Description
This document about becoming the go to bank barclays strategic review.
Becoming the ‘Go-To’ bank
Barclays Strategic Review
Executive Summary
12 February 2013
Barclays Bank PLC. Authorised and regulated by the Financial Services Authority.
Registered in England. Registered No. 1026167. Registered of?ce: 1 Churchill Place, London E14 5HP.
2
Foreword from the Chief Executive 3
Section 1: Turnaround 4
Section 2: Return Acceptable Numbers 6
– Breakdown by business divisions 7
– Business strategy overview 9
Section 3: Sustain Forward Momentum 10
– Our commitments 12
Glossary 13
Contents
Barclays Bank PLC. Authorised and regulated by the Financial Services Authority.
Registered in England. Registered No. 1026167. Registered of?ce: 1 Churchill Place, London E14 5HP.
3
Barclays is changing
Our Strategic Review is the roadmap to achieve our goal of
becoming the ‘Go-To’ bank. It sets out not just what we will
do, but how we will do it.
It follows an unprecedented examination of every aspect of our business and an analysis of the profound and permanent
trends rede?ning our industry. These include a prolonged period of lower global growth, a tougher regulatory environment and
raised consumer and client expectations. It is also based on the recognition that banking lost its way in recent years, putting
the pursuit of short-term pro?ts before long-term interests.
We are determined that Barclays will help shape the new era for banking. We have de?ned our purpose as helping people,
whether customers, clients or those in the communities we serve, to achieve their ambitions – in the right way. We want them
to choose Barclays because of both our performance and our behaviour. At the heart of our strategy is the strong belief that
there can be no con?ict between good results and good values if we are to build a successful, sustainable business. We have
set out a rigorous programme of work to deliver our ambitions. The Transform Programme has three elements – Turnaround,
Return Acceptable Numbers and Sustain Forward Momentum. This summary explains how we have stabilised the business,
how we will put our performance on the right track and how, through a new values-driven culture and direction, we will
become the ‘Go-To’ bank.
Foreword
Antony Jenkins
Group Chief Executive
Barclays Strategic Review Executive Summary 4
Section 1: Turnaround
Turnaround was the immediate task of stabilising the business
and maintaining momentum after the events of last summer.
This required us to engage and listen to our stakeholders in a way we had not before. One clear message came back:
Barclays needs to change. We have taken this message fully on board.
The quality and the commitment of the people at Barclays, combined with our underlying ?nancial strength,
mean we start this work from a good position.
We have begun by delivering our ?nancial objectives for 2012 and managing the legacy issues we face. To sustain
this progress we need to embed a culture that delivers the right outcomes for all our stakeholders. We have agreed
a common goal, purpose and values to guide us in all we do.
Our Goal is to become the ‘Go-To’ bank.
Our Purpose is helping people achieve their ambitions
– in the right way.
Our Values are simple: Respect, Integrity, Service,
Excellence and Stewardship.
Section 1: Turnaround
Our Values
Respect
Means respecting and valuing those we work with –
our colleagues and partners. It is about building trust
and promoting collaboration.
Integrity
Demands we act fairly, ethically and honestly. This requires
us to have the courage always to behave well and to be
accountable for our decisions.
Service
Means ensuring our clients and customers are always
uppermost in our minds. We must always strive to exceed
their expectations.
Excellence
Calls on us to use all our energy, skills and resources to
deliver great service for our customers and clients and
strong, sustainable results for our shareholders.
Stewardship
Is about being determined to leave things better than we
?nd them; always working to improve the way we operate
as an organisation and the impact we have on society.
Barclays Strategic Review Executive Summary 5
Our Purpose and Values de?ne the work we will and will
not do, and the value we create. They de?ne the way we
hire, develop, promote and reward our people.
In future we will assess our people against a balanced
scorecard measuring performance against our values
alongside other targets. Variable pay will depend on
delivering performance in a way that is consistent with
our values. This structure will be in place for all senior
executives during 2013 and for all colleagues from the
middle of 2014.
Section 1: Turnaround
Barclays Strategic Review Executive Summary 6
Section 2: Return Acceptable Numbers
Returning acceptable numbers means delivering a return on
equity (RoE) above the cost of equity (CoE) on a sustainable
basis – overall and in each of our businesses.
Our new ?nancial plan to achieve this goal is grounded in a detailed performance review. We conducted a rigorous analysis
of our business, looking at 75 different performance units globally. We considered each area through both a ?nancial and a
reputational lens. We were sensitive to how we delivered returns not just what returns we deliver.
Each business was considered against two key criteria:
• The attractiveness of the market and its changing dynamics
• Our ability to generate an ROE in excess of our COE, with no attachment to prior assumptions or goals.
The strategic review concluded that
Barclays will:
• Focus solely on activities that support customers and
clients in geographic markets and businesses where
Barclays has scale and competitive advantage
• Focus investment in the UK, US and Africa, whilst
maintaining an appropriate presence across Europe and
Asia to support our global Investment Banking franchise
• Restructure Barclays European retail operations to focus
on the mass af?uent customer segment
• Reposition Barclays European and Asian Equities and
Investment Banking Division businesses to re?ect the
market opportunities and maintain a relevant proposition
for our clients
• Close the Structured Capital Markets business unit
• Manage RWAs more ef?ciently through a run-off of legacy
assets in Europe and the Investment Bank and invest in
high-return businesses such as UK mortgages, Barclaycard
and Wealth
• Reduce total costs signi?cantly across the Group by
operating more ef?ciently.
