Download as PDFAnalysis of results by business
Analysis of results by business
For the year ended 31st December 2007
Download table as excel file| 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
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
Download table as excel file| Key facts | 2007 | 2006 | 2005 |
| Number of UK branches | 1,733 | 2,014 | 2,029 |
Global Retail and Commercial Banking
UK Banking
Performance
Download table as excel file| 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
Download table as excel file| 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
Global Retail and Commercial Banking
UK Retail Banking
Performance
Download table as excel file| 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
Download table as excel file| 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
Global Retail and Commercial Banking
Barclays Commercial Bank Results by nature of income and expense
Performance
Download table as excel file| 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 | 589 | |||||
| Net trading income | 9 | 2 | – | |||||
| Net investment income | 47 | 28 | 17 | |||||
| Principal transactions | 56 | 30 | 17 | |||||
| Other income | 11 | 21 | 17 | |||||
| Total income | 2,554 | 2,395 | 2,159 | |||||
| Impairment charges | (290) | (252) | (177) | |||||
| Net income | 2,264 | 2,143 | 1,982 | |||||
| Operating expenses excluding amortisation of intangible assets | (903) | (856) | (822) | |||||
| Amortisation of intangible assets | (4) | (1) | (3) | |||||
| Operating expenses | (907) | (857) | (825) | |||||
| Share of post-tax results of associates and joint ventures | – | 3 | 3 | |||||
| Profit on disposal of subsidiaries, associates and joint ventures | 14 | 76 | – | |||||
| Profit before tax | 1,371 | 1,365 | 1,160 | |||||
| Balance sheet information | ||||||||
| Loans and advances to customers | £63.3bn | £56.3bn | £53.4bn | |||||
| Customer accounts | £60.8bn | £57.4bn | £50.9bn | |||||
| Total assets | £73.9bn | £65.9bn | £59.9bn | |||||
| Performance ratios | ||||||||
| Return on average economic capital | 30% | 37% | 31% | |||||
| Cost:income ratio | 36% | 36% | 38% | |||||
| Cost:net income ratio | 40% | 40% | 42% | |||||
| Other financial measures | ||||||||
| Risk Tendency | £305m | £290m | £250m | |||||
| Economic profit | £650m | £738m | £544m | |||||
| Risk weighted assets | £53.8bn | £50.0bn | £47.1bn | |||||
2007/06
Barclays Commercial Bank profit before tax increased £6m to £1,371m (2006: £1,365m) due to continued good income growth partially offset by lower gains from business disposals. Profit before business disposals increased 5% to £1,357m (2006: £1,289m).
Income increased 7% (£159m) to £2,554m (2006: £2,395m). Non-interest income increased to 32% of total income (2006: £29%), reflecting continuing focus on cross sales and efficient balance sheet utilisation. There was very strong growth in net fee and commission income, which increased 17% (£107m) to £749m (2006: £642m) due to very strong performance in lending fees. There was also good growth in transaction related income, foreign exchange and derivatives transactions undertaken on behalf of clients.
Net interest income improved 2% (£36m) to £1,738m (2006: £1,702m). Average customer lendings increased 3% to £53.6bn (2006: £52.0bn) and 5%, excluding the impact of the vehicle leasing and European vendor finance businesses sold in 2006. Average customer accounts grew 4% to £46.4bn (2006: £44.8bn). The asset margin decreased by twelve basis points to 1.80%, reflecting an increased focus on higher quality lending and competitive market conditions. The liabilities margin remained broadly stable at 1.49%.
Income from principal transactions primarily reflecting venture capital and other equity realisations increased 87% (£26m) to £56m (2006: £30m).
Impairment charges increased 15% (£38m) to £290m (2006: £252m), mainly due to a higher level of impairment losses in Larger Business as impairment trended towards risk tendency. There was a reduction in impairment levels in Medium Business due to a tightening of the lending criteria.
Operating expenses increased 6% (£50m) to £907m (2006: £857m). Operating expenses are net of gains of £39m (2006: £60m) on the sale of property. Growth in operating expenses was focused on continuing investment in operations, infrastructure, and new initiatives in product development and sales capability.
2006/05
Barclays Commercial Bank profit before tax increased 18% (£205m) to £1,365m (2005: £1,160m), driven by continued strong income growth. Barclays Commercial Bank maintained its market share of primary customer relationships. The 2006 result included a £23m (2005: £13m) contribution from the full year consolidation of Iveco Finance, in which a 51% stake was acquired on 1st June 2005. Profit before business disposals increased 11% to £1,289m (2005: £1,160m).
Income increased 11% (£236m) to £2,395m (2005: £2,159m), driven by strong balance sheet growth. The uplift in income was broadly based across income categories.
Net interest income increased 11% (£166m) to £1,702m (2005: £1,536m) driven by strong balance sheet growth. There was strong growth in all business areas and in particular Larger Business. The lending margin improved slightly. Average customer accounts increased 11% to £44.8bn (2005: £40.5bn) with good growth across product categories. The deposit margin was stable.
Net fee and commission income increased 9% (£53m) to £642m (2005: £589m). There was a strong rise in income from foreign exchange and derivatives business transacted through Barclays Capital on behalf of Barclays Commercial Bank customers.
Income from principal transactions was £30m (2005: £17m), primarily reflecting the profit realised on a number of equity investments.
