24th Apr 2008 07:01
Barclays PLC24 April 2008 BARCLAYS PLC 24 April 2008 Annual General Meeting Barclays PLC will hold its Annual General Meeting of shareholders at 11.00 amthis morning. At this meeting John Varley, Group Chief Executive, will make thefollowing remarks: "Good morning ladies and gentlemen. Thank you for taking the trouble to be withus today. I'm going to talk for about 15 minutes this morning. But in the middle of myremarks, I want to break off to show you a video made by Bob Diamond, FritsSeegers and myself, which talks about Barclays, our ambitions for the Group and,in particular, the business strategy that we have been pursuing. We meet in unusual times. You'll have noticed that the financial servicesindustry has been making the front pages of the newspapers as well as thebusiness pages. There's a lot of concern about the outlook for economic growthin the world. Here in the UK we've seen a bank nationalised, and every day youread of concerns being expressed about the housing market. Of course, some cautious words are in order. Nobody would pretend that marketconditions are easy - the second half of 2007 was as hard a six month period asI can remember, and conditions in some markets in 2008 have remained difficult.But we must maintain a sense of perspective. Interest rates are moving lower.Employment is high. World economic growth this year will be between 3% and 4%again. Governments and central banks around the world are showing theirdetermination to help the financial system recover. We need to retain a sense of perspective about banks too. I recognise that whensome banks miscalculate risk, then the reputation of the whole industry istarnished. It's important not to lose sight of the fact that a good bankingsystem is an indispensable part of a healthy modern economy. Innovation and risktaking by the financial services industry has helped to create unprecedentedeconomic growth in the world over the last twenty years. It would be bad for theworld if we were to conclude that banks should stop taking risk. Managingfinancial risk is what banks do. The example of the Japanese economy between 1990 and 2000 illustrates what I'mtalking about. The Japanese banks' sense of risk aversion overtook the financialsystem, and that led to a decade of economic stagnation, as the banks stoppedlending. So it's very important that risk management doesn't become risk aversion. It'salso clear that strong economies need strong banks. For 2007, Barclays reportedanother successful year, with profit before tax of £7.1bn. I'll talk more aboutthat in a minute. But the point I want to look at here is to examine thebenefits of successful financial performance. Because Barclays is successful, we employ 135,000 people around the world.Because Barclays is successful, we pay large amounts of tax. We make substantialfinancial and in kind contributions to the communities in which we live and work(last year our community investment programme added up to well over £50m, andmore than 43,000 people across the Group were involved in community activity).Our profits support substantial dividend payments, dividends which put cash intothe pension funds which support the livelihoods of millions of citizens of thiscountry and others in their retirement. So society needs successful banks, and in difficult times, this is a point whichneeds to be said, and repeated. These are difficult times but in times of flux,strong organisations (and Barclays is a strong organisation) have significantopportunities. This highlights the importance of business strategy, which I've described onthese occasions for a number of years now. Our strategy is to achieve higherrates of growth over time by diversifying our business, both by geography and bybusiness line. This means not being too reliant on any one area of activity. Ata time of economic turbulence, that's very helpful to financial performance.And, of course, it also means that we are active in markets that have anaturally higher rate of growth. That strategy of diversification led to afinancial performance by Barclays in 2007 that was, in the circumstances,resilient. Our strategy of pursuing higher growth through diversification iscausing Barclays to change. So let me show you the video that I promised, which illustrates what I'm talkingabout. You can see, I think, that our strategy is making today's Barclays quitedifferent from the Barclays of the beginning of this decade. I think of strategyas "the what". And the "what" for us is achieving higher growth throughdiversification. You need to have a range of ways of achieving the "what". Thinkof these as the "hows". How to achieve the strategy? Of course the principal "how" route is through "organic business growth" -taking the businesses that we currently have and growing them. But inorganicgrowth (for example, by mergers and acquisitions) is another "how". Last year we attempted to acquire ABN AMRO. As you know, we concluded that wecould not acquire ABN at a price that represented value for money to ourshareholders. But the fact that our financial discipline restrained us in theABN AMRO transaction doesn't necessitate a change of strategy. The bid wassimply a way of accelerating the delivery of existing