Section 2: Return Acceptable Numbers
Quadrant 1 – Invest and Grow
This quadrant includes 39 of our 75 businesses. These are
areas where we will continue to innovate, invest and grow.
They will drive most of our growth over the plan period and
together, this group generates a return on equity in 2015
sustainably above the current cost of equity.
Quadrant 2 – Right-size
A group of 15 businesses which currently generate a little
over £4bn of income. We will strategically realign these
businesses and expect them to be in Quadrant 1 within
the plan period.
Quadrant 3 – Transition
Businesses which require more fundamental restructuring.
There are 17 businesses in this section, which currently
generate over £2bn of income. We plan to reposition these,
monetise or sell them off over time. The estimated costs of
this are in the plan. These businesses are primarily in Europe
or relate to non-client activity in the Investment Bank.
Quadrant 4 – Exit
This section includes four uneconomic “legacy” businesses.
These contribute under £0.5bn of income but currently
consume over £90bn of RWAs on a pro forma Basel 3 basis.
Over the plan period, we expect these to reduce by
nearly £50bn.
Barclays Strategic Review Executive Summary 7
Investment Bank
The Investment Bank is our largest business division,
generating 60% of adjusted PBT in 2012. We intend to
maintain its position as one of a small group of full service
global investment banks. By putting in place important
changes to its composition, we believe we can provide a
compelling client proposition and generate appropriate
returns to shareholders on a standalone basis.
By 2015, we aim to achieve a return on equity of 14 to 15%,
driven by RWAs of £210bn to £230bn and a compensation
to income ratio in the mid-30s.
Fixed Income, Currency and Commodities (FICC)
This is a well-diversi?ed business generating 63% of the
Investment Bank’s income in 2012. It has generated attractive
returns, grown its market share and has been preparing well
for regulatory change.
We plan to deal aggressively with legacy FICC positions, move
away from non-client businesses and those with reputational
challenges and align similar pro?le assets alongside our
remaining credit market assets. For example, we will no
longer trade soft commodities (such as agricultural products)
for speculative purposes.
Breakdown by business divisions
Section 2: Return Acceptable Numbers
Equities and Investment Banking
These are less capital intensive businesses which can
generate high returns over the cycle when they operate
at scale. We are now well positioned in the US and the UK
and we are con?dent that we can convert this scale into
appropriate returns.
There will, though, be some changes needed to deliver
these returns.
We will ?nd cost savings of £300m per year from front and
back of?ce functions, reposition our business in Europe and
Asia to ?t market opportunities and close our Structured
Capital Markets tax planning business unit.
Barclays Strategic Review Executive Summary 8
Corporate Banking
Our Corporate Bank is in the middle of a very strong
turnaround. We have focused on servicing the cross-border
needs of our largest Global Corporates and Financial
Institutions clients as well as the needs of our domestic
clients in the UK and Africa.
The intention is to grow these businesses further by
accelerating our plans to build a global cash management
platform and expanding the product offering across Africa,
especially in trade-related services. We will continue to
reduce our European corporate exposures. By 2015, we aim
to double PBT in Corporate Banking, with a return on equity
over 10%.
UK Retail and Business Banking
This is a leading franchise in our home market. The majority
of our businesses here are high performing, despite the
economic conditions in the UK. We see an opportunity
to create a technology-driven franchise with signi?cant
improvements in customer service, controls and costs.
There are also income growth opportunities, for example
in mortgages. Given the environment, there is also a need
to sharpen our focus on costs, to achieve a cost to income
ratio in the mid-50s in 2015. Over the plan period to 2015,
we expect to maintain the current level of return on equity
in the high teens.
Barclaycard
Barclaycard is the 8th largest consumer payment business
globally and is a top-three player in all of its chosen
markets, except the US. With our competitive advantage
our aim is to capitalise on opportunities in all geographies,
driven by technology innovations and evolve Barclaycard
into a full service payments business. Our plan is for
income growth while maintaining a return on equity
of over 20%.
Wealth and Investment Management
We are now one of the top ten wealth managers globally.
The fragmented global market represents an opportunity
to further our position through focusing on improving high
return areas and repositioning those with lower returns. Our
aim is to double PBT by 2015, as income continues to grow
and the return on equity remains in the high teens.
Africa
Africa is the primary emerging market for Barclays. We
operate in 12 countries and generated PBT of over £900m
across the continent in 2012, which we expect to grow
signi?cantly over time. We will integrate our businesses
across the continent through our “One Africa” strategy. By
2015, we aim to increase the return on equity from 3.8% to
above the cost of equity in Africa Retail and Business Banking.