As expected, impairment rates trended upwards during the year towards a more normalised level. Impairment increased 42% (£75m) to £252m (2005: £177m), with the increase mainly reflecting higher charges from Medium Business and balance growth. Impairment charges in Larger Business were stable.
Operating expenses increased 4% (£32m) to £857m (2005: £825m). Cost growth reflected higher volumes, increased expenditure on front line staff and the costs of Iveco Finance for a full year. Operating expenses included a credit of £60m on the sale and leaseback of property. Increased investment was focused on the acceleration of the rationalisation of operating sites and technology infrastructure.
The cost:income ratio improved two percentage points to 36% (2005: 38%).
Profit on disposals of subsidiaries, associates and joint ventures of £76m (2005: £nil) arose from the sales of interests in vehicle leasing and European vendor finance businesses.
Global Retail and Commercial Banking
Barclaycard
Who we are
We are a multi-brand international credit card and consumer lending business. Our credit card was the first to be launched in the UK in 1966 and is now one of the leading credit card businesses in Europe, with a fast growing business in the US.
What we do
UK
Our activities include all Barclaycard branded credit cards, the FirstPlus secured lending business and the retail finance business Barclays Partner Finance. In addition to these activities, Barclaycard also operates partnership cards with leading brands including SkyCard and the Thomas Cook Credit Card. We continue to lead the UK market with the launch in 2007 of Barclaycard OnePulse, the UK’s first contactless card, and Barclaycard Breathe, the first card to donate a percentage of its profits to carbon reduction projects around the world.
International
Barclaycard’s international presence is extensive. In 2007, 3 out of every 4 cards issued by Barclaycard were in markets outside the UK and we have 8.8m international cards in issue. We currently operate across Europe and the United States where we are the fastest growing credit card business. In Scandinavia we operate through Entercard, a joint venture with Swedbank.
Barclaycard Business
Barclaycard Business processes card payments for 93,000 retailers and merchants and issues credit and charge cards to corporate customers and the UK Government. It is Europe’s number one issuer of Visa Commercial Cards with over 137,000 corporate customers.
Highlights
£2,486 m
Income
£540 m
Profit before tax
Performance indicators
Download table as excel file| Key facts | 2007 | 2006 | 2005 | ||
| Number of Barclaycard UK customers | 10.1m | 9.8m | 11.2m | ||
| Number of retailer relationships | 93,000 | 93,000 | 93,000 | ||
| UK credit cards – | |||||
| average outstanding balances | £8.4bn | £9.4bn | £10.1bn | ||
| UK credit cards – | |||||
| average extended credit balances | £6.9bn | £8.0bn | £8.6bn | ||
| International average | |||||
| outstanding balance | £3.9bn | £2.9bn | £2.1bn | ||
| International – | |||||
| average extended credit balances | £3.3bn | £2.5bn | £1.8bn | ||
| International – cards in issue | 8.8m | 6.4m | 4.3m | ||
| Secured lending – | |||||
| average outstanding balance | £4.3bn | £3.4bn | £2.2bn | ||
Global Retail and Commercial Banking
Barclaycard
Performance
Download table as excel file| 2007 | 2006 | 2005 | ||||||
| £m | £m | £m | ||||||
| Income statement information | ||||||||
| Net interest income | 1,394 | 1,383 | 1,231 | |||||
| Net fee and commission income | 1,080 | 1,106 | 1,065 | |||||
| Net investment income | 11 | 15 | – | |||||
| Net premiums from insurance contracts | 40 | 18 | 6 | |||||
| Other income | (26) | – | – | |||||
| Total income | 2,499 | 2,522 | 2,302 | |||||
| Net claims and benefits incurred on insurance contracts | (13) | (8) | (3) | |||||
| Total income net of insurance claims | 2,486 | 2,514 | 2,299 | |||||
| Impairment charges | (838) | (1,067) | (753) | |||||
| Net income | 1,648 | 1,447 | 1,546 | |||||
| Operating expenses excluding amortisation of intangible assets | (1,073) | (964) | (891) | |||||
| Amortisation of intangible assets | (28) | (17) | (17) | |||||
| Operating expenses | (1,101) | (981) | (908) | |||||
| Share of post-tax results of associates and joint ventures | (7) | (8) | 1 | |||||
| Profit before tax | 540 | 458 | 639 | |||||
| Balance sheet information | ||||||||
| Loans and advances to customers | £20.1bn | £18.2bn | £16.5bn | |||||
| Total assets | £22.2bn | £20.1bn | £18.2bn | |||||
| Performance ratios | ||||||||
| Return on average economic capital | 19% | 16% | 24% | |||||
| Cost:income ratio | 44% | 39% | 39% | |||||
| Cost:net income ratio | 67% | 68% | 59% | |||||
| Other financial measures | ||||||||
| Risk Tendency | £945m | £1,135m | £865m | |||||
| Economic profit | £183m | £137m | £269m | |||||
| Risk weighted assets | £19.9bn | £17.0bn | £13.6bn | |||||
2007/06
Barclaycard profit before tax increased 18% (£82m) to £540m (2006: £458m), driven by strong international growth coupled with a significant improvement in UK impairment charges. Other income included a £27m loss on disposal of part of the Monument card portfolio. 2006 results reflected a property gain of £38m.