strategy. As I said a moment ago, there are, and must be, a number of ways in which astrategy can be carried out, and acquisition is just one. Let me give you anexample of what I'm talking about. ABN AMRO had 7m credit card customers. Wereally liked that as a business opportunity. But over time we can recruit largenumbers of new credit card customers ourselves - in 2007 alone (and in the midstof pursuing ABN AMRO) GRCB credit card businesses recruited over 2m newcustomers outside the UK. Let me show you, on these next two slides, the financial benefits of thestrategy at work in a larger context. Let's go back to 2000. In that year theprofits of your company were £3.4bn. And at the time, the overwhelming majorityof the profit came from the United Kingdom, with UK Banking as the dominantsource of our Group profits. If we then scroll forward to 2007, the £3.4bn hasbecome £7.1bn. And in 2007, 65% of the profits of the Group came from outside the UK Bankingbusinesses. If you look at the profit performance of the Group in 2007, it wasquite evenly distributed between our two big business areas: Global Retail &Commercial Banking and Investment Banking & Investment Management. We saw record performance in most of our business lines during 2007, includingin those business areas - Barclays Capital and Barclays Global Investors - thatwere in the middle of the storm in capital markets. For all the understandable interest of market commentators on exposures andwrite-downs during 2007, the key question for me is: how well equipped were thebusinesses to absorb risk, and grow profits? The financial performance of Barclays Capital and Barclays Global Investorsstands out in the top quartile of competitor results right across the industryin 2007. And meanwhile, the GRCB businesses were investing heavily for futuregrowth. In times of turbulence you need to be very clear about strategic direction. Thatensures that you're not distracted from serving customers and clients - who arefar more interested in being certain that their needs will be looked after whenthey visit us today than they are about the latest screaming headline in thefinancial pages of the world press. So we should be getting on with it: and we are. We've opened 400 new branchesand sales outlets outside the United Kingdom in the first quarter of 2008. Webought the Goldfish credit card business here in the UK. We've bought Expobankin Russia. We've acquired a banking licence in Pakistan and will be opening forbusiness there in June. We launched eight new exchange traded funds in BarclaysGlobal Investors. We've been jointly mandated with China Development Bank toarrange a term loan financing by the Ministry of Finance in Indonesia. As I say: we're getting on with it. None of which is to say that the environmentin 2008 is benign. But, given that, I'm quite pleased with the way in whichwe've started the year. We will give our usual Trading Update in mid May. But meanwhile I can tell you,that we have seen good levels of activity in Q1 and we continue to see thebenefit of our strong customer franchise and of the investments we've made inexpanding our physical footprint. First quarter profits in Global Retail and Commercial Banking were ahead of lastyear's. This was a strong performance. Although profits at Barclays Capital andBarclays Global Investors were well below the very strong profits of theequivalent period in 2007, each of the three businesses of Investment Bankingand Investment Management (Barclays Capital, BGI and Barclays Wealth) wasprofitable in the quarter. So how have we done as a Group this year? Let me take you through the firstthree months. Group profit before tax in January and February was in line withthe monthly run rate for 2007. We were profitable in March as well, but tradingconditions were tougher, meaning that Group profit for the first quarter wasbelow that of the very strong prior year period. But I believe that the sameresilience of financial performance that we saw in 2007 is observable again inour first quarter results of 2008. Of course no financial update in today's world would be complete without acomment on capital. To remind you of where we were when we reported in February,our tier 1 ratio was 7.6% at the end of 2007, compared with our target of 7.25%.And our equity ratio was 5.1% compared with our target of 5.25%. 2007 was a good stress test for balance sheet management, not least because ofthe extent of balance sheet growth during the year. But in fact we ended 2007with a tier 1 ratio in line with the ratio at the beginning of the year, which,as I have said, was ahead of our target. Having said that, this is a time forstrong ratios, and we want to see our equity ratio at least at 5.25% in time. Those of you who follow these things closely will have seen how active we havebeen in managing our capital base over the last months, including of course theissuance of equity to China Development Bank and Temasek last summer. We willremain active managers both of our balance sheet, and of our capital ratios. I want to end by giving you an insight into our plans and ambitions for thecoming period. We set ourselves goals every four years. When we last re-set themin 2004, we said that we planned