Your SlideShare is downloading. ×
Developing financial capabilities presentation
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Developing financial capabilities presentation

767
views

Published on

PERFORMANCE COMPARISON BETWEEN …

PERFORMANCE COMPARISON BETWEEN
BARCLAYS BANK PLC &
LLOYDS BANKING GROUP PLC


0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
767
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
14
Comments
0
Likes
1
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. PERFORMANCE COMPARISON BETWEENBARCLAYS BANK PLC &LLOYDS BANKING GROUP PLC PRESENTED BY: Oluwasegun Akande - S11731546
  • 2. INTRODUCTION– Performance Measurement in the Banking Sector  Compare to other sectors, a strong financial services industry must be built on stable and sound foundations.  A resilient banking sector is of critical economic importance.  UK financial services in 2009 generated a trade surplus of £40bn and professional services firms a surplus of £6bn. UK exports of financial services are 3 times larger than any other country, and 10 times those of the US in 2008 This Presentation is Looking at :  Financial Ratio Analysis Also, Looking at are …  Profile of the two Banks  KPIs, Financial & Business Ratios:  Stakeholders Analysis in Banking Sector Comparison between Barclays Banks & Lloyds Banking Group  Factors Affecting Performance Measurement in the Banking Sector  Investment appraisal techniques in banking sectors  Financial crisis and the failure of the UK Regulatory framework  Cost control in banking sectors  2011 Comparison at a Glance; Barclays Bank  Forecasts for Barclays & Lloyds PLC & Lloyds Banking Group PLC  Recommendations & Conclusion
  • 3. FINANCIAL RATIOS ANALYSIS LIQUIDITY RATIOS PROFITABILITY RATIOS This determines how much profit Liquidity ratios measure the a business has made, and then to extent to which assets can be compare it with previous periods turned into cash quickly or with other entities.  Current Asset  Return on capital employed  Acid Test  Gross profit  Mark-up  Net profit INVESTMENT RATIOS EFFECIENCY RATIOS Ratios that are primarily How efficiently an entity has (although not exclusively) of been managed, i.e. how well its interest to prospective investors. resources have been looked after.  Dividend yield  Dividend cover  Stock turnover  Earnings per share  Fixed assets turnover  Price/earnings ratio  Trade debtor collection  Capital gearing period  Trade creditor payment period (Dyson 2008)
  • 4. Source: FAME Source:PROFILES FOR BARCLAYS & LLOYDS TSB Barclays Banks PLC Lloyds Banking Group PLCBanking Classification UK Retail and Business Banking Retail (Biggest Retail Bank in the UK)Trade Description A group engaged in the provision of Group is involved in a wide range of retail and commercial banking, banking and financial services through credit card, banking, wealth and branches and offices in the UK and investment management services. overseas.Date of Incorporation: October 04, 1971 October 21, 1985Registered Number: 01026167 SC095000Registered Office 1 Churchill Place, The Mound London Edinburgh E14 5HP Lothian England EH1 1YZ ScotlandTotal Employees 151,300 122,979As at Dec 31, 2010No. of Recorded Subsidiaries 352 2,364Legal Form Public quoted Public quoted. 41% owned by the taxpayer following a massive Government bail-out. Source: FAME