Income decreased 1% (£28m) to £2,486m (2006: £2,514m) reflecting strong growth in Barclaycard International, offset by a decline in UK Cards revenue resulting from a more cautious approach to lending in the UK and a £27m loss on disposal of part of the Monument card portfolio.
Net interest income increased 1% (£11m) to £1,394m (2006: £1,383m) due to strong organic growth in international average extended credit card balances, up 32% to £3.3bn and average secured consumer lending balances up 26% to £4.3bn, partially offset by lower UK average extended credit card balances which fell 14% to £6.9bn. Margins fell to 6.59% (2006: 7.13%) due to higher average base rates across core operating markets and a change in the product mix with an increased weighting to secured lending.
Net fee and commission income fell 2% (£26m) to £1,080m (2006: £1,106m) with growth in Barclaycard International offset by our actions in response to the Office of Fair Trading’s findings on late and overlimit fees in the UK which were implemented in August 2006.
Impairment charges improved 21% (£229m) to £838m (2006: £1,067m) reflecting reduced flows into delinquency, lower levels of arrears and lower charge-offs in UK Cards. We made changes to our impairment methodologies to standardise our approach and in anticipation of Basel II. The net positive impact of these changes in methodology was offset by an increase in impairment charges in Barclaycard International and secured consumer lending.
Operating expenses increased 12% (£120m) to £1,101m (2006: £981m). Excluding a property gain of £38m in 2006, operating expenses increased 8% (£82m) reflecting continued investment in expanding our businesses in Europe and the US. Costs in the UK businesses were broadly flat, with investment in new UK product innovations such as Barclaycard OnePulse being funded out of operating efficiencies.
Barclaycard International continued to gain momentum, delivering a profit before tax of £77m against a loss before tax of £36m in 2006. We concluded seven new credit card partnership deals across Western Europe. The Entercard joint venture continued to perform ahead of plan and entered the Danish market, extending its reach across the Scandinavian region. Barclaycard US was profitable, with very strong average balance growth and a number of new card partnerships including Lufthansa Airlines and Princess Cruise Lines.
2006/05
Barclaycard profit before tax decreased 28% (£181m) to £458m (2005: £639m) as good income growth was more than offset by higher impairment charges and increased costs from the continued development of international businesses.
Income increased 9% (£215m) to £2,514m (2005: £2,299m) reflecting very strong momentum in Barclaycard US and strong performances in Barclaycard Business, FirstPlus, SkyCard and continental European markets.
Net interest income increased 12% (£152m) to £1,383m (2005: £1,231m) due to strong growth in International average extended credit card balances up 39% to £2.5bn (2005: £1.8bn) and average secured consumer lending balances up 55% to £3.4bn (2005: £2.2bn), partly offset by UK average extended credit card balances down 7% to £8.0bn (2005: £8.6bn), reflecting the impact of tighter lending criteria.
Margins increased to 7.13% (2005: 7.11%), due to the impact of increased card rates and a reduced proportion of promotional rate balances in the UK.
Net fee and commission income increased 4% (£41m) to £1,106m (2005: £1,065m) as a result of increased contributions from Barclaycard International, SkyCard, FirstPlus and Barclaycard Business. Barclaycard reduced its late and overlimit fee charges in the UK on 1st August 2006 in response to the Office of Fair Trading’s findings.
Investment income of £15m (2005: £nil) represents the gain arising from the sale of part of the stake in MasterCard Inc, following its flotation.
Impairment charges increased 42% (£314m) to £1,067m (2005: £753m). The increase was driven by a rise in delinquent balances and increased numbers of bankruptcies and Individual Voluntary Arrangements. As a result of management action in 2005 and 2006 to tighten lending criteria and improve collection processes, the flows of new delinquencies reduced, and levels of arrears balances declined in the second half of 2006 in UK cards.
Operating expenses increased 8% (£73m) to £981m (2005: £908m). This included a £38m gain from the sale and leaseback of property. Excluding this item, underlying operating expenses increased 12% (£111m) to £1,019m. This was largely as a result of continued investment in Barclaycard International, particularly Barclaycard US, and the development of UK partnerships.
Barclaycard International continued its growth strategy in the continental European business delivering solid results. The Entercard joint venture, which is based in Scandinavia, performed ahead of plan. Barclaycard International loss before tax reduced to £36m (2005: loss £44m), including the loss before tax for Barclaycard US of £57m (2005: loss £60m). Barclaycard US continued to perform ahead of expectations, delivering very strong growth in balances and customer numbers and creating a number of new partnerships including US Airways, Barnes & Noble, Travelocity and Jo-Ann Stores.
Barclaycard UK customer numbers declined 1.4 million to 9.8 million (2005: 11.2 million). This reflected the closure of 1.5 million accounts that had been inactive.
Global Retail and Commercial Banking
International Retail and Commercial Banking
Who we are
Our business comprises: International Retail and Commercial Banking – excluding Absa and International Retail and Commercial Banking – Absa.
What we do
International Retail and Commercial Banking provides banking services to Barclays personal and corporate customers outside the UK. The products and services offered to customers are tailored to meet customer needs and the regulatory and commercial environments within each country.
