Barclays Regulatory News (BARC)

Barclays PLC

2023 Results Announcement

31 December 2023

BARCLAYS PLC, 1 CHURCHILL PLACE, LONDON, E14 5HP, UNITED KINGDOM. TELEPHONE: +44 (0) 20 7116 1000. COMPANY NO. 48839.

Notes

This document contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014 (as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended).

The terms Barclays and Group refer to Barclays PLC together with its subsidiaries. Unless otherwise stated, the income statement analysis compares the twelve months ended 31 December 2023 to the corresponding twelve months of 2022 and balance sheet analysis as at 31 December 2023 with comparatives relating to 31 December 2022. The abbreviations '£m' and '£bn' represent millions and thousands of millions of Pounds Sterling respectively; the abbreviations '$m' and '$bn' represent millions and thousands of millions of US Dollars respectively; and the abbreviations '?m' and '?bn' represent millions and thousands of millions of Euros respectively.

There are a number of key judgement areas, for example impairment calculations, which are based on models and which are subject to ongoing adjustment and modifications. Reported numbers reflect best estimates and judgements at the given point in time.

Relevant terms that are used in this document but are not defined under applicable regulatory guidance or International Financial Reporting Standards (IFRS) are explained in the results glossary, which can be accessed at home.barclays/investor-relations

The information in this announcement, which was approved by the Board of Directors on 19 February 2024, does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2023, which contain an unmodified audit report under Section 495 of the Companies Act 2006 (which does not make any statements under Section 498 of the Companies Act 2006) will be delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

These results will be furnished on Form 6-K to the US Securities and Exchange Commission (SEC) as soon as practicable following its publication. Once furnished to the SEC, a copy of the Form 6-K will be available from the SEC's website at www.sec.gov

Barclays is a frequent issuer in the debt capital markets and regularly meets with investors via formal roadshows and other ad hoc meetings. Consistent with its usual practice, Barclays expects that from time to time over the coming quarter it will meet with investors globally to discuss these results and other matters relating to the Group.

Non-IFRS performance measures

Barclays' management believes that the non-IFRS performance measures included in this document provide valuable information to the readers of the financial statements as they enable the reader to identify a more consistent basis for comparing the businesses' performance between financial periods and provide more detail concerning the elements of performance which the managers of these businesses are most directly able to influence or are relevant for an assessment of the Group. They also reflect an important aspect of the way in which operating targets are defined and performance is monitored by Barclays' management. However, any non-IFRS performance measures in this document are not a substitute for IFRS measures and readers should consider the IFRS measures as well. Refer to the appendix on pages 69 to 76 for definitions and calculations of non-IFRS performance measures included throughout this document, and reconciliations to the most directly comparable IFRS measures.