  • 5. STAKEHOLDERS ANALYSIS IN BANKING SECTORS CUSTOMERS REGULATORS MANAGEMENT INVESTORS &  Customer & EMPLOYEES SHAREHOLDERS  Bank of Satisfaction Financial services England (the employ over 1  Individual &  Competitive Bank), million people, Institutional Advantage 3.9% of all UK  Customer  Financial employment.  Interest is mainly on the Financial Perceptions of Services Performance Value  Business Authority Measurement Strategy  Corporate Image (FSA) and formulation &  Using alignment management‟s  Switching Barriers  The Treasury own measures of (e.g. transaction  Risk success really costs, learning Management helps deepen costs, loyal Collectively investors‟ customer responsible for  Corporate understanding of discounts and emotional costs) financial stability Culture progress and movement in  Principle of business.  Customer Loyalty Engagement (Cohen & Gan 2006)
  • 6. FACTORS AFFECTING PERFORMANCEMEASUREMENT IN BANKING SECTOR Much Focus on financial measures, such as, Earnings per Share (EPS). Return on Investment (ROI) and Return on Equity (ROE). Emergence of contemporary system such performance measurement matrix (Keegan et al., 1989). SMART pyramid (Lynch and Cross, 1991). the balanced scorecard (Kaplan and Norton, 1992). result and determinants framework (Fitzgerald et al., 1991). The performance prism (Neely et al., 2001) and Comparative business scorecard (Kanji and Moura, 2002). ECONOMIC TECHNOLOGICAL SOCIO-CULTURAL PRESSURES FOR ENVIRONMENT ENVIRONMENT AND POLITICAL CHANGE  Negative economic  technological ENVIRONMENT  Mimetic pressures conditions place advancements  Most Banks in the pressure on seem to make UK are  Coercive pressures organizations to banks offer a transnational (e.g. Central bank‟s increase wider variety of institutions regulatory control, profitability customer services, Financial legislations) (Burney, 1999). not only to fulfill  Adopt consistent making it difficult the needs of Performance  Normative pressures for management to customers, but measurement (Professionals, focus on improving also to achieve practices with Strategic Orientation, and measuring non- economies of international the corporate culture & financial scale and to be practices. top management.) – performance. competitive. Professionals is the most dominant influence (Rahat Munir, Kevin Baird 2008)
  • 7. FINANCIAL CRISIS AND THE FAILURE OF THE UKREGULATORY FRAMEWORK UK‟s „TRIPARTITE‟ THIS SYSTEM FAILED IN A EMERGING CONSENSUS REGULATORY NUMBER OF IMPORTANT ON THE FUNDAMENTAL SYSTEM WAYS CAUSES OF THE CRISIS  Bank of England (the Bank),  To identify the problems  Global economic that were building up in imbalances;  Financial Services the financial system; Authority (FSA)  Mispriced and and  To take steps to misunderstood risk; mitigate them before  The Treasury they led to significant  Unsustainable funding instability in financial and business models – collectively markets; and for banks; responsible for financial stability  to deal adequately with  Excessive build up of the crisis when it did debt across the break, especially financial system; and during the first part of the crisis in the summer  The growth of an of 2007. unregulated „shadow banking‟ system