Highlights
£3,523 m
Income
£935 m
Profit before tax
Performance indicators
Download table as excel file| Key facts | 2007 | 2006 | 2005 | ||
| Number of distribution points | 2,349 | 1,705 | 1,598 | ||
Global Retail and Commercial Banking
International Retail and Commercial Banking
Performance
Download table as excel file| 2007 | 2006 | 2005 | ||||||
| £m | £m | £m | ||||||
| Income statement information | ||||||||
| Net interest income | 1,890 | 1,653 | 1,045 | |||||
| Net fee and commission income | 1,210 | 1,221 | 644 | |||||
| Net trading income | 69 | 6 | 3 | |||||
| Net investment income | 179 | 188 | 143 | |||||
| Principal transactions | 248 | 194 | 146 | |||||
| Net premiums from insurance contracts | 372 | 351 | 227 | |||||
| Other income | 87 | 74 | 60 | |||||
| Total income | 3,807 | 3,493 | 2,122 | |||||
| Net claims and benefits incurred under insurance contracts | (284) | (244) | (206) | |||||
| Total income net of insurance claims | 3,523 | 3,249 | 1,916 | |||||
| Impairment charges | (252) | (167) | (33) | |||||
| Net income | 3,271 | 3,082 | 1,883 | |||||
| Operating expenses excluding amortisation of intangible assets | (2,279) | (2,077) | (1,289) | |||||
| Amortisation of intangible assets | (77) | (85) | (47) | |||||
| Operating expenses | (2,356) | (2,162) | (1,336) | |||||
| Share of post-tax results of associates and joint ventures | 7 | 49 | 46 | |||||
| Profit on disposal of subsidiaries, associates and joint ventures | 13 | 247 | – | |||||
| Profit before tax | 935 | 1,216 | 593 | |||||
| Balance sheet information | ||||||||
| Loans and advances to customers | £70.1bn | £53.2bn | £49.2bn | |||||
| Customer accounts | £28.8bn | £22.1bn | £22.4bn | |||||
| Total assets | £89.5bn | £68.6bn | £63.4bn | |||||
| Performance ratios | ||||||||
| Return on average economic capital | 16% | 36% | 17% | |||||
| Cost:income ratio | 67% | 67% | 70% | |||||
| Cost:net income ratio | 72% | 70% | 71% | |||||
| Other financial measures | ||||||||
| Risk Tendency | £475m | £220m | £175m | |||||
| Economic profit | £150m | £493m | £179m | |||||
| Risk weighted assets | £53.3bn | £40.8bn | £41.0bn | |||||
2007/06
International Retail and Commercial Banking profit before tax decreased £281m to £935m (2006: £1,216m). International Retail and Commercial Banking – excluding Absa profit before tax in 2006 included a £247m gain on the sale of associate FirstCaribbean International Bank and a £41m share of its post-tax results. Profit before tax in 2007 included gains from the sale and leaseback of property of £23m (2006: £55m). Very strong profit growth in Rand terms in International Retail and Commercial Banking – Absa was offset by a 12% decline in the average value of the Rand.
A significant investment was made in infrastructure and distribution, including the opening of 644 new branches and sales centres across Western Europe, Emerging Markets and Absa.
2006/05
International Retail and Commercial Banking profit before tax increased £623m to £1,216m (2005: £593m). The increase reflected the inclusion of a full year’s profit before tax from International Retail and Commercial Banking – Absa of £698m (2005 a : £298m) and a profit of £247m on the disposal of Barclays interest in FirstCaribbean International Bank.
Global Retail and Commercial Banking
International Retail and Commercial Banking – excluding Absa
Who we are
Western Europe
This business area includes our retail and commercial banking operations in Spain, Portugal, France and Italy. Barclays has operated in Spain for over 30 years, and is the leading foreign bank and the sixth largest banking group overall. We have tripled the branch network in Portugal over the last two years, becoming the largest non-Iberian bank. Barclays is a leading affluent banking brand and a recognised product innovator in France. We are one of the leading mortgage providers in Italy and in 2007 established full retail and commercial banking operations.
Emerging Markets
The Emerging Markets team is responsible for Barclays businesses in the growing markets of Africa, India and the Middle East. Barclays has long-standing commercial banking operations in the UAE and in 2007 launched retail banking operations in India and the UAE. In Africa, Barclays operates in Botswana, Egypt, Ghana, Kenya, Mauritius, Seychelles, Tanzania, Uganda, Zambia and Zimbabwe offering a range of retail and commercial banking products.
What we do
We provide a full range of banking services, including current accounts, savings, investments, mortgages and loans to our international personal and corporate customers.
International Retail and Commercial Banking works closely with all other parts of the group to leverage synergies from product and service propositions.