Europe Retail and Business Banking
Our European RBB business faces a dif?cult macroeconomic,
sovereign and regulatory environment. We will reposition
to focus more on the pro?table mass af?uent sector, while
accelerating the run-off of our legacy assets. We will continue
to build our small but pro?table cards business. We will
substantially reduce the cost to income ratio leading to a
return on equity in the low single digits by 2015.
Breakdown by business divisions
Section 2: Return Acceptable Numbers
Barclays Strategic Review Executive Summary 9
Costs
Our aim is to generate £1.7bn of cost savings by 2015.
Existing cost initiatives have delivered net reductions in
operating expenses over the last couple of years, despite
a number of unplanned costs. We expect the ?nal effects
of these existing initiatives and new actions set out above
will take out signi?cant further costs over the plan period.
Those cost reductions must offset in?ation and investment
in growth areas. Performance against estimates will be
disclosed each year.
RWAs
There have been signi?cant management actions to reduce
RWAs to provide a buffer for the further regulatory headwinds
we expect and our investment in high return RWAs.
• Overall we estimate an increase as at 31 December
2012 of £81bn. This gives us a pro forma starting
point of £468bn
• Aim is for a gross reduction in pro forma Basel 3 RWAs
of £75bn by 2015
• The net reduction will be less, due to investment in
areas of high return, leading to our plan target of around
£440bn for total Group RWAs in 2015.
Funding and liquidity
We will seek to maintain a diversi?ed funding base. Our
expectation is that our wholesale unsecured funding volumes
will come down and the mix will change over the next three
years, in particular towards secured funding.
Finally, the announced changes to Basel 3 rules on liquidity
should allow us to reduce the volume of liquid assets that we
hold and include a broader range of high quality assets within
the pool. This should reduce its carry cost to £300m.
Capital funding
This remains a critical component of Barclays ?nancial
strength and, along with our funding and liquidity positions, a
source of competitive advantage which we want to preserve.
Our aim is for a target capital position, post Basel 3, through
the cycle Core Tier One ratio of 10.5%. This implies a 1.5%
management buffer above the minimum required by CRD IV
(European Union Capital Requirements Directive IV)
and the 2% G-SIFI buffer applied by the BCBS to Barclays.
The task of transition to an ef?cient CRD IV capital position
will be challenging. Loss absorbing capital instruments will
cover around 2% of Barclays RWAs in our target structure.
We believe that will provide an appropriate distribution of
risk between bond and equity holders. The intention is not to
meet all of that with the same write-down structure that
we used last year but to diversify and look at other designs.
Business strategy overview
Our strategy also sets out changes we will be making overall
in relation to costs, RWAs, capital funding and liquidity.
Section 2: Return Acceptable Numbers
Barclays Strategic Review Executive Summary 10
Culture
On culture, our challenge is to ensure that we weave our
Purpose and Values permanently and inextricably into
our day-to-day operations. We have established a new
leadership framework to ensure that the Purpose and Values
is embedded into hiring, objective setting, performance
assessment, reward and disciplinary procedures.
At the heart of this will be the balanced scorecard, which
will create a single, integrated framework for measuring
performance against our values in ?ve dimensions:
customers and clients, company, conduct, colleagues and
citizenship. As noted above, this scorecard will be in place
for all colleagues from the middle of 2014.
We will also develop an integrated report card for the bank
as a whole, re?ecting our values as well as our ?nancial
performance, which we will update annually –
a fundamental shift in our approach to reporting.
Sustain Forward Momentum
This plan sets out a clear path for the ?rst three years of our
longer journey to realise our goal of becoming the ‘Go-To’ bank.
That longer journey depends on continuing to adapt Barclays for
the future and ensuring that we do not return to a short-term
bias as we execute our plans.
Section 3: Sustain Forward Momentum
Beyond the immediate actions we have set out, we have also
set in place longer-term markers in four critical areas: Culture,
Rewards, Control and Cost.
Rewards
We will also be making major changes to our reward
structure.
We will continue to pay for performance – and we will
continue to pay competitively for the best talent. But in
future variable pay will depend on performance against
our values as well as other targets.
We also need to make a more fundamental shift on pay.
Barclays Group compensation to net income ratio fell from
42% in 2011 to 38% in 2012. Over time we want to move
to a sustainable compensation to net income ratio in the
mid-30s.
Barclays Strategic Review Executive Summary 11
Control
A strong culture is the ?rst line of defence against repeating
the mistakes of the past. Individuals and business units are
responsible for operating in a way that is both compliant
with regulatory requirements and consistent with our
Purpose and Values. Given the importance of what we do
to society, however, we must also have in place world-class
controls systems.
For the ?rst time all compliance staff will report to a
single global function head and will operate completely
independently of business and regional management
teams. This will be supported by signi?cant new investment,
training and process change.
Cost
Finally, we believe that cost will be the strategic battleground
for banking over the next decade. For the ?rst time we
intend to take a strategic approach to managing cost as
an integrated part of our plans to improve controls and the
service we offer to our customers and clients.
Technology has a critical role to play in cost reduction.
For example, we have already made signi?cant progress
in pioneering self-service technology. We believe that we
will be able to increase self-service rates from low double
digits today to at least half of all transactions over time.
This will reduce processing volumes as well as complaints
while freeing resource to improve the quality of customer
interaction in other areas.
