Barclays PLC Management Discusses Q1 2012 Results - Interim Management Statement Call Transcript

Barclays PLC (BCS)

Q1 2012 Interim Management Statement Call

April 26, 2012 4:00 am ET

Executives

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

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

Analysts

Chris Manners - Morgan Stanley, Research Division

John-Paul Crutchley - UBS Investment Bank, Research Division

Thomas Rayner - Exane BNP Paribas, Research Division

Michael Helsby - BofA Merrill Lynch, Research Division

Andrew Coombs - Citigroup Inc, Research Division

Ian Gordon - Investec Securities (UK), Research Division

Fiona Swaffield - RBC Capital Markets, LLC, Research Division

Edward Firth - Macquarie Research

James Invine - Societe Generale Cross Asset Research

Rahul Sinha

Christopher Wheeler - Mediobanca Securities, Research Division

Peter Toeman - HSBC, Research Division

Michael Trippitt - Oriel Securities Ltd., Research Division

Chintan Joshi - Nomura Securities Co. Ltd., Research Division

Jon Kirk - Redburn Partners LLP, Research Division

Presentation

Operator

Ladies and gentlemen, welcome to the Barclays Interim Management Statement Analyst and Investors Conference Call. I will now hand you over to Bob Diamond, Chief Executive.

Robert Edward Diamond

Good morning. Thanks for joining. I'm here with Chris Lucas, Barclays Finance Director. Before Chris you through the numbers in more detail, I wanted to share a few thoughts and a few headlines.

First, these results reflect a strong performance across our businesses. The environment has improved since the second half of last year, but frankly, continues to be challenging. We reported adjusted PBT of GBP 2.4 billion, 22% up on a strong first quarter last year. The statutory numbers include a large reversal in owned credit, which is both noncash and non-regulatory capital and a further provision for PPI.

Our adjusted profit performance was driven by total income growth of 5% to just over GBP 8 billion. This positive momentum and earnings is both broadly based and well balanced. It was good underlying performance in every business. An encouraging start to the year in Investment Banking, an important turnaround in Corporate Banking and a strong performance in U.K. Retail and Business Banking in Barclaycard and in Wealth Management, where we are seeing the benefits of our Gamma investment program.

The results were achieved a the continued focus on delivering against 4 key execution priorities. Let me just update you on progress on all 4 of those. First, we continue to be rock solid on capital, liquidity and funding. That is our primary execution priority. Our Core Tier 1 ratio remain strong at 10.9%. Our liquidity pool increased to GBP 173 billion. We raised GBP 12 billion of term funding in the first quarter, just about 1/2 our requirement for 2012.

Secondly on returns. We delivered adjusted return on equity of 12.2% and an adjusted return on tangible equity of 14.3%. This is particularly encouraging as it was achieved in a relatively weak economic and low interest rate environment. Our 3 biggest businesses -- our 3 largest businesses, delivered returns comfortably above our targets. U.K. Retail and Business Banking at 15% return on equity; Barclaycard, 20% return on equity; Investment Banking, 17% return on equity. Now progress will not be in a straight line as regulation still has to be implemented. This result does support our belief that we can achieve 13% returns over time.

The third execution priority is income growth. Total income growth of 5% was driven by the increasing strength of our franchise in cards, in wealth, and in corporate. The turnaround that our corporate businesses is important. That's a really important business for us. Investment Bank income was broadly flat on a strong first quarter in 2011 and was up significantly on a second half of 2011.

Our fourth execution priority is citizenship. We remain absolutely focused on supporting economic growth and job creation, particularly here in the United Kingdom. We were able to deliver gross new lending of over GBP 10 billion in the first quarter, 1/2 of that to businesses. We participated in the government's national loan guarantee scheme. We're able to deliver value to customers upfront through our unique cash back mechanism.

So overall, first quarter results demonstrate that we're making steady progress across our priorities, in a challenging and volatile environment. Let me hand over now to Chris, to take you through some numbers.

Christopher Lucas

Thanks, Bob, and good morning. We're using adjusted numbers this morning as usual, to give a better understanding of the operating trends in the business. These numbers exclude a reversal on noncredit of GBP 2.6 billion, arising from an improvement in our credit spreads and a further provision for the PPI of GBP 300 million. You'll find the statutory numbers in the document together with details of a small restatement related to some activities in Absa, which are now reported in Corporate Banking.

In general, my comments compare the first quarter this year with the first quarter last year. Let's start with the headlines. On an adjusted basis, profits increased 22% to GBP 2.4 billion. Total income grew 5% to GBP 8.1 billion and impairment improved 16%. As a result, net operating income grew 8%, while costs increased 2% and the cost/income ratio improved to 61%.

Return on equity rose to 12.2%, above our cost of equity at 11.5% and return on tangible equity grew to 14.3%. Earnings per share went up from 10.7p to 13.6p and we've announced a dividend of 1p for the first quarter. We look forward to increasing the dividend once the industry has certainty of our new capital requirements.

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