Highlights
£1,339 m
Income
£246 m
Profit before tax
Performance indicators
Download table as excel file| Key facts | 2007 | 2006 | 2005 | ||
| Number of distribution points | 1,348 | 867 | 798 | ||
| Average European mortgage balances | €30.1m | €25.9m | €21.2m | ||
| Average liabilities balances | £12,484m | £10,423m | £8,983m | ||
| Average asset balances | £33,321m | £27,210m | £22,743m | ||
Global Retail and Commercial Banking
International Retail and Commercial Banking – excluding Absa
Performance
Download table as excel file| 2007 | 2006 | 2005 | ||||||
| £m | £m | £m | ||||||
| Income statement information | ||||||||
| Net interest income | 753 | 604 | 557 | |||||
| Net fee and commission income | 425 | 366 | 316 | |||||
| Net trading income | 68 | 17 | 31 | |||||
| Net investment income | 109 | 66 | 88 | |||||
| Principal transactions | 177 | 83 | 119 | |||||
| Net premiums from insurance contracts | 145 | 111 | 129 | |||||
| Other income | 9 | 20 | 23 | |||||
| Total income | 1,509 | 1,184 | 1,144 | |||||
| Net claims and benefits incurred under insurance contracts | (170) | (138) | (162) | |||||
| Total income net of insurance claims | 1,339 | 1,046 | 982 | |||||
| Impairment charges | (79) | (41) | (14) | |||||
| Net income | 1,260 | 1,005 | 968 | |||||
| Operating expenses excluding amortisation of intangible assets | (1,007) | (765) | (706) | |||||
| Amortisation of intangible assets | (16) | (9) | (6) | |||||
| Operating expenses | (1,023) | (774) | (712) | |||||
| Share of post-tax results of associates and joint ventures | 1 | 40 | 39 | |||||
| Profit on disposal of subsidiaries, associates and joint ventures | 8 | 247 | – | |||||
| Profit before tax | 246 | 518 | 295 | |||||
| Balance sheet information | ||||||||
| Loans and advances to customers | £39.3bn | £29.0bn | £25.3bn | |||||
| Customer accounts | £15.7bn | £11.0bn | £10.2bn | |||||
| Total assets | £52.2bn | £38.2bn | £34.0bn | |||||
| Performance ratios | ||||||||
| Return on average economic capital | 11% | 36% | 17% | |||||
| Cost:income ratio | 76% | 74% | 73% | |||||
| Cost:net income ratio | 81% | 77% | 74% | |||||
| Other financial measures | ||||||||
| Risk Tendency | £220m | £75m | £75m | |||||
| Economic profit | £20m | £309m | £89m | |||||
| Risk weighted assets | £29.7bn | £20.1bn | £20.2bn | |||||
2007/06
International Retail and Commercial Banking – excluding Absa profit before tax decreased 53% (£272m) to £246m (2006: £518m). Profit before tax in 2006 included a £247m gain on the sale of associate FirstCaribbean International Bank and a £41m share of its post-tax results. Profit before tax in 2007 included gains from the sale and leaseback of property in 2007 of £23m (2006: £55m). The performance reflected very strong income growth driven by a rapid growth in distribution points to 1,348 (2006: 867) as well as the launch of new businesses in India and UAE and a full retail and commercial banking offering in Italy.
Income increased 28% (£293m) to £1,339m (2006: £1,046) driven by excellent performances in Western Europe and Emerging Markets.
Net interest income increased 25% (£149m) to £753m (2006: £604m). Total average customer loans increased 22% (£6.1bn) to £33.3bn (2006: £27.2bn) with lending margins broadly stable. Mortgage balance growth in Western Europe was very strong, with average Euro balances up 16% (€4.2bn) to €30.1bn (2006: €25.9bn). Average customer deposits increased 20% (£2.1bn) to £12.5bn (2006: £10.4bn) driven by growth in Western Europe and Emerging Markets.
Net fee and commission income grew 16% (£59m) to £425m (2006: £366m), reflecting strong performances in Western Europe driven by the expansion of the customer base.
Principal transactions increased £94m to £177m (2006: £83m) reflecting gains on equity investments and higher foreign exchange income across Emerging Markets.
Impairment charges rose 93% (£38m) to £79m (2006: £41m). The increase reflected very strong balance sheet growth in 2006 and 2007 and the impact of lower releases in 2007.
Operating expenses grew 32% (£249m) to £1,023m (2006: £774m) driven by the rapid expansion of the distribution network across all regions and investment in people and infrastructure to support future growth across the franchise. Operating expenses included property sales in Spain of £23m (2006: £55m).
Western Europe continued to perform strongly. Profit before tax increased 30% (£56m) to £245m (2006: £189m). Barclays Spain profit before tax increased 53% (£72m) to £207m (2006: £135m) driven by increased customer lending, higher service commissions and equity investment realisations. France also performed well driven by good growth in the balance sheet, higher fees and commissions and good cost control. Income grew very strongly in Italy as a result of the opening of new branches and the roll-out of a complete retail and commercial banking offering but this was more than offset by higher investment costs. Profit before tax decreased in Portugal, with very strong income growth offset by increased investment in the expansion of the business.
Emerging Markets profit before tax increased 25% (£28m) to £142m (2006: £114m) reflecting a very strong rise in income across a broad range of markets, with particularly strong growth in Egypt, UAE, Kenya, Ghana, Tanzania, Uganda and India. The income growth benefited from increased investment in the business across all geographies, including branch openings and the launch of retail banking services in India and the UAE.
2006/05
International Retail and Commercial Banking – excluding Absa profit before tax increased 76% (£223m) to £518m (2005: £295m), including a gain on the disposal of the interest in FirstCaribbean International Bank of £247m. This reflected good growth in continental Europe offset by a decline in profits in Africa caused by higher impairment, and increased costs reflecting a step change in the rate of organic investment in the business.
Income increased 7% (£64m) to £1,046m (2005: £982m).
Net interest income increased 8% (£47m) to £604m (2005: £557m), reflecting strong balance sheet growth in continental Europe, Africa and the Middle East, and the development of the corporate business in Spain.
Total average customer loans increased 20% to £27.2bn (2005: £22.7bn). Mortgage balance growth in continental Europe was particularly strong, with average Euro balances up 22%. There was a modest decline in lending margins partly driven by a greater share of mortgage assets as a proportion of the total book in continental Europe. Average customer deposits increased 16% to £10.4bn (2005: £9.0bn), with deposit margins stable.