In addition, the integration of new technologies, including
cloud-based platforms, will lead to signi?cant reductions in
headcount, physical IT infrastructure and data centres.
The granularity of the Strategic Review has also highlighted
signi?cant new opportunities to reduce duplication. This will
build on existing work to integrate our operations in Africa
as well as the further integration of our Corporate Banking
business and our Investment Bank.
Sustain Forward Momentum
Section 3: Sustain Forward Momentum
We are already delivering on many of these pillars
in different parts of Barclays. We will now scale that
experience across the Group to deliver savings of £1.7bn
through our plan period and further sustainable cost
reductions over the medium term.
Barclays Strategic Review Executive Summary 12
Non-?nancial commitments
• Provide greater disclosure and transparency around our
?nancial performance
• Embed our purpose and values across Barclays and
publish an annual scorecard assessing our performance.
Financial commitments
• Deliver a return on equity for the Group in excess of the
Group cost of equity in 2015, which we have assumed
will remain at the current 11.5% level
• In 2013, reduce headcount by at least 3,700 across the
Group, including 1,800 in the Corporate & Investment
Bank and 1,900 in Europe Retail and Business Banking.
This is expected to result in a restructuring charge of
close to £500m in Q1 2013
• Reduce the Group’s total cost base by £1.7bn to £16.8bn
in 2015, including interim cost estimates of £18.5bn and
£17.5bn in 2013 and 2014 respectively. This excludes
‘one-time’ costs to achieve the strategic plan of £1bn
in 2013, £1bn in 2014 and £0.7bn in 2015, delivering a
Group cost to income ratio in the mid-50s in 2015
• Target Risk Weighted Assets (RWAs) of £440bn by the end
of 2015, after mitigating the estimated impact of CRD IV
(£81bn) through legacy asset and other RWA reductions
(£75bn), enabling RWA investment in selected areas
• Report a transitional Common Equity Tier 1 ratio above
its target ratio of 10.5% in 2015
• From 2014, accelerate our progressive dividend policy,
targeting a payout ratio of 30% over time.
Our commitments
We are making a series of ?nancial and non-?nancial commitments
against which progress can be tracked across the plan period.
We will update against these commitments every six months.
Section 3: Sustain Forward Momentum
For more information on the Transform Programme and
Barclays Strategic Review visit barclays.com/transform
Barclays Strategic Review Executive Summary 13
Basel 3
The third of the Basel Accords. Developed in response to
the ?nancial crisis of 2008, setting new requirements on
composition of capital, counterparty credit risk, liquidity
and leverage ratios.
BCBS
A forum for regular co-operation on banking supervisory
matters which develops global supervisory standards for the
banking industry. Its members are of?cials from central banks
or prudential supervisors from 27 countries and territories.
Commission
A service charge issued by a bank in return for providing
investment advice and/or handling the purchase or sale
of a security. It can be a ?xed or percentage value of the
asset traded.
Core Tier One Capital
Called-up share capital and eligible reserves plus non-
controlling equity interests, less intangible assets and
deductions relating to the excess of expected loss over
regulatory impairment allowance and securitisation
positions as speci?ed by the FSA.
Cost of Equity (COE)
The rate of return targeted by the equity holders of a company.
CRD IV (Capital Requirements Directive IV)
The Fourth Capital Requirements Directive. Proposal for a
Directive and an accompanying Regulation that together
will (among other things) update EU capital adequacy and
liquidity requirements and implement Basel 3 in the
European Union.
Currency
A system of money issued by a government and circulated in
a particular economy.
Fixed Income
Fixed income is any type of investment that yields a regular
(?xed) payment and the eventual return of the principal
investment at maturity.
G-SIFI (Global Systemically Important Financial Institution)
A list of global banks that are required to hold extra capital
equal to between 1-2.5% of their assets because of their
importance to the global ?nancial system.
Mass af?uent
A term used to refer to the wealthiest end of the mass market.
Pro?t Before Tax (PBT)
Pro?t before tax (PBT) is a pro?tability measure that looks
at company’s pro?ts before the company has paid corporate
income tax.
Pro-forma
Projected or estimated ?nancial statement that attempts
to present a reasonably accurate ?gure of a ?rm’s ?nancial
situation should present trends or certain assumptions hold
true. Often used to formulate business plans or re?ect a
planned transaction.
Proprietary trading
When a ?nancial institution trades for direct gain using
its own capital and resources, rather than on behalf of
a customer.
Soft commodities
A traded commodity that is often categorised as an
agricultural product or livestock, such as coffee, cocoa,
pork and corn. This term generally refers to commodities
that are grown or reared, rather than mined.
Return on Equity (ROE)
Return on Equity measures the rate of return the
management of a company have been able to generate
on the equity funds given to them by the shareholders.
Risk Weighted Assets (RWA)
A measure of a bank’s assets adjusted for their associated
risks. Risk weightings are established in accordance with
the Basel Capital Accord as implemented by the FSA.
Run-rate
A metric used to show a company’s ?nancial performance if
you were to extrapolate the current results out over a certain
period of time.