  • 8. Source: FAME Source:2011 COMPARISON AT A GLANCE Lloyds 2011 (£m) Barclays 2011 (£m) Total Asset 970,546 1,563,402 Total Liabilities 923,952 1,498,232 Shareholder Equity 45,920 65,170 Operating expenses (10,621) (20,772) Net Income 21,123 26,780 Profit (Loss) Before Tax (3,542) 5,974 2011 ANNUAL REPORTS 2011 ANNUAL REPORTS (Operating Expenses, Net Income & PBT) (Total Asset, Total Liabilities, Shareholder Lloyds 2011 (£m) Barclays 2011 (£m) Equity) 26,780 Lloyds 2011 (£m) Barclays 2011 (£m) 21,123 1,563,402 1,498,232 5,974 970,546 923,952 Operating expenses Net Income Profit Before Tax (3,542) (10,621) 45,920 65,170 (20,772) Total Asset Total Liabilities Shareholder Equity
  • 9. KPIs, FINANCIAL & BUSINESS RATIOS 2,500,000 2,000,000 1,500,000 £ Million 1,000,000 2007 2008 2009 2010 2011 Barclays (Total Assets) 1,227,583 2,053,029 1,379,148 1,490,038 1,563,402 500,000 Lloyds (Total Assets) 353,346 436,033 1,027,255 991,574 970,546 0 Barclays (Income) 23,523 21,153 29,094 32,214 33,123 2007 2008 2009 2010 2011 Lloyds (Income) 10,696 9,868 23,278 24,956 20,771 Barclays (Profit After Tax) 5126 5249 3512 4172 3,616 Barclays (Total Assets) Lloyds (Total Assets) Lloyds (Profit After Tax) 3,288 772 2,827 -320 -2,787 35,000 6000 30,000 5000 4000 25,000 3000 20,000 2000 1000 15,000 0 £ Million 10,000 -1000 2007 2008 2009 2010 2011 5,000 -2000 -3000 0 -4000 2007 2008 2009 2010 2011 Barclays (Profit After Tax) Barclays (Income) Lloyds (Income) Lloyds (Profit After Tax)
  • 10. KPIs, FINANCIAL & BUSINESS RATIOS - Profitability Ratios Lloyds Barclays Lloyds Barclays Lloyds Barclays 2010 2010 2009 2009 2008 2008Return on Shareholders Fund 0.61 10.27 2.41 8.15 7.17 14.65ROCE 0.22 9.43 2.3 5.28 2.79 7.98Return on Total Asset 0.03 0.41 0.1 0.33 0.19 0.29Profitability Ratio for 2010 Profitability Ratio for 2009 Lloyds 2010 Barclays 2010 Lloyds 2009 Barclays 2009 10.27 9.43 8.15 5.28 2.41 2.3 0.61 0.22 0.03 0.41 0.1 0.33 Return on ROCE Return on Total Return on ROCE Return on Total Shareholders Asset Shareholders Asset Fund Fund  Barclays Bank is a more profitable business Profitability Ratio for 2008 compare to Lloyds Banking Group. This Lloyds 2008 Barclays 2008 performance could be attributed to the management of Barclays Bank PLC. Most time, management of an organization seem to 14.65 be the difference maker. This could be buttressed by the article on FT.com captioned 7.17 7.98 “Barclays co-heads each get more than £9m” - By Sharlene Goff (March 14, 2012 ) 2.79 0.19 0.29  According to FT.com, acquisition HBOS was a bad investment that contributed to their poor Return on ROCE Return on Total performance captioned “Lloyds in £42bn bill Shareholders Asset Fund from toxic HBOS” - By Patrick Jenkins and Adam Jones (February 26, 2010 10:22 pm)
  • 11. KPIs, FINANCIAL & BUSINESS RATIOS – Structure Ratios Lloyds Barclays Lloyds Barclays Lloyds Barclays 2010 2010 2009 2009 2008 2008Current Ratio 1.12 1.03 0.27 1.05 1.03 1.03Luquidity Ratio 1.12 1.03 0.27 1.05 1.03 1.03Shareholders Liquidity Ratio 0.56 11.18 21.41 1.84 0.64 1.2Solvency Ratio 4.56 3.97 4.21 4.06 2.58 2.01Gearing Ratio 814.52 0 4.67 54.61 157.16 912.12 Structure Ratio for 2008 Structure Ratio for 2009 Lloyds 2008 Lloyds 2009 Barclays 2009 2.58 21.41 2.01 1.2 1.03 1.03 1.03 1.03 0.64 4.21 4.06 1.84 1.05 1.05 0.27 0.27 Current Ratio Luquidity Shareholders Solvency Current Ratio Luquidity Shareholders Solvency Ratio Ratio Liquidity Ratio Ratio Ratio Liquidity Ratio
