"There is no doubt that 2012 was a difficult year for Barclays and the entire banking sector. The behaviours which made headlines during the year stemmed from a period of 20 years in banking in which the sector became too aggressive, too focused on the short-term, and too disconnected from the needs of customers and clients, and wider society. Barclays was not immune from the impact of these trends, and we suffered reputational damage in 2012 as a consequence. Change is needed both in our industry and at Barclays.
As I reflect on my first five months as Chief Executive and on the transformation required, I am reassured by the strong foundations on which we can build. Through a prolonged difficult economic environment, our financial performance has been strong, and our 2012 results clearly demonstrate the good momentum in our businesses. Our franchise remains robust and well positioned, in fact our position in many businesses improved through the year. I am proud of how our colleagues were not distracted and continued to focus on delivering for our customers and clients. I am also grateful for our customers' and clients' continued loyalty to Barclays, despite circumstances where it could have easily faltered.
The significant reduction in this year's total incentive awards is the product of actions taken by management to reposition Barclays in the marketplace and reflects the significant conduct issues that impacted Barclays in 2012. We committed last year to a journey to bring down our compensation ratio and have made good progress this year, with the Group compensation to net income ratio declining to 38% (2011: 42%). While this is progress, not the destination, we believe a ratio in the mid-30s is a sustainable position in the medium term which will ensure that we can continue to pay our people competitively for performance while also enabling us to deliver a greater share of the income we generate to shareholders.
Of course we must also improve our financial position further - despite improvement year on year, our return on equity is not yet at an acceptable level. However, the notion that there must always be a choice between profits and a values-driven business is false. Barclays will only be a valuable business if it is a values-driven business. Under my leadership, Barclays will become a valuable and sustainable institution for all our stakeholders by aligning behind a common purpose: 'helping people achieve their ambitions - in the right way'. This will be delivered by embedding five core values: Respect, Integrity, Service, Excellence and Stewardship. By building this culture, I am confident that Barclays can become the 'Go-To' bank for all our stakeholders"
Adjusted profit before tax was up 26% to £7,048m for the 12 months ended 31 December 2012, with an improvement of 46% in Corporate and Investment Banking, and 52% in Wealth and Investment Management
- Statutory profit before tax decreased to £246m (2011: £5,879m), including own credit charge of £4,579m (2011: gain of £2,708m), gain on disposal of BlackRock investment of £227m (2011: impairment/loss of £1,858m), £1,600m (2011: £1,000m) provision for PPI redress, and £850m (2011: £nil) provision for interest rate hedging products redress
- Investment Bank profit before tax increased 37% to £4,063m driven by income growth of 13% and reduced operating expenses. Q4 12 Investment Bank income was £2,593m, up 43% on Q4 11 and down 2% on Q3 12
- Adjusted return on average shareholders' equity increased to 7.8% (2011: 6.6%) with improvements in most of our businesses. Statutory return on average shareholders' equity was negative 1.9% (2011: positive 5.8%)
- Adjusted income was up 2% at £29,043m despite challenging economic conditions, the continuing low interest rate environment and non-recurrence of gains from the disposal of hedging instruments in 2011 of £1,061m
- Credit impairment charges were down 5% at £3,596m, principally reflecting improvements in Barclaycard, Corporate Banking and UK RBB, partially offset by higher charges in the Investment Bank, Africa RBB and Europe RBB
- Adjusted operating expenses were down 3% to £18,539m as we reduced non-performance costs by 3% to £16,114m and performance costs by 4% to £2,425m. Total incentive awards declined 16% for the Group and 20% for the Investment Bank, reducing the Investment Bank compensation: income ratio to 39% (2011: 47%)
- Core Tier 1 ratio remained strong at 10.9% (2011: 11.0%). Risk weighted assets reduced 1% to £387bn
- The Group continues to access both secured and unsecured term funding markets and raised £28bn of term funding in 2012, including £6bn through Barclays participation in the Bank of England's Funding for Lending Scheme (FLS). In Q4 12 the Group successfully placed $3bn of Tier 2 Contingent Capital Notes (CCNs) which was well received by the market
- The Group delivered £44bn (2011: £45bn) of gross new lending to UK households and businesses