Glossary
doc_381574101.pdf
This document about becoming the go to bank barclays strategic review.
Becoming the ‘Go-To’ bank
Barclays Strategic Review
Executive Summary
12 February 2013
Barclays Bank PLC. Authorised and regulated by the Financial Services Authority.
Registered in England. Registered No. 1026167. Registered of?ce: 1 Churchill Place, London E14 5HP.
2
Foreword from the Chief Executive 3
Section 1: Turnaround 4
Section 2: Return Acceptable Numbers 6
– Breakdown by business divisions 7
– Business strategy overview 9
Section 3: Sustain Forward Momentum 10
– Our commitments 12
Glossary 13
Contents
Barclays Bank PLC. Authorised and regulated by the Financial Services Authority.
Registered in England. Registered No. 1026167. Registered of?ce: 1 Churchill Place, London E14 5HP.
3
Barclays is changing
Our Strategic Review is the roadmap to achieve our goal of
becoming the ‘Go-To’ bank. It sets out not just what we will
do, but how we will do it.
It follows an unprecedented examination of every aspect of our business and an analysis of the profound and permanent
trends rede?ning our industry. These include a prolonged period of lower global growth, a tougher regulatory environment and
raised consumer and client expectations. It is also based on the recognition that banking lost its way in recent years, putting
the pursuit of short-term pro?ts before long-term interests.
We are determined that Barclays will help shape the new era for banking. We have de?ned our purpose as helping people,
whether customers, clients or those in the communities we serve, to achieve their ambitions – in the right way. We want them
to choose Barclays because of both our performance and our behaviour. At the heart of our strategy is the strong belief that
there can be no con?ict between good results and good values if we are to build a successful, sustainable business. We have
set out a rigorous programme of work to deliver our ambitions. The Transform Programme has three elements – Turnaround,
Return Acceptable Numbers and Sustain Forward Momentum. This summary explains how we have stabilised the business,
how we will put our performance on the right track and how, through a new values-driven culture and direction, we will
become the ‘Go-To’ bank.
Foreword
Antony Jenkins
Group Chief Executive
Barclays Strategic Review Executive Summary 4
Section 1: Turnaround
Turnaround was the immediate task of stabilising the business
and maintaining momentum after the events of last summer.
This required us to engage and listen to our stakeholders in a way we had not before. One clear message came back:
Barclays needs to change. We have taken this message fully on board.
The quality and the commitment of the people at Barclays, combined with our underlying ?nancial strength,
mean we start this work from a good position.
We have begun by delivering our ?nancial objectives for 2012 and managing the legacy issues we face. To sustain
this progress we need to embed a culture that delivers the right outcomes for all our stakeholders. We have agreed
a common goal, purpose and values to guide us in all we do.
Our Goal is to become the ‘Go-To’ bank.
Our Purpose is helping people achieve their ambitions
– in the right way.
Our Values are simple: Respect, Integrity, Service,
Excellence and Stewardship.
Section 1: Turnaround
Our Values
Respect
Means respecting and valuing those we work with –
our colleagues and partners. It is about building trust
and promoting collaboration.
Integrity
Demands we act fairly, ethically and honestly. This requires
us to have the courage always to behave well and to be
accountable for our decisions.
Service
Means ensuring our clients and customers are always
uppermost in our minds. We must always strive to exceed
their expectations.
Excellence
Calls on us to use all our energy, skills and resources to
deliver great service for our customers and clients and
strong, sustainable results for our shareholders.
Stewardship
Is about being determined to leave things better than we
?nd them; always working to improve the way we operate
as an organisation and the impact we have on society.
Barclays Strategic Review Executive Summary 5
Our Purpose and Values de?ne the work we will and will
not do, and the value we create. They de?ne the way we
hire, develop, promote and reward our people.
In future we will assess our people against a balanced
scorecard measuring performance against our values
alongside other targets. Variable pay will depend on
delivering performance in a way that is consistent with
our values. This structure will be in place for all senior
executives during 2013 and for all colleagues from the
middle of 2014.
Section 1: Turnaround
Barclays Strategic Review Executive Summary 6
Section 2: Return Acceptable Numbers
Returning acceptable numbers means delivering a return on
equity (RoE) above the cost of equity (CoE) on a sustainable
basis – overall and in each of our businesses.
Our new ?nancial plan to achieve this goal is grounded in a detailed performance review. We conducted a rigorous analysis
of our business, looking at 75 different performance units globally. We considered each area through both a ?nancial and a
reputational lens. We were sensitive to how we delivered returns not just what returns we deliver.
Each business was considered against two key criteria:
• The attractiveness of the market and its changing dynamics
• Our ability to generate an ROE in excess of our COE, with no attachment to prior assumptions or goals.
The strategic review concluded that
Barclays will:
• Focus solely on activities that support customers and
clients in geographic markets and businesses where
Barclays has scale and competitive advantage
• Focus investment in the UK, US and Africa, whilst
maintaining an appropriate presence across Europe and
Asia to support our global Investment Banking franchise
• Restructure Barclays European retail operations to focus
on the mass af?uent customer segment
• Reposition Barclays European and Asian Equities and
Investment Banking Division businesses to re?ect the
market opportunities and maintain a relevant proposition
for our clients
• Close the Structured Capital Markets business unit
• Manage RWAs more ef?ciently through a run-off of legacy
assets in Europe and the Investment Bank and invest in
high-return businesses such as UK mortgages, Barclaycard
and Wealth
• Reduce total costs signi?cantly across the Group by
operating more ef?ciently.