Forward-looking statements

This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to the Group. Barclays cautions readers that no forward-looking statement is a guarantee of future performance and that actual results or other financial condition or performance measures could differ materially from those contained in the forward-looking statements. Forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as 'may', 'will', 'seek', 'continue', 'aim', 'anticipate', 'target', 'projected', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', 'achieve' or other words of similar meaning. Forward-looking statements can be made in writing but also may be made verbally by directors, officers and employees of the Group (including during management presentations) in connection with this document. Examples of forward-looking statements include, among others, statements or guidance regarding or relating to the Group's future financial position, business strategy, income levels, costs, assets and liabilities, impairment charges, provisions, capital, leverage and other regulatory ratios, capital distributions (including policy on dividends and share buybacks), return on tangible equity, projected levels of growth in banking and financial markets, industry trends, any commitments and targets (including environmental, social and governance (ESG) commitments and targets), plans and objectives for future operations and other statements that are not historical or current facts. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements speak only as at the date on which they are made. Forward-looking statements may be affected by a number of factors, including, without limitation: changes in legislation, regulations, governmental and regulatory policies, expectations and actions, voluntary codes of practices and the interpretation thereof, changes in IFRS and other accounting standards, including practices with regard to the interpretation and application thereof and emerging and developing ESG reporting standards; the outcome of current and future legal proceedings and regulatory investigations; the Group's ability along with governments and other stakeholders to measure, manage and mitigate the impacts of climate change effectively; environmental, social and geopolitical risks and incidents, pandemics and similar events beyond the Group's control; the impact of competition in the banking and financial services industry; capital, liquidity, leverage and other regulatory rules and requirements applicable to past, current and future periods; UK, US, Eurozone and global macroeconomic and business conditions, including inflation; volatility in credit and capital markets; market related risks such as changes in interest rates and foreign exchange rates; reforms to benchmark interest rates and indices; higher or lower asset valuations; changes in credit ratings of any entity within the Group or any securities issued by it; changes in counterparty risk; changes in consumer behaviour; the direct and indirect consequences of the conflicts in Ukraine and the Middle East on European and global macroeconomic conditions, political stability and financial markets; political elections; developments in the UK's relationship with the European Union (EU); the risk of cyberattacks, information or security breaches, technology failures or other operational disruptions and any subsequent impacts on the Group's reputation, business or operations; the Group's ability to access funding; and the success of acquisitions, disposals and other strategic transactions. A number of these factors are beyond the Group's control. As a result, the Group's actual financial position, results, financial and non-financial metrics or performance measures or its ability to meet commitments and targets may differ materially from the statements or guidance set forth in the Group's forward-looking statements. In setting its targets and outlook for the period 2024-2026, Barclays has made certain assumptions about the macro-economic environment, including, without limitation, inflation, interest and unemployment rates, the different markets and competitive conditions in which Barclays operates, and its ability to grow certain businesses and achieve costs savings and other structural actions. Additional risks and factors which may impact the Group's future financial condition and performance are identified in Barclays PLC's filings with the SEC (including, without limitation, Barclays PLC's Annual Report on Form 20-F for the financial year ended 31 December 2023), which are available on the SEC's website at www.sec.gov

Subject to Barclays PLC's obligations under the applicable laws and regulations of any relevant jurisdiction (including, without limitation, the UK and the US) in relation to disclosure and ongoing information, we undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Performance Highlights

In 2023 Barclays delivered a return on tangible equity (RoTE) of 10.6% excluding Q423 structural cost actions1, with total capital distributions of £3.0bn2, equivalent to c.19.4p per share

?Group FY23 RoTE of 10.6% and earnings per share (EPS) of 32.4p, excluding £0.9bn of Q423 structural cost actions

?Total capital distributions of £3.0bn announced in relation to 2023, up c.37% on 2022, reflecting a total dividend of 8.0p and total share buybacks of £1.75bn for 2023. This includes our intention to initiate a further share buyback of up to £1.0bn

?Group net interest income (NII) of £12.7bn, up 20% year-on-year, with Barclays UK NII of £6.4bn, up 9% year-on-year, delivering a Barclays UK net interest margin (NIM) of 3.13%

?Group cost: income ratio of 63% excluding Q423 structural cost actions

?Group FY23 loan loss rate (LLR) of 46bps

?CET1 ratio of 13.8% and tangible net asset value (TNAV) per share of 331p

2023 Key financial metrics:

2023 Performance highlights:

?Group statutory RoTE was 9.0% (2022: 10.4%) with profit before tax of £6.6bn (2022: £7.0bn), including £0.9bn of structural cost actions in Q423, taking total structural cost actions for 2023 to £1.0bn

-Group income was £25.4bn, up 2% year-on-year

-Group total operating expenses were £16.9bn, an increase of 1% year-on-year

?Excluding the impacts of Q423 structural cost actions and the Over-issuance of Securities in the prior year3:

-Group RoTE of 10.6% (2022: 11.6%) with profit before tax of £7.5bn (2022: £7.7bn)

-Group income of £25.4bn, up 3% year-on-year:

-Barclays UK income increased 5% to £7.6bn, driven by NII growth from higher rates, including higher structural hedge income

-Corporate and Investment Bank (CIB) income decreased 4% to £12.6bn, driven by lower client activity in both Global Markets and Investment Banking, partially offset by a strong performance in Corporate driven by Transaction Banking

