It’s a big day for Barclays.
The bank unveiled a loss for 2015, a new structure and higher provisions for payment protection insurance redress than analysts’ expected.
Investors haven’t reacted well. The stock fell more than 10% in London.
It was also CEO Jes Staley’s first annual results presentation since coming aboard at the end of last year.
Here’s the note he sent Barclays staff. Hold onto your hats, it’s a long one:
2015 Full Year Results and Strategy Update from Jes Staley
In January, I said that 2016 would be a year of strong accelerated delivery of our strategy. In the last few months alone, we have made real progress in simplifying the Group and taking some important steps towards becoming the high performing business that Barclays can and should be. I know how hard you have all worked and I am immensely grateful for your commitment and dedication to serving our customers and clients over a continuing period of change. It is energising and inspiring to me.
Completing our restructuring; improving our performance
Today, we have announced a Strategy Update, which lays out the steps that we need to take to complete our restructuring and improve our performance. I have outlined some definitive choices about the future shape of Barclays, in order to simplify the business and prepare early for UK ring-fencing. I am confident that these decisions will allow us to become a Group which can generate the returns our shareholders, who have been so patient, deserve.
Our 2015 results show that our core businesses today are strong, generating attractive earnings, with excellent prospects for growth. We need to address the impact of Barclays Non-Core on our profitability however, and recognise that the billions of pounds that we have paid out in regulatory fines, have reduced our earnings to almost zero in the period 2012-2015. We have not been able to retain a single pound of our earnings in that time.
We will therefore quickly run down our Non-Core operations, and resolve as fast as possible our remaining legacy conduct issues, while at the same time continuing to promote a strong values-driven culture across the bank. We must work with our regulators to put our past failings behind us, and have the controls and culture in place to avoid creating any new matters.
The Board has decided to reduce our dividend in 2016-17 to give us the flexibility to accelerate Non-Core rundown. We believe that the shareholder value derived from selling or exiting Non-Core operations quickly will greatly exceed the downside of cutting our dividend for a short period of time. We have had tremendous success in unlocking value from Barclays Non-Core, and I would like to wholeheartedly thank the team there for their tireless efforts in achieving this since 2014.
As part of our simplification of the Group, we have decided, subject to required shareholder and regulatory approvals, to reduce our interest in Barclays Africa to a non-controlling, non-consolidated position, over the next two to three years. It has been very difficult to make this decision, given it has been part of the Barclays family for over 100 years, and we have a great management team and dedicated colleagues there who we all value and respect. As a British bank though, we face very specific challenges as a shareholder in Barclays Africa, and regrettably, we have concluded that it is in the best interest of the Group to reduce our position. We will of course do this thoughtfully and with our people, our customers and our clients in mind at all times.
We will also sell further businesses that are neither sufficiently profitable nor strategic to Barclays including our Southern European cards business, our Egyptian and Zimbabwean businesses and our Asian wealth business. I know this is very hard news to hear for our colleagues affected by these changes to come to terms with, and I want to reiterate that we will support them through this period of change, with the utmost respect and care. Our actions at times like this in particular, speak volumes about the culture and values of Barclays and we must live up to them every day.
The Barclays of the future
At the heart of Barclays’ strategy is to build on our strength as a Transatlantic Consumer, Corporate and Investment Bank, anchored in the two financial centres of the world, London and New York. From today, Barclays will operate as two clearly defined businesses, Barclays UK and Barclays Corporate & International. These core divisions are equally important to the Group, complementing each other, and represent the future of Barclays. Barclaycard will continue to operate as an integrated international consumer payments business, straddling these two new entities.
Barclays UK will house our leading UK retail bank, UK consumer credit card business, UK wealth business and play a key role as a committed provider of lending and financial services for small businesses (with turnover of less than £6.5 million) across the UK. This business has formidable strength and it will ultimately become our UK ring-fenced bank – resilient, and compliant with all regulatory requirements.
Barclays Corporate & International will comprise our bulge-bracket Investment Bank, our market leading Corporate banking business, our international wealth business and our Barclaycard operations in Europe and the US. Barclays Corporate & International has scale in wholesale banking and consumer lending, strength in our key geographies, and good balance in its revenue streams, delivering further resilience. We are confident that Barclays Corporate & International, as our future non ring-fenced bank, will continue to be well capitalised with a balanced funding profile, supporting solid investment grade credit ratings.
Both Barclays UK and Barclays Corporate & International are strong financially, and currently generate double-digit adjusted returns on tangible equity (ROTE). In future, we will report our financials based on these two business divisions. Their creation as sibling businesses, simplifies the Group and shareholders and debt investors in Barclays will benefit from the diversified revenue streams they produce.
I appreciate that moving to this new structure creates yet more change for everyone and you will all have questions about what this means for you. Our alignment to the new structure will not happen overnight and I want to reassure you that we will carefully update you as the changes unfold. For the time being, I ask that all of you continue to focus on the needs of our customers and clients and remain committed to the priorities of the business or function that you support.
Our culture and our contribution to society
Our goals are achievable, but they can only be realised alongside the ongoing and critically important transformation in our culture. We have made so much progress in the last few years, and we will never retreat from being a values-driven organisation which conducts itself with integrity at all times.
I joined banking back in 1979, because I was excited to be a part of a respected profession. It was a profession because it was moored to a commitment for integrity. A company that retains the loyalty of its employees solely because of compensation is a company that gambles with its institutional culture. Barclays cannot succeed or prosper unless the societies and communities in which we live and work also succeed and prosper. I want Barclays to be a bank where our employees choose to work because they believe in the institution, its values, its passion for diversity and inclusion, and its intrinsically valuable role in society. These are the mindsets I want to reinvigorate in everyone here, from our branch colleagues to our M&A bankers. Banking, at this great institution, will again be a profession and it will be up to all of us here to promote that goal internally.
In summary then, the future is bright and we should feel optimistic. Whilst today’s news brings more change for everyone, and will require us all to be resilient and completely focused on the task in hand, these strategic actions will accelerate the creation of the Barclays of the future.
Thank you for your ongoing support and hard work.