Net fee and commission income increased 16% (£50m) to £366m (2005: £316m). This reflected a strong performance from the Spanish funds business, where average assets under management increased 11%, together with very strong growth in France, including the first full year contribution of the ING Ferri business which was acquired on 1st July 2005. Net fee and commission income showed solid growth in Africa and the Middle East.
Principal transactions decreased £36m to £83m (2005: £119m). 2005 included £23m from the redemption of preference shares in FirstCaribbean International Bank.
Impairment charges increased £27m to £41m (2005: £14m). This reflected the absence of one-off recoveries of £12m which arose in 2005 in Africa and the Middle East, and strong balance sheet growth across the businesses.
Operating expenses increased 9% (£62m) to £774m (2005: £712m). This included gains from the sale and leaseback of property in Spain of £55m. Operating expenses also included incremental investment expenditure of £25m to expand the distribution network and enhance IT and operational capabilities.
Barclays Spain continued to perform strongly. Profit before tax increased 21% (£30m) to £171m (2005: £141m), excluding net one-off gains on asset sales of £32m (2005: £8m) and integration costs of £43m (2005: £57m). This was driven by the continued realisation of benefits from Banco Zaragozano, together with strong growth in assets under management and solid growth in mortgages.
Africa and the Middle East profit before tax decreased 9% (£12m) to £126m (2005: £138m) driven by higher impairment charges reflecting one-off recoveries of £12m that arose in 2005 and an increase in investment expenditure.
Profit before tax increased strongly in Portugal reflecting good flows of new customers and increased business volumes. France also performed well as a result of good organic growth and the acquisition of ING Ferri.
The profit on disposal of subsidiaries, associate and joint ventures of £247m (2005: £nil) comprised the gain on the sale of Barclays interest in FirstCaribbean International Bank. The share of post-tax results of FirstCaribbean International Bank included in 2006 was £41m (2005: £37m).
Global Retail and Commercial Banking
International Retail and Commercial Banking – Absa
Who we are
This business represents Barclays consolidation of Absa, excluding Absa Capital which is included in Barclays Capital.
International Retail and Commercial Banking – Absa comprises four operating divisions: Retail Banking, Commercial Banking, African operations and a Bancassurance division. (Barclays Bank PLC owns 59% of Absa Group Limited).
What we do
International Retail and Commercial Banking – Absa serves retail customers through a variety of distribution channels and offers a full range of banking services, including current and deposit accounts, mortgages, instalment finance, credit cards, bancassurance products and wealth management services. It also offers customised business solutions for commercial and large corporate customers.
Highlights
£2,184 m
Income
£689 m
Profit before tax
Performance indicators
| Key facts | 2007 | 2006 | 2005 | |||||
| Number of branches | 837 | 800 | 759 | |||||
| Number of sales centres | 164 | 38 | 41 | |||||
| Number of distribution points | 1,001 | 838 | 800 | |||||
| Number of ATMs | 7,884 | 7,411 | 5,835 | |||||
| Number of retail customers | 9.7m | 8.3m | 7.7m | |||||
| Number of corporate customers | 100,000 | 84,000 | 79,000 | |||||
Global Retail and Commercial Banking
International Retail and Commercial Banking – Absa
Performance
Download table as excel file| 2007 | 2006 | 2005 | ||||||
| £m | £m | £m | ||||||
| Income statement information | ||||||||
| Net interest income | 1,137 | 1,049 | 488 | |||||
| Net fee and commission income | 785 | 855 | 328 | |||||
| Net trading income/(expense) | 1 | (11) | (28) | |||||
| Net investment income | 70 | 122 | 55 | |||||
| Principal transactions | 71 | 111 | 27 | |||||
| Net premiums from insurance contracts | 227 | 240 | 98 | |||||
| Other income | 78 | 54 | 37 | |||||
| Total income | 2,298 | 2,309 | 978 | |||||
| Net claims and benefits incurred under insurance contracts | (114) | (106) | (44) | |||||
| Total income net of insurance claims | 2,184 | 2,203 | 934 | |||||
| Impairment charges | (173) | (126) | (19) | |||||
| Net income | 2,011 | 2,077 | 915 | |||||
| Operating expenses excluding amortisation of intangible assets | (1,272) | (1,312) | (583) | |||||
| Amortisation of intangible assets | (61) | (76) | (41) | |||||
| Operating expenses | (1,333) | (1,388) | (624) | |||||
| Share of post-tax results of associates and joint ventures | 6 | 9 | 7 | |||||
| Profit on disposal of subsidiaries, associates and joint ventures | 5 | – | – | |||||
| Profit before tax | 689 | 698 | 298 | |||||
| Balance sheet information | ||||||||
| Loans and advances to customers | £30.8bn | £24.2bn | £23.9bn | |||||
| Customer accounts | £13.1bn | £11.1bn | £12.2bn | |||||
| Total assets | £37.3bn | £30.4bn | £29.4bn | |||||
| Performance ratios | ||||||||
| Return on average economic capital | 23% | 34% | 36% | |||||
| Cost:income ratio | 61% | 63% | 67% | |||||
| Cost:net income ratio | 66% | 67% | 37% | |||||
| Other financial measures | ||||||||
| Risk Tendency | £255m | £145m | £100m | |||||
| Economic profit | £130m | £184m | £90m | |||||
| Risk weighted assets | £23.6bn | £20.7bn | £20.8bn | |||||
2007/06
Absa Group Limited’s operating profit before income tax increased 23% (R2,650m) to R14,067m (2006: R11,417m) reflecting very good performances from Retail Banking, Absa Capital and Absa Corporate and Business Bank. Absa Group Limited delivered a return on equity of 27.2% (2006: 27.4%). Key factors impacting the results included: very strong asset and income growth; the diversification of earnings in favour of investment banking and commercial banking; an increased retail credit impairment charge, and the achievement of the Absa – Barclays synergy target 18 months ahead of schedule.
