 equity ratio stands at 11%. We passed the EBA stress test, therefore, there is no need for additional equity. We reduced our exposure in the EU periphery to sovereigns about 31% to corporates by 7% during the third quarter. We increased our pool of liquid assets by GBP 21 billion since the half year, to GBP 166 billion. The majority of that pull, by the way, is FSA-eligible, and that covers all of our wholesale debt maturing within the next 12 months. And we raised over GBP 6 billion of term funding in the third quarter through various channels, all at pretty favorable rates.

The second execution priority is returns. Our adjusted return on equity is 8.1%, up from where we ended 2010, our adjusted return on tangible equity is close to 10%. Another part of returns is managing expenses. And I'm pleased that excluding the PPI provision, operating expenses are flat, and impairment is down by over 1/3. And we continue to exit underperforming businesses, the list that included Barclays Financial Planning in Indonesia now includes Russia as well.

The third execution priority is income growth. And I think this is a pleasant surprise, I think it should be looked at closely. We see clear positive momentum in wealth, in retail, in cards and in the corporate business.

Our fourth execution priority is citizenship, and I think a key factor there is that we are ahead of our targets set in Merlin, with gross new lending of GBP 33 billion, GBP 11 billion of that to SMEs.

All in all, as I've said, I think this performance is pleasing given the difficult market conditions. Looking ahead, you do not need me to tell you, but I will, market conditions remain difficult. Our focus is on execution, execution, execution. Let me hand over to Chris.

Christopher Lucas

Good morning, and thanks, Bob. Adjusted profit before tax is up 18% to GBP 5 billion, with well-balanced contribution from across the business. Our capital funding and liquidity remained strong. Our Eurozone and credit market exposures have reduced, and continued to be well managed. Our return on equity is up year-over-year. We're making good progress with those businesses that have underperformed. And excluding PPI, we have held costs flat. This represents a reassuring performance in a challenging market conditions.

I'm going to use the adjusted numbers this morning, because it gives a better understanding of the operating trends. The adjusted numbers principally exclude a gain on own credit with GBP 3 billion, impairment on our state in BlackRock of GBP 1.8 billion, and the provision for Payment Protection Insurance of GBP 1 billion. We've also provided statutory numbers in the document.

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