-Consumer Cards and Payments (CC&P) income increased 18% to £5.3bn reflecting higher balances in US cards and favourability from higher rates and client balance growth in Private Bank

-Group total operating expenses were £16.0bn, up 2% year-on-year. Cost: income ratio of 63% as the Group delivered positive cost: income jaws of 1%

2023 Performance highlights (continued):

?Credit impairment charges were £1.9bn (2022: £1.2bn) with an LLR of 46bps (2022: 30bps):

-Barclays UK credit impairment charges were £0.3bn (2022: £0.3bn) with an LLR of 14bps (2022: 13bps), consistent with low delinquencies in UK cards and a high quality mortgage lending portfolio

-CC&P credit impairment charges increased to £1.5bn (2022: £0.8bn) with an LLR of 354bps (2022: 175bps), driven by higher delinquencies in US cards, which was anticipated and led to higher coverage ratios

?CET1 ratio of 13.8% (2022: 13.9%), with risk weighted assets (RWAs) of £342.7bn (December 2022: £336.5bn) and TNAV per share of 331p (December 2022: 295p)

Q423 Performance highlights:

?Excluding the impacts of Q423 structural cost actions1:

-Group RoTE was 5.1% (Q422: 8.9%) with profit before tax of £1.0bn (Q422: £1.3bn)

-Group income was £5.6bn down 3% year-on-year:

-Barclays UK income was 9% lower, with NII broadly stable and net fees, commissions and other income down 41% reflecting one-off items and the transfer of Wealth Management & Investments (WM&I) to CC&P during Q223

-CC&P was 6% higher, driven by balance growth in US cards and the transfer of WM&I, partially offset by lower Payments income

-CIB income was 7% lower, reflecting decline in Global Markets against a record Q4222

-Group total operating expenses were £4.0bn, broadly stable year-on-year

?Credit impairment charges were £0.6bn (Q422: £0.5bn), with an LLR of 54bps (Q422: 49bps)

Impact of £0.9bn structural cost actions in Q423

?To help drive future returns, Barclays has taken £0.9bn of structural cost actions in Q423 which are expected to result in gross cost savings of c.£0.5bn in 2024, with an expected payback period3 of less than 2 years

?Structural cost actions include initiatives across people, property and infrastructure, with the allocation by business and type as follows:

-£0.2bn in Barclays UK, £0.2bn in CIB, £0.1bn in CC&P and £0.5bn in Head Office

-£0.3bn related to People, £0.2bn related to Property and £0.4bn related to Infrastructure

New Operating Divisions

?Subsequent to FY23 reporting, Barclays will be managed and reported via five focused operating divisions:

-Barclays UK

-Barclays UK Corporate Bank

-Barclays Private Bank and Wealth Management

-Barclays Investment Bank

-Barclays US Consumer Bank

?Barclays segmental reporting will reflect these five operating divisions, in addition to Head Office, from Q124. Further detail is provided in the 20 February 2024 Investor Update

?This resegmentation will provide an enhanced and more granular disclosure of the performance of each of these operating divisions, alongside more accountability from an operational and management standpoint

?Barclays 2021, 2022 and 2023 segmental performance, including Head Office, has been re-presented to reflect these new operating divisions. A resegmentation document may be accessed via the Barclays website at: home.barclays/investor-relations

Revised Group Financial Targets and Outlook:

?Returns: targeting RoTE of greater than 10% in 2024 and c.10.5% excluding inorganic activity, with a greater than 12% target in 2026

?Capital returns: plan to return at least £10bn of capital to shareholders between 2024 and 2026, through dividends and share buybacks, with a continued preference for buybacks. Plan to keep total dividend stable at 2023 level in absolute terms, with progressive dividend per share growth driven through share count reduction as a result of increased share buybacks. Dividends will continue to be paid semi-annually. This multiyear plan is subject to supervisory and Board approval, anticipated financial performance and our published CET1 ratio target range of 13-14%

?Income: targeting Barclays Group NII excluding Barclays Investment Bank and Head Office of c.£10.7bn, of which Barclays UK NII of c.£6.1bn, in 20241. Targeting Group total income of c.£30bn in 2026

