Barclays PLC (BCS) Q2 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Jes Staley – Group CEO

Divestiture from non-core to core is bearing fruit

“Our core businesses, Barclays UK and Barclays corporate and international are performing very well, producing a combined underlying return on tangible equity in the second quarter of 11.0%. This already impressive profitability of these businesses today, businesses which represent the future of Barclays, emphasizes again why our strategy is focusing on delivering to our shareholdings the earnings power of those core franchises free from the drag of non-core, and to do this as quickly as possible”

The divestiture continues in H2 2016 unaffected by the Brexit

“Second half will include even more progress in non-core rundown as we anticipate closing deals that we have already announced, including the sale of our cards business in Iberia; the sale of our wealth business in Asia; and the sale of indices business; and the sale of our Italian retail network…To be clear, our assessment is that the Brexit vote in the UK will have no effect on our ability to run down non-core at an accelerated pace; and we therefore, remain confident in reiterating our goal of closing non-core in 2017.”

Diversified business and a prudent track record helps them deal with the Brexit effects

“I believe Barclays is particularly well placed to weather whatever the consequences of a Brexit decision are because of two inherent strengths in our business and strategic approach; specifically, the diversification, which we’ve talked a lot about, and, secondly, a historically prudent approach to risk. For me, as I’ve said before, the best place to be in a time of economic uncertainty is with a large diversified financial institution, and that is precisely what Barclays is today.”

Customers are cautious following the Brexit

“While resolutely open for business, we are detecting some understandable caution in consumer and business confidence, following the referendum and find that some decisions are potentially being put on pause or pushed out while people see how events play out. However, in my view it is too early to say whether this will be an enduring condition.”

They are hoping that passporting continues

“We believe the development of a single market for financial services in Europe, with the full participation of UK banks, remains the best option for the UK economy, and the best option for the European Union economy. Therefore, any political settlement should ideally retain access to the European capital markets by UK regulated banks; as well as reciprocal continued access to the hugely important British capital markets for European corporates, and European banks.”

Tushar Morzaria – Group Finance Director

The digital migration continues

“Customer behaviors are changing, and we are leading the way in adapting to these changes. We now interact with customers more than 30,000 times per week via either encrypted video calls, we were the first Bank in the UK to offer this service; or via web chat, both online and digitally through our mobile banking app. It was another successful quarter for our digital branch as digital unsecured lending continued to expand with a 38% annualized growth, year-over-year, as we originated 1.1 billion for these loans in H1.”

An excellent quarter for consumer cards and payments; future prospects good.

“Consumer cards and payments had another outstanding quarter. On an underlying basis, profits increased 41%, with strong positive jaws, as income increased by 15%…the growth prospects for the business across cards and payments are encouraging.”