Net operating income grew 17% (R4,852m) to R33,185m (2006: R28,333m).
Net interest income grew 27% (R4,003m) to R18,890m (2006: R14,887m) driven by growth in loans and advances and deposits at improved margins. Loans and advances to customers increased 22% from 31st December 2006 driven by growth of 23% in mortgages and 23% in credit cards.
Non-interest income grew 11% (R1,709m) to R16,728m (2006: R15,019m) driven by increased transaction volumes in retail banking and Absa Corporate and Business Bank, as well as advisory fees from Absa Capital.
Impairment charges on loans and advances increased 55% (R860m) to R2,433m (2006: R1,573m) from the cyclically low levels of recent years. Arrears in retail portfolios increased driven by interest rate increases in 2006 and 2007. Impairment charges as a percentage of loans and advances was 0.58%, ahead of the 0.45% charge in 2006 but within long-term industry averages.
Operating expenses increased 15% (R2,353m) to R18,442m, (2006: R16,089m) resulting from increased investment in new distribution outlets and staff in order to support continued growth in volumes and customers. The cost:income ratio improved two percentage points from 54% to 52%.
Excellent progress was made with the realisation of synergy benefits of R1,428m to date thus achieving the synergy target of R1.4bn, 18 months ahead of schedule.
Impact on Barclays results
Absa Group Limited's profit before tax of R14,067m (2006: R11,417m) is translated into Barclays results at an average exchange value of R14.11/£ (2006: R12.47/£), a 12% depreciation in the average value of the Rand against Sterling. Consolidation adjustments reflected the amortisation of intangible assets of £55m (2006: £75m) and internal funding and other adjustments of £98m (2006: £72m). The resulting profit before tax of £844m (2006: £769m) is represented within International Retail and Commercial Banking – Absa £689m, (2006: £698m) and Barclays Capital, £155m (2006: £71m).
Absa Group Limited’s total assets were R640,909m (2006: R495,112m), growth of 29%. This is translated into Barclays results at a period-end exchange rate of R13.64/£ (2006: R13.71/£). The capital investment was hedged against currency movements in 2007.
2006/05
International Retail and Commercial Banking – Absa profit before tax increased 134% to £698m (2005: £298m) reflecting the full year to 31st December 2006 compared with the five months ended 31st December 2005. Barclays acquired a controlling stake in Absa Group Limited on 27th July 2005.
In the commentary below, the comparable period referred to, for illustrative purposes only, is the proforma full year to 31st December 2005 and is based on performance in Rand.
Absa Group Limited’s profit before tax increased 24% reflecting a very good performance from banking operations, with retail, corporate and business banking operations performing exceptionally well. Absa Group Limited delivered a return on equity of 27.4% (2005: 25.6%). Key factors impacting the results included very strong asset growth, strong revenue growth, an increased credit impairment charge, the realisation of synergies from leveraging Barclays expertise and economies of scale and the sale of non-core operations. The South African economy continued to expand at a solid pace with real growth expected to be about 4.9% for 2006 (2005: 5.1%).
Net interest income grew 27%. Loans and advances to customers increased 26% underpinned by very strong growth in mortgages, credit cards and commercial property finance.
Non-interest income increased 12% reflecting higher transaction volumes, strong growth in insurance related earnings and gains on asset sales.
As expected the impairment charge on loans and advances increased from the very low levels of the prior year, particularly in Absa Home Loans, Absa Card and Retail Banking Services.
Operating expenses increased 14% resulting from increased investment in the business in order to support continued growth in volumes and customers.
Excellent progress was made with the realisation of synergy benefits. In 2006 synergies of R753m were delivered, in excess of the target originally communicated for the year. Integration costs for the period were in line with expectations.
Impact on Barclays results
Absa Group Limited’s profit before tax of R11,417m is translated into Barclays results at an average exchange rate for 2006 of R12.47/£ (2005: R11.57/£). Consolidation adjustments reflected the amortisation of intangible assets of £75m and internal funding and other adjustments of £72m. The resulting profit before tax of £769m (2005: £337m) is represented with International Retail and Commercial Banking – Absa £698m, (2005: £298m) and Barclays Capital, £71m (2005: £39m).
Absa Group Limited’s total assets at 31st December 2006 were R495,112m (31st December 2005: R404,561m), growth of 22%. This is translated into Barclays results at a year-end exchange rate of R13.71/£ (31st December 2005: R10.87/£). The consolidation of total assets reflected the impact of the 21% depreciation in the Rand largely offsetting the growth in the Rand balance sheet.
Investment Banking and Investment Management
Barclays Capital
Who we are
Barclays Capital is a leading global investment bank providing large corporate, institutional and government clients with solutions to their financing and risk management requirements.