to grow Economic Profit at a compound growthrate of 10% to 13%. We achieved that goal, as you can see on this slide. We alsosaid that we wanted to achieve Top Quartile Total Shareholder return in the fouryear period 2004-2007. We did not meet this goal. I'm disappointed that our stock price performance hasbeen poor over the last twelve months. We can't control the price at which thestock trades, but that doesn't prevent me empathising with shareholders aboutthe fact that our share price reached a high point of almost £8 in March 2007,and it's a lot lower than that today. So we must create the conditions in whichthe stock price can move ahead again, and concentrate on what we can control -which is the profit performance of the Group. We have published new goals for the period 2008-2011, which I illustrate on thisslide. You can see that we're aiming to generate Economic Profit of between£9.3bn and £10.6bn over the coming four year period, which would representcompound growth of 5% to 10%. We believe that if we hit the upper end of thatrange, that will translate into Top Quartile Total Shareholder return. As I finish, I want to express on your behalf, as well as mine, gratitude to ouremployees: for their energy, their commitment, and their contribution to ourresults in 2007. It was a tough year. They could have been distracted. But theykept their eyes and their attention on our customers, and that converted intogood financial results. I say again how pleased we are to have you with us today. Thank you forlistening. I'll now hand back to the Chairman." -ENDS- A copy of the slides referred to above and a recorded webcast of the Chairman'sand Chief Executive's opening remarks will be available for viewing from latertoday in the investor relations section of the Barclays Group website. For further information please contact: Investor Relations Media Relations Mark Merson Alistair Smith+44 (0) 20 7116 5752 +44 (0) 20 7116 6132 John McIvor Robin Tozer+44 (0) 20 7116 2929 +44 (0) 20 7116 6586 About BarclaysBarclays PLC is a major global financial services provider engaged in retail andcommercial banking, credit cards, investment banking, wealth management andinvestment management services. With over 300 years of history and expertise inbanking, Barclays operates in over 50 countries and employs 135,000 people, Wemove, lend, invest and protect money for over 38 million customers and clientsworldwide. For further information about Barclays, please visit our websitewww.barclays.com. Forward-looking statementsThis document contains certain forward-looking statements within the meaning ofSection 21E of the US Securities Exchange Act of 1934, as amended, and Section27A of the US Securities Act of 1933, as amended, with respect to certain of theGroup's plans and its current goals and expectations relating to its futurefinancial condition and performance. These forward-looking statements can beidentified by the fact that they do not relate only to historical or currentfacts. Forward-looking statements sometimes use words such as 'aim','anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal','believe', or other words of similar meaning. Examples of forward-lookingstatements include, among others, statements regarding the Group's futurefinancial position, income growth, impairment charges, business strategy,projected levels of growth in the banking and financial markets, projectedcosts, estimates of capital expenditures, and plans and objectives for futureoperations. By their nature, forward-looking statements involve risk anduncertainty because they relate to future events and circumstances, including,but not limited to, UK domestic and global economic and business conditions, theeffects of continued volatility in credit markets, market related risks such aschanges in interest rates and exchange rates, the policies and actions ofgovernmental and regulatory authorities, changes in legislation, the furtherdevelopment of standards and interpretations under International FinancialReporting Standards (IFRS) applicable to past, current and future periods,evolving practices with regard to the interpretation and application ofstandards under IFRS, progress in the integration of Absa into the Group'sbusiness and the achievement of synergy targets related to Absa, the outcome ofpending and future litigation, the success of future acquisitions and otherstrategic transactions and the impact of competition - a number of which factorsare beyond the Group's control. As a result, the Group's actual future resultsmay differ materially from the plans, goals, and expectations set forth in theGroup's forward-looking statements. Any forward-looking statements made by or on behalf of Barclays speak only as ofthe date they are made. Barclays does not undertake to update forward-lookingstatements to reflect any changes in Barclays expectations with regard theretoor any changes in events, conditions or circumstances on which any suchstatement is based. The reader should, however, consult any additionaldisclosures that Barclays has made or may make in documents it has filed or mayfile with the SEC. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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