Section 2: Return Acceptable Numbers
Quadrant 1 – Invest and Grow
This quadrant includes 39 of our 75 businesses. These are
areas where we will continue to innovate, invest and grow.
They will drive most of our growth over the plan period and
together, this group generates a return on equity in 2015
sustainably above the current cost of equity.
Quadrant 2 – Right-size
A group of 15 businesses which currently generate a little
over £4bn of income. We will strategically realign these
businesses and expect them to be in Quadrant 1 within
the plan period.
Quadrant 3 – Transition
Businesses which require more fundamental restructuring.
There are 17 businesses in this section, which currently
generate over £2bn of income. We plan to reposition these,
monetise or sell them off over time. The estimated costs of
this are in the plan. These businesses are primarily in Europe
or relate to non-client activity in the Investment Bank.
Quadrant 4 – Exit
This section includes four uneconomic “legacy” businesses.
These contribute under £0.5bn of income but currently
consume over £90bn of RWAs on a pro forma Basel 3 basis.
Over the plan period, we expect these to reduce by
nearly £50bn.
Barclays Strategic Review Executive Summary 7
Investment Bank
The Investment Bank is our largest business division,
generating 60% of adjusted PBT in 2012. We intend to
maintain its position as one of a small group of full service
global investment banks. By putting in place important
changes to its composition, we believe we can provide a
compelling client proposition and generate appropriate
returns to shareholders on a standalone basis.
By 2015, we aim to achieve a return on equity of 14 to 15%,
driven by RWAs of £210bn to £230bn and a compensation
to income ratio in the mid-30s.
Fixed Income, Currency and Commodities (FICC)
This is a well-diversi?ed business generating 63% of the
Investment Bank’s income in 2012. It has generated attractive
returns, grown its market share and has been preparing well
for regulatory change.
We plan to deal aggressively with legacy FICC positions, move
away from non-client businesses and those with reputational
challenges and align similar pro?le assets alongside our
remaining credit market assets. For example, we will no
longer trade soft commodities (such as agricultural products)
for speculative purposes.
Breakdown by business divisions
Section 2: Return Acceptable Numbers
Equities and Investment Banking
These are less capital intensive businesses which can
generate high returns over the cycle when they operate
at scale. We are now well positioned in the US and the UK
and we are con?dent that we can convert this scale into
appropriate returns.
There will, though, be some changes needed to deliver
these returns.
We will ?nd cost savings of £300m per year from front and
back of?ce functions, reposition our business in Europe and
Asia to ?t market opportunities and close our Structured
Capital Markets tax planning business unit.
Barclays Strategic Review Executive Summary 8
Corporate Banking
Our Corporate Bank is in the middle of a very strong
turnaround. We have focused on servicing the cross-border
needs of our largest Global Corporates and Financial
Institutions clients as well as the needs of our domestic
clients in the UK and Africa.
The intention is to grow these businesses further by
accelerating our plans to build a global cash management
platform and expanding the product offering across Africa,
especially in trade-related services. We will continue to
reduce our European corporate exposures. By 2015, we aim
to double PBT in Corporate Banking, with a return on equity
over 10%.
UK Retail and Business Banking
This is a leading franchise in our home market. The majority
of our businesses here are high performing, despite the
economic conditions in the UK. We see an opportunity
to create a technology-driven franchise with signi?cant
improvements in customer service, controls and costs.
There are also income growth opportunities, for example
in mortgages. Given the environment, there is also a need
to sharpen our focus on costs, to achieve a cost to income
ratio in the mid-50s in 2015. Over the plan period to 2015,
we expect to maintain the current level of return on equity
in the high teens.
Barclaycard
Barclaycard is the 8th largest consumer payment business
globally and is a top-three player in all of its chosen
markets, except the US. With our competitive advantage
our aim is to capitalise on opportunities in all geographies,
driven by technology innovations and evolve Barclaycard
into a full service payments business. Our plan is for
income growth while maintaining a return on equity
of over 20%.
Wealth and Investment Management
We are now one of the top ten wealth managers globally.
The fragmented global market represents an opportunity
to further our position through focusing on improving high
return areas and repositioning those with lower returns. Our
aim is to double PBT by 2015, as income continues to grow
and the return on equity remains in the high teens.
Africa
Africa is the primary emerging market for Barclays. We
operate in 12 countries and generated PBT of over £900m
across the continent in 2012, which we expect to grow
signi?cantly over time. We will integrate our businesses
across the continent through our “One Africa” strategy. By
2015, we aim to increase the return on equity from 3.8% to
above the cost of equity in Africa Retail and Business Banking.