?Costs: targeting Group cost: income ratio of c.63% in 2024. Targeting total Group operating expenses of c.£17.0bn and a Group cost: income ratio of high 50s in percentage terms in 2026. This includes c.£1bn of gross efficiency savings in 2024 and total gross efficiency savings of c.£2bn by 2026

?Impairment: continue to expect an LLR of 50-60bps through the cycle

?Capital: expect to continue to operate within the CET1 ratio target range of 13-14%

-Targeting Barclays Investment Bank RWAs of c.50% of Group RWAs in 2026

-Impact of regulatory change on RWAs in line with prior guidance, expected to be at lower end of 5-10% of Group RWAs. This includes c.£16bn RWAs expected in H224 due to Barclays US Consumer Bank moving to Internal Ratings-Based (IRB) models

Reconciliation of financial results excluding adjusting items1

Reconciliation of financial results excluding adjusting items1

Group Finance Director's Review

2023 Group performance

?Barclays delivered a profit before tax of £6,557m (2022: £7,012m), RoTE of 9.0% (2022: 10.4%) and EPS of 27.7p (2022: 30.8p)

?Group income increased 2% to £25,378m primarily driven by the net benefit from the higher interest rate environment, including continued structural hedge income, and higher balances in US cards, partially offset by the non-repeat of the prior year income from hedging arrangements related to the Over-issuance of Securities and lower income in Global Markets and Investment Banking

?Group total operating expenses increased to £16,931m (2022: £16,730m)

-Group operating expenses excluding litigation and conduct charges increased to £16,894m (2022: £15,133m) driven by:

-£927m of structural cost actions in Q423 supporting the Group's structural transformation and updated strategic priorities, bringing total structural cost actions for FY23 to £1,046m (2022: £151m)

-the impact of business growth and the Kensington Mortgage Company (KMC) acquisition in Barclays UK, as well as investments in resilience and controls

-the impact of inflation on the Group was more than offset by efficiency savings

-Litigation and conduct charges decreased to £37m (2022: £1,597m). Prior year charges included £966m of costs related to the Over-issuance of Securities, £282m of customer remediation costs relating to legacy loan portfolios in CC&P and £165m related to the Devices Settlements1

?Credit impairment charges were £1,881m (2022: £1,220m), driven by higher delinquencies in US cards, which was anticipated and led to higher coverage ratios. Total coverage ratio remains strong at 1.4% (December 2022: 1.4%)

?The effective tax rate (ETR) was 18.8% (2022: 14.8%). The 2023 ETR includes tax relief on payments made under Additional Tier 1 (AT1) instruments and on holdings of inflation-linked government bonds

?Attributable profit was £4,274m (2022: £5,023m)

?Total assets decreased to £1,477.5bn (December 2022: £1,513.7bn) reflecting a decrease in derivatives driven by lower market volatility and a decrease in the forward interest rates, and a reduction in the liquidity pool primarily driven by lower customer deposits in Barclays UK reflecting broader market trends. This was partially offset by an increase in trading securities and client balances as we facilitate client demand in Global Markets

?TNAV per share increased to 331p (December 2022: 295p) including: EPS of 27.7p, positive cash flow hedge reserve movements of 22p, and 8p from the reduction in share count following share buybacks of £1.25bn completed in 2023. This was partially offset by an 8p reduction from dividends paid during 2023 and net negative other reserve movements

Group capital and leverage

?The CET1 ratio decreased to 13.8% (December 2022: 13.9%) as RWAs increased by £6.2bn to £342.7bn partially offset by an increase in CET1 capital of £0.4bn to £47.3bn:

-c.125bps increase from 2023 attributable profit, including the c.25bps negative impact of structural cost actions, of which c.10bps are offset in other capital movements

-c.70bps decrease driven by returns to shareholders including the 8p per share total dividend and £1.25bn of share buybacks announced with FY22 and H123 results

