Our strategy and business model

Barclays moves, lends, invests and protects money for customers and clients worldwide.

Implementing our strategy

To achieve the primary objective of maximising Total Shareholder Returns, we focus on four key execution priorities.

These execution priorities drive Barclays performance and continue to improve our competitive position. We have made solid progress, with a resilient financial performance despite the difficult trading conditions in 2011, and the bank is well positioned to generate the financial returns that we are targeting over time.

Business model

Customers

Our purpose:

To help individuals, institutions and economies progress and grow

  • Store and transfer money / payments

  • Manage
    and invest money


  • Offer financial advice and other services
  • Provide access to loans and liquidity

  • Manage
    risks and different maturities

  • Make markets
    and trade


Our vision:

One of the premier globally integrated universal banks providing superior benefits to each of our stakeholders (customers, shareholders, colleagues, and communities)

  • Integrated universal banking model
  • Diversification by business, geography, client and funding
  • Relentless customer and client focus
Our execution:

Execute our strategy focusing on four priorities (capital, funding and liquidity, returns, income growth, and citizenship)

  • Operational Excellence
    Deliver cost effective, high quality solutions for customers, particularly those with global and complex needs

  • Risk Management
    Increase resilience by matching, balancing, and diversifying income and funding and in managing our risks

  • Financial Discipline
    Allocate capital efficiently across our businesses to maximise returns


Create value for shareholders and deliver a top quartile Total Shareholder Return

Shareholders

The ultimate objective of our strategy is to create and deliver long-term sustainable shareholder value. We fulfil our purpose by delivering the fundamental functions of a bank to our customers. We do this through an integrated universal banking model which we believe is the best model through which to build strong and stable relationships with our customers, employees and suppliers to deliver operational excellence; manage our risks appropriately; and allocate scarce resources, including capital, efficiently.

We take a long-term view on our strategy and have not changed it for many years. Changes in the environment continue to influence Barclays, especially how we choose to execute our strategy. We are currently focused on four execution priorities: Capital, Funding and Liquidity; Returns; Income Growth; and Citizenship.

As banking markets around the world continue to evolve, with regulatory change, and with the distinct need for rebuilding trust in the banking industry post crisis, our strategy and our execution priorities allow us to continue to serve the wide ranging needs of our customers in a safe and stable manner that is aligned with our responsibilities as corporate citizens and is able to deliver attractive returns for shareholders.

Strategy

Our focus is on execution and in particular delivering our promises in four key areas.

At the beginning of 2011 we set out our execution priorities based on a three year plan to improve both the bank’s performance and its position. We have made solid progress in 2011 despite the market uncertainty.

1. Capital, Funding and Liquidity

We remain mindful of the changing regulatory environment and our rock solid capital, funding and liquidity positions give us confidence that we will meet future requirements. Our robust Core Tier 1 ratio of 11.0% is supported by our ability to generate capital organically and we do not expect to seek additional capital from our shareholders. We have also maintained resilient funding and liquidity profiles despite recent market stresses caused by the Eurozone crisis. This has allowed us to access diverse funding sources, minimising the cost of funding and providing protection against unexpected fluctuations.

2. Returns

Our focus on delivering returns is a key driver in the way we manage the business. We seek to improve return on equity to ultimately increase shareholder returns, reflecting the strong link between the share price and return on equity. In doing so we also look to maintain strong capital, liquidity and leverage ratios, to enable us to deliver returns on a sustainable basis. Although the worse than predicted macroeconomic conditions as well as new regulatory constraints mean that we may not be able to deliver 13% returns by 2013, we will continue to focus on delivering a steady improvement in returns and achieve 13% over time.

3. Income Growth

A component of delivering improved returns is generating income growth. Despite the macro environment depressing income growth, we generated momentum and improved the competitive positions of all our major businesses in 2011. We grew net operating income in all businesses, except Barclays Capital which was most affected by difficult trading conditions, as we remain focused on improving the quality of assets to ensure that we do not grow at the expense of future credit losses.

4. Citizenship

We believe that being a valued, respected and trusted citizen is vital in creating long term value for all our stakeholders. We produce a Citizenship Report each year in order to benchmark our progress in the key areas of focus: contributing to growth in the real economy; the way we do business; and supporting our communities.

Total Shareholder Return (TSR)

Our primary objective is to maximise returns for shareholders and in doing so, we aim to deliver top quartile TSR.

TSR consists of two components: the movement in market value of the shares and the income received on those shares in the form of dividends. Over the past five years there has been a clear relationship between TSR and return on equity (RoE) with the market value of shares improving with higher reported RoE. Increased dividend payments positively affect both TSR and RoE. Therefore, improving the bank’s RoE is a key driver in the way we manage the business to maximise TSR.

While we seek to have a progressive dividend policy, we must balance this with requirements for capital in order to ensure sustainable and long term TSR creation.

As RoE declined throughout the crisis to a low point in 2008, so too did TSR. Barclays maintained positive RoE and outperformed peers during the crisis as we remained profitable.

In recent years TSR and RoE have become more closely aligned as share prices have reflected market uncertainty, low sector RoEs, and low dividend payout ratios. This has strengthened the link between market valuation and returns, and therefore TSR and RoE.


For more detailed information, please see Financial review

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