Europe Retail and Business Banking
Our European RBB business faces a dif?cult macroeconomic,
sovereign and regulatory environment. We will reposition
to focus more on the pro?table mass af?uent sector, while
accelerating the run-off of our legacy assets. We will continue
to build our small but pro?table cards business. We will
substantially reduce the cost to income ratio leading to a
return on equity in the low single digits by 2015.
Breakdown by business divisions
Section 2: Return Acceptable Numbers
Barclays Strategic Review Executive Summary 9
Costs
Our aim is to generate £1.7bn of cost savings by 2015.
Existing cost initiatives have delivered net reductions in
operating expenses over the last couple of years, despite
a number of unplanned costs. We expect the ?nal effects
of these existing initiatives and new actions set out above
will take out signi?cant further costs over the plan period.
Those cost reductions must offset in?ation and investment
in growth areas. Performance against estimates will be
disclosed each year.
RWAs
There have been signi?cant management actions to reduce
RWAs to provide a buffer for the further regulatory headwinds
we expect and our investment in high return RWAs.
• Overall we estimate an increase as at 31 December
2012 of £81bn. This gives us a pro forma starting
point of £468bn
• Aim is for a gross reduction in pro forma Basel 3 RWAs
of £75bn by 2015
• The net reduction will be less, due to investment in
areas of high return, leading to our plan target of around
£440bn for total Group RWAs in 2015.
Funding and liquidity
We will seek to maintain a diversi?ed funding base. Our
expectation is that our wholesale unsecured funding volumes
will come down and the mix will change over the next three
years, in particular towards secured funding.
Finally, the announced changes to Basel 3 rules on liquidity
should allow us to reduce the volume of liquid assets that we
hold and include a broader range of high quality assets within
the pool. This should reduce its carry cost to £300m.
Capital funding
This remains a critical component of Barclays ?nancial
strength and, along with our funding and liquidity positions, a
source of competitive advantage which we want to preserve.
Our aim is for a target capital position, post Basel 3, through
the cycle Core Tier One ratio of 10.5%. This implies a 1.5%
management buffer above the minimum required by CRD IV
(European Union Capital Requirements Directive IV)
and the 2% G-SIFI buffer applied by the BCBS to Barclays.
The task of transition to an ef?cient CRD IV capital position
will be challenging. Loss absorbing capital instruments will
cover around 2% of Barclays RWAs in our target structure.
We believe that will provide an appropriate distribution of
risk between bond and equity holders. The intention is not to
meet all of that with the same write-down structure that
we used last year but to diversify and look at other designs.
Business strategy overview
Our strategy also sets out changes we will be making overall
in relation to costs, RWAs, capital funding and liquidity.
Section 2: Return Acceptable Numbers
Barclays Strategic Review Executive Summary 10
Culture
On culture, our challenge is to ensure that we weave our
Purpose and Values permanently and inextricably into
our day-to-day operations. We have established a new
leadership framework to ensure that the Purpose and Values
is embedded into hiring, objective setting, performance
assessment, reward and disciplinary procedures.
At the heart of this will be the balanced scorecard, which
will create a single, integrated framework for measuring
performance against our values in ?ve dimensions:
customers and clients, company, conduct, colleagues and
citizenship. As noted above, this scorecard will be in place
for all colleagues from the middle of 2014.
We will also develop an integrated report card for the bank
as a whole, re?ecting our values as well as our ?nancial
performance, which we will update annually –
a fundamental shift in our approach to reporting.
Sustain Forward Momentum
This plan sets out a clear path for the ?rst three years of our
longer journey to realise our goal of becoming the ‘Go-To’ bank.
That longer journey depends on continuing to adapt Barclays for
the future and ensuring that we do not return to a short-term
bias as we execute our plans.
Section 3: Sustain Forward Momentum
Beyond the immediate actions we have set out, we have also
set in place longer-term markers in four critical areas: Culture,
Rewards, Control and Cost.
Rewards
We will also be making major changes to our reward
structure.
We will continue to pay for performance – and we will
continue to pay competitively for the best talent. But in
future variable pay will depend on performance against
our values as well as other targets.
We also need to make a more fundamental shift on pay.
Barclays Group compensation to net income ratio fell from
42% in 2011 to 38% in 2012. Over time we want to move
to a sustainable compensation to net income ratio in the
mid-30s.
Barclays Strategic Review Executive Summary 11
Control
A strong culture is the ?rst line of defence against repeating
the mistakes of the past. Individuals and business units are
responsible for operating in a way that is both compliant
with regulatory requirements and consistent with our
Purpose and Values. Given the importance of what we do
to society, however, we must also have in place world-class
controls systems.
For the ?rst time all compliance staff will report to a
single global function head and will operate completely
independently of business and regional management
teams. This will be supported by signi?cant new investment,
training and process change.
Cost
Finally, we believe that cost will be the strategic battleground
for banking over the next decade. For the ?rst time we
intend to take a strategic approach to managing cost as
an integrated part of our plans to improve controls and the
service we offer to our customers and clients.
Technology has a critical role to play in cost reduction.
For example, we have already made signi?cant progress
in pioneering self-service technology. We believe that we
will be able to increase self-service rates from low double
digits today to at least half of all transactions over time.