-c.10bps decrease from other capital movements, including the impact of regulatory change on 1 January 2023 relating to IFRS 9 transitional relief, the impact of the KMC acquisition, and movements in other regulatory capital deductions

-c.50bps decrease as a result of a £13.2bn increase in RWAs excluding the impact of foreign exchange movements, primarily driven by higher CIB and CC&P RWAs

-An £8.2bn decrease in RWAs as a result of foreign exchange movements was offset by a £1.1bn decrease in CET1 capital due to a decrease in the currency translation reserve

?The UK leverage ratio decreased to 5.2% (December 2022: 5.3%) primarily due to a £38.3bn increase in leverage exposure to £1,168.3bn, largely driven by an increase in trading portfolio assets within Global Markets

Group funding and liquidity

?The liquidity metrics remain well above regulatory requirements, underpinned by well-diversified sources of funding, a stable global deposit franchise and a highly liquid balance sheet

?The liquidity pool was £298.1bn (December 2022: £318.0bn). The decrease in the liquidity pool was driven by a reduction in wholesale funding, a slight reduction in overall deposits, with a decrease in Barclays UK deposits being largely offset by growth in Corporate deposits, and changes in business funding consumption

?The average1 Liquidity Coverage Ratio (LCR) increased to 161% (December 2022: 156%), equivalent to a surplus of £117.7bn (December 2022: £114.4bn)

?Total deposits remained largely stable at £538.8bn (December 2022: £545.8bn)

?The average2 Net Stable Funding Ratio (NSFR) was 138% (December 2022: 137%), which represents a £167.1bn (December 2022: £155.6bn) surplus above the 100% regulatory requirement

?Wholesale funding outstanding, excluding repurchase agreements, was £176.8bn (December 2022: £184.0bn)

?The Group issued £14.1bn equivalent of minimum requirement for own funds and eligible liabilities (MREL) instruments from Barclays PLC (the Parent company) during 2023. The Group has a strong MREL position with a ratio of 33.6%, which is in excess of the regulatory requirement of 30.1% plus a confidential, institution specific, Prudential Regulation Authority (PRA) buffer

Other matters

?KMC acquisition: on 1 March 2023, Barclays completed the acquisition of UK specialist mortgage lender KMC, including a portfolio of mortgages totalling £2.2bn with an RWA impact of £0.8bn

?Combination of the Private Bank and Barclays UK Wealth business: on 1 May 2023, WM&I was transferred from Barclays UK to CC&P, creating a combined Private Bank and Wealth Management business. The combination seeks to improve customer and client experience and create business synergies:

-The business transferred includes c.£28bn of invested assets, generating annualised income of c.£0.2bn

?Purchase of Tesco Bank: Barclays announced on 9 February 2024 that Barclays Bank UK PLC has entered into an agreement with Tesco Personal Finance plc (operating using the trading name "Tesco Bank") to acquire its retail banking business, which includes credit cards, unsecured personal loans, deposits and the operating infrastructure. Additionally, upon completion, Barclays Bank UK PLC will enter into a long-term, exclusive strategic partnership with Tesco Stores Limited for an initial period of 10 years to market and distribute credit cards, unsecured personal loans and deposits using the Tesco brand, as well as explore other opportunities to offer financial services to Tesco customers. The transaction involves the acquisition of approximately £8.3bn of unsecured lending balances, including approximately £4.2bn of gross credit card receivables and £4.1bn of gross unsecured personal loans, together with approximately £6.7bn in customer deposits. The acquisition is expected to reduce Barclays' CET1 ratio by c.30bps on completion, which is expected to occur in H224, subject to court sanction and regulatory approvals

?Sale of German consumer finance business: Barclays is currently engaged in a process to sell its German consumer finance business (comprising credit cards, unsecured personal loans and deposits), currently included within CC&P, as part of our ambition to simplify Barclays and support our focus on growing our key businesses. Any sale is expected to complete in 2024 and would be expected to be accretive to Barclays' CET1 ratio