  • 12. KPIs, FINANCIAL & BUSINESS RATIOS – Structure Ratios STRUCTURE RATIOSStructure Ratio for 2010 Lloyds 2010 Barclays 2010  The current ratio & liquidity ratio of Lloyds Banking group in year 2009 show that the group could not have been able 11.18 to meet its financial obligation. It is clear indication of over trading on their part and this probably have caused the bank a financial crises. Massive business expansion with 100% rise in number of employee from 66,473 to 132,000 could have contributed to this.  The solvency ratio of Lloyds shows that its over dependency on outside sources for long-term financial 4.56 support. 3.97 1.12 1.03 1.12 1.03 0.56Current Ratio Luquidity Ratio Shareholders Solvency Ratio Liquidity Ratio (Dyson, 2008) (Walker, 2009)
  • 13. KPIs, FINANCIAL & BUSINESS RATIOS – Trends in Percentage GROWTH IN ASSET, INCOME & PROFIT OVER THE LAST 5 YEARS (TRENDS IN %) 2008 - 07 2009 - 08 2010 - 09 2011 - 10Total Asset (Barclays) 67.24 -32.82 8.04 4.92Total Income (Barclays) -10.08 37.54 10.72 2.82Profit (Barclays) 2.40 -33.09 18.79 -13.33Total Asset (Lloyds) 23.40 135.59 -3.47 -2.12Total Income (Lloyds) -7.74 135.89 7.21 -16.77Profit (Lloyds) -76.52 266.19 -111.32 -1151.94 Asset Trends in % Income Trends in % 160.00 160.00 140.00 140.00 120.00 120.00 100.00 100.00 80.00 80.00 60.00 60.00 40.00 40.00 20.00 0.00 20.00 -20.00 2008 - 07 2009 - 08 2010 - 09 2011 - 10 0.00 -40.00 -20.00 2008 - 07 2009 - 08 2010 - 09 2011 - 10 -60.00 -40.00 Total Asset (Barclays) Total Asset (Lloyds) Total Income (Barclays) Total Income (Lloyds)
  • 14. (Milis et al. n.d.)(ACCOUNTANTS n.d.)KPIs, FINANCIAL & BUSINESS RATIOS – Trends in Percentage Profit Trends in % 400.00 200.00 0.00 2008 - 07 2009 - 08 2010 - 09 2011 - 10 -200.00 -400.00 -600.00 -800.00 -1000.00 -1200.00 -1400.00 Profit (Barclays) Profit (Lloyds) TRENDS IN PERCENTAGE  Except for the Asset trend that seem to be getting stable for Lloyds banking Group, all others which include income and profit trends are noise-diving.  Although the income trend for Barclays Bank is also noise-diving but there is a relative stability in its profitability ; a good cost saving strategy and effective risk management can be deduced.
  • 15. INVESTMENT APPRAISAL TECHNIQUESThe most important investment appraisal techniques are concerned not only withwhat cash flows will arise in the future as a result of the project, but also with thetiming of those cash flows. For what reasons might earlier, perhapssmaller, forecast cash inflows be preferred than later, perhaps larger, cashinflows? INVESTMENT TECHNIQUES INVESTMENT/SPROJECTS IN A DECISION-MAKING BANK & CATEGORY OF BENEFITS PROCESS Banks could be involved in any type  Net Present Value of investments/projects; IS services investment, Business Acquisition and  Origination of  Accounting Rate of so on are common to Banks proposals Return Use of these Traditional techniques  Project screening.  Payback Period might not be sufficient to evaluate an investments/projects such as IS  Analysis and  Internal Rate Of Return service acceptance (Graphical Approach & Interpolation Method) Category of benefits  Monitoring and review  Tangible benefits  Intangible benefits (Milis et al. n.d.)(ACCOUNTANTS n.d.)
  • 16. COST CONTROL IN THE UK BANKING SECTORCost control has taken on a new priority at the UK‟s banks. Since the crisis,market participants have been grappling with cost to income ratio strainsand a more challenging regulatory and competitive landscape. And withrevenue growth becoming increasingly difficult to source, bank executiveshave stepped up their focus on cutting costs wherever possible in a bid tomake their organizations more efficient and agile.
