Analysis of results by business

Analysis of results by business

For the year ended 31st December 2007

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International  Head office 
Retail and  Barclays  functions 
UK  Commercial  Barclays  Global  Barclays  and other 
Banking  Barclaycard  Banking  Capital  Investors  Wealth  operations  Group 
£m  £m  £m  £m  £m  £m  £m  £m 
Net interest income  4,596  1,394  1,890  1,179  (8) 431  128  9,610 
Net fee and commission income  1,932  1,080  1,210  1,235  1,936  739  (424) 7,708 
Principal transactions a   56  11  248  4,692  (4) 55  (83) 4,975 
Net premiums from insurance contracts  252  40  372  –  –  195  152  1,011 
Other income  58  (26) 87  13  2  19  35  188 
Total income  6,894  2,499  3,807  7,119  1,926  1,439  (192) 23,492 
Net claims and benefits incurred 
on insurance contracts  (43) (13) (284) –  –  (152) –  (492)
Total income, net of insurance claims  6,851  2,486  3,523  7,119  1,926  1,287  (192) 23,000 
Impairment charges  (849) (838) (252) (846) –  (7) (3) (2,795)
Net income  6,002  1,648  3,271  6,273  1,926  1,280  (195) 20,205 
Operating expenses  (3,370) (1,101) (2,356) (3,973) (1,192) (973) (234) (13,199)
Share of post-tax results of associates 
and joint ventures  7  (7) 7  35  –  –  –  42 
Profit before business disposals  2,639  540  922  2,335  734  307  (429) 7,048 
Profit on disposal of subsidiaries, 
associates and joint ventures  14  –  13  –  –  –  1  28 
Profit before tax  2,653  540  935  2,335  734  307  (428) 7,076 

As at 31st December 2007 
Total assets  161,777  22,164  89,457  839,662  89,224  18,024  7,053  1,227,361 
Total liabilities  166,988  1,559  48,809  811,516  87,101  43,988  34,924  1,194,885 

Note
a
Principal transactions comprise net trading income and net investment income.

Global Retail and Commercial Banking

UK Banking

Who we are

UK Banking comprises UK Retail Banking and Barclays Commercial Bank (formerly UK Business Banking).

What we do

UK Banking delivers banking solutions to Barclays retail and business banking customers in the United Kingdom. We offer a range of integrated products and services and access to the expertise of other Group businesses. Customers are served through a variety of channels comprising the branch network, automated teller machines, telephone banking, online banking and relationship managers.

Highlights

£6,851 m

Income

£2,653 m

Profit before tax

Performance indicators

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Key facts 2007 2006 2005
Number of UK branches 1,733 2,014 2,029

Global Retail and Commercial Banking

UK Banking

Performance

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2007  2006  2005 
£m  £m  £m 
Income statement information 
Net interest income  4,596  4,467  4,213 
Net fee and commission income  1,932  1,874  1,728 
Net trading income  9  2  – 
Net investment income  47  28  26 
Principal transactions  56  30  26 
Net premiums from insurance contracts  252  342  298 
Other income  58  63  32 
Total income  6,894  6,776  6,297 
Net claims and benefits incurred on insurance contracts  (43) (35) (61)
Total income, net of insurance claims  6,851  6,741  6,236 
Impairment charges  (849) (887) (671)
Net income  6,002  5,854  5,565 
Operating expenses excluding amortisation of intangible assets  (3,358) (3,387) (3,323)
Amortisation of intangible assets  (12) (2) (3)
Operating expenses  (3,370) (3,389) (3,326)
Share of post-tax results of associates and joint ventures  7  5  (3)
Profit on disposal of subsidiaries, associates and joint ventures  14  76  – 
Profit before tax  2,653  2,546  2,236 
Balance sheet information 
Loans and advances to customers  £145.3bn  £131.0bn  £125.5bn 
Customer accounts  £147.9bn  £139.7bn  £127.2bn 
Total assets  £161.8bn  £147.6bn  £138.0bn 
Performance ratios 
Return on average economic capital  29%  32%  21% 
Cost:income ratio  49%  50%  53% 
Cost:net income ratio  56%  58%  60% 
Other financial measures 
Risk Tendency  £775m  £790m  £665m 
Economic profit  £1,272m  £1,327m  £1,069m 
Risk weighted assets  £99.8bn  £93.0bn  £87.9bn 

2007/06

UK Banking profit before tax increased 4% (£107m) to £2,653m (2006: £2,546m) driven principally by solid income growth. Results included gains from the sale and leaseback of properties and property sales of £232m (2006: £313m).

The cost:income ratio improved one percentage point to 49%. Excluding the impact of settlements on overdraft fees in relation to prior years, the cost:income ratio improved two percentage points to 48%, making eight percentage points of improvement from 2004 to 2007 compared to the target of six percentage points.

2006/05

UK Banking profit before tax increased 14% (£310m) to £2,546m (2005: £2,236m) driven principally by good income growth. Profit before business disposals grew 10% (£234m) to £2,470m (2005: £2,236m).

In 2006 the cost:income ratio improved three percentage points to 50% (2005: 53%) excluding gains from property sales not reinvested; this brings the cumulative improvement to six percentage points in two years.