This will reduce processing volumes as well as complaints
while freeing resource to improve the quality of customer
interaction in other areas.
In addition, the integration of new technologies, including
cloud-based platforms, will lead to signi?cant reductions in
headcount, physical IT infrastructure and data centres.
The granularity of the Strategic Review has also highlighted
signi?cant new opportunities to reduce duplication. This will
build on existing work to integrate our operations in Africa
as well as the further integration of our Corporate Banking
business and our Investment Bank.
Sustain Forward Momentum
Section 3: Sustain Forward Momentum
We are already delivering on many of these pillars
in different parts of Barclays. We will now scale that
experience across the Group to deliver savings of £1.7bn
through our plan period and further sustainable cost
reductions over the medium term.
Barclays Strategic Review Executive Summary 12
Non-?nancial commitments
• Provide greater disclosure and transparency around our
?nancial performance
• Embed our purpose and values across Barclays and
publish an annual scorecard assessing our performance.
Financial commitments
• Deliver a return on equity for the Group in excess of the
Group cost of equity in 2015, which we have assumed
will remain at the current 11.5% level
• In 2013, reduce headcount by at least 3,700 across the
Group, including 1,800 in the Corporate & Investment
Bank and 1,900 in Europe Retail and Business Banking.
This is expected to result in a restructuring charge of
close to £500m in Q1 2013
• Reduce the Group’s total cost base by £1.7bn to £16.8bn
in 2015, including interim cost estimates of £18.5bn and
£17.5bn in 2013 and 2014 respectively. This excludes
‘one-time’ costs to achieve the strategic plan of £1bn
in 2013, £1bn in 2014 and £0.7bn in 2015, delivering a
Group cost to income ratio in the mid-50s in 2015
• Target Risk Weighted Assets (RWAs) of £440bn by the end
of 2015, after mitigating the estimated impact of CRD IV
(£81bn) through legacy asset and other RWA reductions
(£75bn), enabling RWA investment in selected areas
• Report a transitional Common Equity Tier 1 ratio above
its target ratio of 10.5% in 2015
• From 2014, accelerate our progressive dividend policy,
targeting a payout ratio of 30% over time.
Our commitments
We are making a series of ?nancial and non-?nancial commitments
against which progress can be tracked across the plan period.
We will update against these commitments every six months.
Section 3: Sustain Forward Momentum
For more information on the Transform Programme and
Barclays Strategic Review visit barclays.com/transform
Barclays Strategic Review Executive Summary 13
Basel 3
The third of the Basel Accords. Developed in response to
the ?nancial crisis of 2008, setting new requirements on
composition of capital, counterparty credit risk, liquidity
and leverage ratios.
BCBS
A forum for regular co-operation on banking supervisory
matters which develops global supervisory standards for the
banking industry. Its members are of?cials from central banks
or prudential supervisors from 27 countries and territories.
Commission
A service charge issued by a bank in return for providing
investment advice and/or handling the purchase or sale
of a security. It can be a ?xed or percentage value of the
asset traded.
Core Tier One Capital
Called-up share capital and eligible reserves plus non-
controlling equity interests, less intangible assets and
deductions relating to the excess of expected loss over
regulatory impairment allowance and securitisation
positions as speci?ed by the FSA.
Cost of Equity (COE)
The rate of return targeted by the equity holders of a company.
CRD IV (Capital Requirements Directive IV)
The Fourth Capital Requirements Directive. Proposal for a
Directive and an accompanying Regulation that together
will (among other things) update EU capital adequacy and
liquidity requirements and implement Basel 3 in the
European Union.
Currency
A system of money issued by a government and circulated in
a particular economy.
Fixed Income
Fixed income is any type of investment that yields a regular
(?xed) payment and the eventual return of the principal
investment at maturity.
G-SIFI (Global Systemically Important Financial Institution)
A list of global banks that are required to hold extra capital
equal to between 1-2.5% of their assets because of their
importance to the global ?nancial system.
Mass af?uent
A term used to refer to the wealthiest end of the mass market.
Pro?t Before Tax (PBT)
Pro?t before tax (PBT) is a pro?tability measure that looks
at company’s pro?ts before the company has paid corporate
income tax.
Pro-forma
Projected or estimated ?nancial statement that attempts
to present a reasonably accurate ?gure of a ?rm’s ?nancial
situation should present trends or certain assumptions hold
true. Often used to formulate business plans or re?ect a
planned transaction.
Proprietary trading
When a ?nancial institution trades for direct gain using
its own capital and resources, rather than on behalf of
a customer.
Soft commodities
A traded commodity that is often categorised as an
agricultural product or livestock, such as coffee, cocoa,
pork and corn. This term generally refers to commodities
that are grown or reared, rather than mined.
Return on Equity (ROE)
Return on Equity measures the rate of return the
management of a company have been able to generate
on the equity funds given to them by the shareholders.
Risk Weighted Assets (RWA)
A measure of a bank’s assets adjusted for their associated
risks. Risk weightings are established in accordance with
the Basel Capital Accord as implemented by the FSA.
Run-rate
A metric used to show a company’s ?nancial performance if
you were to extrapolate the current results out over a certain
period of time.
Glossary
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