  • 17. COST CONTROL IN THE UK BANKING SECTOR The problems with the cost efficiency ratios stem from a combination of factors on both sides of the cost to income equation:  Banks are struggling to grow top line revenues across many areas of their businesses.  growth in revenues, a number of institutions are seeking to expand their emerging market operations.  Catalogue of national and international regulatory initiatives in the wake of the financial crisis is continuing to add to the cost line.  Payment Protection Insurance (PPI) – as banks‟ recent provisions demonstrate  Lastly, the Government announced in February, 2012 that it would increase the bank levy to £2.5 billion this year,
  • 18. FORECAST FOR BARCLAYS BANK & LLOYDS BANKING GROUP BARCLAYS BANK PLC LLOYDS BANKING GROUP PLC Asset Quality Barclays is ready to remain Likelihood of improved asset quality as a confident on credit asset quality result of the accelerated efforts to reduce risk-weighted assets (RWAs) and improve the funding and risk profiles Cost Saving Barclays has identified up to £2 Lloyds is targeting annual cost savings of billion in potential savings by £1.5 billion per annum in 2014 (£1.7 billion of 2013, with a savings target of £1 run-rate savings by end 2014). billion at Group level Market Forecast As of Apr 20, 2012, the As of Apr 20, 2012, the consensus forecast consensus forecast amongst 3 amongst 31 polled investment analysts polled investment analysts covering Lloyds Banking Group PLC advises covering Barclays PLC (ADR) that the company will outperform the advises investors to purchase market. This has been the consensus equity in the company. This has forecast since the sentiment of investment been the consensus forecast analysts improved on Apr 05, 2012. since the sentiment of investment analysts improved on Apr 14, 2012. The previous consensus forecast advised that Barclays PLC (ADR) would outperform the market.
  • 19. RECOMMENDATION & CONCLUSION Aside the Financial crises which affected all banks and the whole economy at large, the investment decision of Lloyds Managements in the acquisition HBOS caused the poor performance. This has greatly increased the level of nonperforming assets and elevated Lloyds credit risk exposure and impairment provisions. Lloyds has a recognizable underlying earnings power, but considerably weak profitability because of its low net interest margin, elevated expense base, and most importantly high credit costs Barclays Bank PLC seem to have a better management staff with a sound business strategy. Barclays Bank was ranked amongst the top performers in the banking industry globally. Creating a good relationship with the clients, risk management and improving the strategic momentum of the BankRECOMMENDATION Lloyds: Proper investment appraisal should be carried out subsequently in any acquisition and investment. Lloyds & Barclays: Cost saving campaign within the organization that will sensitize all employees Barclays: Continuous good relationship with the clients, risk management and improving the strategic momentum of the Bank
  • 20. REFERENCESBOOKS & JOURNALS Cohen, D. & Gan, C., 2006. CUSTOMER SATISFACTION  A STUDY OF BANK CUSTOMER RETENTION IN NEW : ZEALAND. Most, (109). Dyson, J.R., 2008. Ratio analysis. ACCOUNTING FOR NON-ACCOUNTING STUDENTS Seventh Edition John R. Dyson ACNA_A01.QXD 2/20/08 7:10 AM Page iii, 7th Editio, pp.223-232. KPMG, 2011. UK Banks  Performance Benchmarking Report. Europe. : Rahat Munir, Kevin Baird, S.P., 2008. CHANGES IN PERFORMANCE MEASUREMENT SYSTEM IN BANKING SECTOR  AN ANALYTICAL FRAMEWORK Rahat Munir , Kevin Baird , Sujatha Perera. Management : Accounting, pp.1-24. TREASURY, H., 2010. A new approach to financial regulation:, Walker, J., 2009. 6.7 Assessing liquidity 170. Accounting in a Nutshell: Accounting for the Non-specialist Third Edition Janet Walker AMSTERDAM • BOSTON • HEIDELBERG • LONDON NEW YORK • OXFORD • PARIS • SAN DIEGO SAN FRANCISCO • SINGAPORE • SYDNEY &#8226.WEBSITES & PORTALS http://fame2.bvdep.com/version- 201244/SSOLogin.serv?product=fameneo&loginpostback=true&ssotoken=7P0QjUmCOG5UE60jtsv3xQ%3d%3d accessed April 03, 2012 at 12:43pm http://group.barclays.com/Investor-Relations/Financial-results-and-publications/Annual-Reports accessed April 16, 2012 at 16:57pm http://2011.lloydsbankinggroup-annualreport.com/ accessed April 16, 17:08pm http://www.ft.com/cms/s/0/5ccc7970-22a8-11df-8942-00144feab49a.html#axzz1sbaH1sFk accessed April 20, 2012 http://www.ft.com/cms/s/0/0d08b136-6e02-11e1-baa5-00144feab49a.html#axzz1sbaH1sFk accessed April 20, 2012
  • 21. THANK YOU

×