Global Retail and Commercial Banking

UK Retail Banking

Who we are

UK Retail Banking comprises Personal Customers, Home Finance, Local Business, Consumer Lending and Barclays Financial Planning. We have one of the largest branch networks in the UK with around 1,700 branches and an extensive network of cash machines.

What we do

We are transforming Barclays to be the best bank in the UK by designing innovative, simple and transparent propositions, streamlining operating platforms and further leveraging Barclays Group capabilities.

Our cluster of businesses aims to build broader and deeper relationships with customers. Personal Customers and Home Finance provide a wide range of products and services to retail customers, including current accounts, savings and investment products, mortgages branded Woolwich and general insurance. Barclays Financial Planning provides banking, investment products and advice to affluent customers.

Local Business provides banking services to small businesses. UK Retail Banking is also a gateway to more specialised services from other parts of Barclays such as Barclays Stockbrokers.

Our business serves 15 million UK customers.

Highlights

£4,297 m

Income

£1,282 m

Profit before tax

Performance indicators

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Key facts 2007 2006 2005
Personal Customers
Number of UK current accounts a 11.3m 11.5m 11.1m
Number of UK savings accounts 11.1m 11.0m 10.8m
Total UK mortgage balances £69.8bn £61.7bn £59.6bn
Local Business
Number of Local Business customers 643,000 630,000 630,000

Note
a
Decrease reflects the consolidation of Woolwich and Barclays current accounts.

Global Retail and Commercial Banking

UK Retail Banking

Performance

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2007  2006  2005 
£m  £m  £m 
Income statement information 
Net interest income  2,858  2,765  2,677 
Net fee and commission income  1,183  1,232  1,065 
Net premiums from insurance contracts  252  342  372 
Other income  47  42  24 
Total income  4,340  4,381  4,138 
Net claims and benefits on insurance contracts  (43) (35) (61)
Total income net of insurance claims  4,297  4,346  4,077 
Impairment charges  (559) (635) (494)
Net income  3,738  3,711  3,583 
Operating expenses excluding amortisation of intangible assets  (2,455) (2,531) (2,501)
Amortisation of intangible assets  (8) (1) – 
Operating expenses  (2,463) (2,532) (2,501)
Share of post-tax results of associates and joint ventures  7  2  (6)
Profit before tax  1,282  1,181  1,076 
Balance sheet information 
Loans and advances to customers  £82.0bn  £74.7bn  £72.1bn 
Customer accounts  £87.1bn  £82.3bn  £76.3bn 
Total assets  £87.8bn  £81.7bn  £78.1bn 
Performance ratios 
Return on average economic capital  28%  28%  26% 
Cost:income ratio  57%  58%  61% 
Cost:net income ratio  66%  68%  70% 
Other financial measures 
Risk tendency  £470m  £500m  £415m 
Economic profit  £622m  £589m  £525m 
Risk weighted assets  £46.0bn  £43.0bn  £40.8bn 

2007/06

UK Retail Banking profit before tax increased 9% (£101m) to £1,282m (2006: £1,181m) due to reduced costs and a strong improvement in impairment.

Income grew 2% (£67m) before the impact of settlements on overdraft fees in relation to prior years (£116m). This was driven by very strong growth in Personal Customer retail savings and good growth in Personal Customer current accounts, Home Finance and Local Business. Including the impact of settlements on overdraft fees, income decreased £49m to £4,297m (2006: £4,346m).

Net interest income increased 3% (£93m) to £2,858m (2006: £2,765m). Growth was driven by a higher contribution from deposits, through a combination of good balance sheet growth and an increased liability margin. Total average customer deposit balances increased 7% to £81.9bn (2006: £76.5bn), supported by the launch of new products.

Mortgage volumes increased significantly, driven by an improved mix of longer term value products for customers, higher levels of retention and continuing improvements in processing capability. Mortgage balances were £69.8bn at the end of the period (2006: £61.7bn), an approximate market share of 6% (2006: 6%). Gross advances were 25% higher at £23.0bn (2006: £18.4bn). Net lending was £8.0bn (2006: £2.4bn), representing market share of 8% (2006: 2%). The average loan to value ratio of the residential mortgage book on a current valuation basis was 33%. The average loan to value ratio of new residential mortgage lending in 2007 was 54%. Consumer Lending balances decreased 4% to £7.9bn (2006: £8.2bn), reflecting the impact of tighter lending criteria.

Overall asset margins decreased as a result of the increased proportion of mortgages and contraction in unsecured loans.

Net fee and commission income reduced 4% (£49m) to £1,183m (2006: £1,232m). There was strong Current Account income growth in Personal Customers and good growth within Local Business. This was more than offset by settlements on overdraft fees.

Net premiums from insurance underwriting activities reduced 26% (£90m) to £252m (2006: £342m), as there continued to be lower customer take-up of loan protection insurance. Net claims and benefits on insurance contracts increased to £43m (2006: £35m).