?Barclays Payments business: going forward, Barclays will separate its issuing and merchant acquiring Payments businesses, moving the issuing business to the UK Corporate Bank and the merchant acquiring business to Head Office. Barclays has a UK market leading position in merchant acquiring, and continued investment into our propositions, particularly for Small and Medium Sized Enterprise (SME) clients, and leveraging greater scale are important. Barclays is considering various options to achieve this and has commenced a review of strategic partnership opportunities for the business. In connection with this, related goodwill and intangible assets of c.£0.3bn have been written down as structural cost actions, predominantly within Head Office

?Disposal of Italian retail mortgages: Barclays is in discussions with respect to the disposal of its Italian retail mortgage book currently in Head Office. Should the disposal occur, it would be expected to generate a loss on sale but to be broadly neutral to Barclays' CET1 ratio as a result of a reduction in RWAs

?US credit card model migration to IRB: Barclays expects to migrate US credit card models from standardised to IRB in H224. This is a result of the PRA objective requiring banks using IRB modelling to apply it to at least 85% of their credit risk RWAs. This is expected to result in an increase in RWAs of c.£16bn in H224. Outside of US cards, Barclays is not expecting any further material impact from model migrations of current portfolios and has a number of planned mitigating actions

?FCA motor finance review: in January 2024, the UK Financial Conduct Authority (FCA) announced that it was appointing a skilled person to undertake a review of the historical use of discretionary commission arrangements and sales in the motor finance market across several firms. The FCA plans to set out next steps on this matter by the end of September 2024

Anna Cross, Group Finance Director

Results by Business

Barclays UK delivered a RoTE of 19.2% (20.4% excluding Q423 structural cost actions) supported by the higher interest rate environment and the continued investment in our transformation into a next-generation, digitised consumer bank.

2023 compared to 2022

Income statement

?Profit before tax increased 8% to £2,868m with a RoTE of 19.2% (2022: 18.7%)

?Total income increased 5% to £7,587m. NII increased 9% to £6,431m with a NIM of 3.13% (2022: 2.86%), as higher interest rates and associated structural hedge benefit outweighed mortgage margin pressure and adverse deposit dynamics reflecting wider market trends. Net fee, commission and other income decreased 15% to £1,156m including the impact of the transfer of WM&I to CC&P

-Personal Banking income increased 4% to £4,729m, driven by higher interest rates, partially offset by mortgage margin compression and movements in deposit volumes and mix resulting from cost of living pressures and customers searching for yield

-Barclaycard Consumer UK income decreased 12% to £964m as higher customer spend volumes were more than offset by lower interest earning lending balances following repayments and ongoing prudent risk management

-Business Banking income increased 16% to £1,894m driven by higher interest rates, partially offset by lower government scheme lending as repayments continue and lower deposit volumes

?Total operating expenses increased 2% to £4,415m, including £168m impact from Q423 structural cost actions. Excluding the impact of Q423 structural cost actions, operating expenses decreased 2%, driven by the transfer of WM&I to CC&P partially offset by the impact of inflation and the acquisition of KMC. Ongoing efficiency savings continue to be reinvested, including in our transformation programme to support sustainable improvement to the cost: income ratio over the longer term

?Credit impairment charges increased to £304m (2022: £286m), consistent with low delinquencies in UK cards and a high quality mortgage lending portfolio. UK cards 30 and 90 day arrears remained low at 0.9% (Q422: 0.9%) and 0.2% (Q422: 0.2%) respectively. The UK cards total coverage ratio was 6.8% (December 2022: 7.6%)

Balance sheet

?Loans and advances to customers at amortised cost decreased by 1% to £202.8bn (December 2022: £205.1bn), primarily reflecting continued repayment of government scheme lending in Business Banking, subdued mortgage lending amid lower market demand, partially offset by the acquisition of KMC

?Customer deposits at amortised cost decreased 7% to £241.1bn (December 2022: £258.0bn). Primarily driven by reduced current account balances in Personal and Business Banking, reflecting broader market trends. The loan: deposit ratio increased to 92% (December 2022: 87%)

?RWAs increased to £73.5bn (December 2022: £73.1bn), primarily due to the acquisition of KMC, broadly offset by reduction across lending portfolios