Impairment charges decreased 12% (£76m) to £559m (2006: £635m) reflecting lower charges in unsecured Consumer Lending and Local Business. This was driven by improvements in the collection process which led to reduced flows into delinquency, lower levels of arrears and stable charge-offs. Mortgage impairment charges remained negligible.

Operating expenses reduced 3% (£69m) to £2,463m (2006: £2,532m), reflecting strong and active management of all expense lines, targeted processing improvements and back office consolidation. Gains from the sale of property were £193m (2006: £253m). Increased investment was focused on improving the overall customer experience through converting and improving the branch network; revitalising the product offering; increasing operational and process efficiency; and meeting regulatory requirements.

The cost:income ratio improved one percentage point to 57%. Excluding the impact of settlements on overdraft fees, the cost:income ratio improved two percentage points to 56%.

2006/05

UK Retail Banking profit before tax increased 10% (£105m) to £1,181m (2005: £1,076m), driven by good income growth and well controlled costs. There has been substantial additional investment to transform the business.

Income increased 7% (£269m) to £4,346m (2005: £4,077m), continuing the momentum reported at the half year. Income growth was broadly based. There was strong income growth in Personal Customers retail savings, Local Business and UK Premier and good growth in Personal Customers current account income. Sales volumes increased, with a particularly strong performance from direct channels.

Net interest income increased 3% (£88m) to £2,765m (2005: £2,677m). Growth was driven by a higher contribution from deposits, through a combination of good balance sheet growth and a stable liability margin. Total average customer deposit balances increased 8% to £76.5bn (2005: £71.0bn), supported by new products. Growth of personal savings was above that of the market.

Mortgage volumes improved significantly, driven by a focus on improving capacity, customer service, value and promotion. UK residential mortgage balances ended the year at £61.7bn (2005: £59.6bn). Gross advances were 60% higher at £18.4bn (2005: £11.5bn), with a market share of 5% (2005: 4%). Net lending was £2.4bn, with performance improving during the year, leading to a market share of 4% in the second half of the year. The mortgage margin was reduced by changed assumptions used in the calculation of effective interest rates, a higher proportion of new mortgages and base rate changes. The new business spread was in line with the industry. The loan to value ratio within the residential mortgage book on a current valuation basis was 34% (2005: 35%).

There was good balance growth in non-mortgage loans, where Local Business average balances increased 9% and UK Premier average balances increased 25%.

Net fee and commission income increased 16% (£167m) to £1,232m (2005: £1,065m). There was strong current account income growth in Personal Customers and Local Business. UK Premier delivered strong growth reflecting higher income from banking services, mortgage sales and investment advice.

Net premiums from insurance underwriting activities decreased 8% (£30m) to £342m (2005: £372m). There continued to be lower customer take-up of loan protection insurance. Net claims and benefits on insurance contracts improved to £35m (2005: £61m).

Impairment charges increased 29% (£141m) to £635m (2005: £494m). The increase principally reflected balance growth and some deterioration in delinquency rates in the Local Business loan book. Losses from the mortgage portfolio remained negligible, with arrears at low levels.

Operating expenses were steady at £2,532m (2005: £2,501m). Gains from the sale and leaseback of property amounted to £253m (2005: nil). Investment in the business to improve customer service and deliver sustainable performance improvements was directed at upgrading distribution capabilities, including restructuring and improving the branch network. Further investment was focused on upgrading the contact centres, transforming the performance of the mortgage business, revitalising the retail product range to meet customers’ needs, improving core operations and processes and rationalising the number of operating sites. The level of investment reflected in operating expenses in 2006 was approximately double the level of 2005.

The cost:income ratio improved three percentage points to 58% (2005: 61%).

Global Retail and Commercial Banking

Barclays Commercial Bank Results by nature of income and expense

Who we are

Barclays Commercial Bank comprises 8,400 colleagues who serve 81,000 customers.

Earlier this year, we launched our new brand – Barclays Commercial Bank – to replace UK Business Banking. This new identity is much more than just a name change. Instead, it more accurately reflects our current capabilities and future aspirations, and it is scalable across markets. To complement the new identity, we also launched a clear customer proposition. It comprises three elements:

  • – relationship
  • – specialisation
  • – innovation

These encapsulate our capability to deliver distinctive service and solutions that meet our customers’ needs.

What we do

Barclays Commercial Bank provides banking services to organisations with an annual turnover of more than £1m. Customers are served via a network of relationship and industry sector specialists, which provides solutions constructed from a comprehensive suite of banking products, support, expertise and services, including specialist asset financing and leasing facilities.

We are a key component of the Barclays universal banking model, delivering income in partnership with all the constituent business units of the Barclays Group.

Highlights

£2,554 m

Income

£1,371 m

Profit before tax

Performance indicators

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Key facts 2007 2006 2005
Number of customers 81,000 77,000 a 86,500
Number of colleagues 8,400 8,100 7,800

Note
a
Decrease reflects the consolidation of Woolwich and Barclays current accounts.

Global Retail and Commercial Banking

Barclays Commercial Bank Results by nature of income and expense

Performance

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2007  2006  2005 
£m  £m  £m 
Income statement information 
Net interest income  1,738  1,702  1,536 
Net fee and commission income  749  642