What we do
Barclays Capital service a wide variety of client needs, from capital raising and managing foreign exchange, interest rate, equity and commodity risks, through to providing technical advice and expertise.
Activities are organised into three principal areas: Rates, which includes fixed income, foreign exchange, commodities, emerging markets, money markets, prime services and equity products; Credit, which includes primary and secondary activities for loans and bonds for investment grade, high yield and emerging market credit, as well as hybrid capital products, asset based finance, mortgage backed securities, credit derivatives, structured capital markets and large asset leasing; and Private Equity. Barclays Capital includes Absa Capital, the investment banking business of Absa.
Barclays Capital works closely with all other parts of the Group to leverage synergies from client relationships and product capabilities.
Highlights
£7,119 m
Income
£2,335 m
Profit before tax
Performance indicators
Download table as excel file| 2007 | 2006 | 2005 | |||||||||
| League | League | League | |||||||||
| table | Issuance | table | Issuance | table | Issuance | ||||||
| Key facts | position | value | position | value | position | value | |||||
| All international bonds | |||||||||||
| (all currencies) (US$bn) | 2nd | 273.2 | 1st | 271.9 | 2nd | 183.6 | |||||
| Europe overall debt | |||||||||||
| (US$bn) | 1st | 226.5 | 1st | 259.5 | 2nd | 221.6 | |||||
| Sterling bonds (£bn) | 1st | 15.5 | 1st | 27.3 | 1st | 23.0 | |||||
| US investment grade | |||||||||||
| corporate bonds | |||||||||||
| (US$bn) | 10th | 4.7 | 7th | 6.0 | 5th | 9.9 | |||||
Investment Banking and Investment Management
Barclays Capital
Performance
Download table as excel file| 2007 | 2006 | 2005 | |||||||||||||||||
| £m | £m | £m | |||||||||||||||||
| Income statement information | |||||||||||||||||||
| Net interest income | 1,179 | 1,158 | 1,065 | ||||||||||||||||
| Net fee and commission income | 1,235 | 952 | 776 | ||||||||||||||||
| Net trading income | 3,739 | 3,562 | 2,231 | ||||||||||||||||
| Net investment income | 953 | 573 | 413 | ||||||||||||||||
| Principal transactions | 4,692 | 4,135 | 2,644 | ||||||||||||||||
| Other income | 13 | 22 | 20 | ||||||||||||||||
| Total income | 7,119 | 6,267 | 4,505 | ||||||||||||||||
| Impairment charges and other credit provisions | (846) | (42) | (111) | ||||||||||||||||
| Net income | 6,273 | 6,225 | 4,394 | ||||||||||||||||
| Operating expenses excluding amortisation of intangible assets | (3,919) | (3,996) | (2,961) | ||||||||||||||||
| Amortisation of intangible assets | (54) | (13) | (2) | ||||||||||||||||
| Operating expenses | (3,973) | (4,009) | (2,963) | ||||||||||||||||
| Share of post-tax results of associates and joint ventures | 35 | – | – | ||||||||||||||||
| Profit before tax | 2,335 | 2,216 | 1,431 | ||||||||||||||||
| Balance sheet information | |||||||||||||||||||
| Total assets | £839.7bn | £657.9bn | £601.2bn | ||||||||||||||||
| Performance ratios | |||||||||||||||||||
| Return on average economic capital | 33% | 41% | 34% | ||||||||||||||||
| Cost:income ratio | 56% | 64% | 66% | ||||||||||||||||
| Cost:net income ratio | 63% | 64% | 67% | ||||||||||||||||
| Compensation:net income ratio | 47% | 49% | 51% | ||||||||||||||||
| Other financial measures | |||||||||||||||||||
| Risk Tendency | £140m | £95m | £110m | ||||||||||||||||
| Economic profit | £1,172m | £1,181m | £706m | ||||||||||||||||
| Risk weighted assets | £169.1bn | £137.6bn | £116.7bn | ||||||||||||||||
| Average DVaR | £42.0m | £37.1m | £32.0m | ||||||||||||||||
| Average net income generated per member of staff (’000) | £466 | £575 | £498 | ||||||||||||||||
| Corporate lending portfolio | £52.3bn | £40.6bn | £40.1bn | ||||||||||||||||
Performance
2007/06
Barclays Capital delivered profits ahead of the record results achieved in 2006 despite challenging trading conditions in the second half of the year. Profit before tax increased 5% (£119m) to £2,335m (2006: £2,216m). There was strong income growth across the Rates businesses and excellent results in Continental Europe, Asia and Africa demonstrating the breadth of the client franchise. Net income was slightly ahead at £6,273m (2006: £6,225m) and costs were tightly managed, declining slightly year on year. Absa Capital delivered very strong growth in profit before tax to £155m (2006: £71m).
The US sub-prime driven market dislocation affected performance in the second half of 2007. Exposures relating to US sub-prime were actively managed and declined over the period. Barclays Capital’s 2007 results reflected net losses related to the credit market turbulence of £1,635m, of which £795m was included in income, net of £658m gains arising from the fair valuation of notes issued by Barclays Capital. Impairment charges included £840m against ABS CDO Super Senior exposures, other credit market exposures and drawn leveraged finance underwriting positions.
Income increased 14% (£852m) to £7,119m (2006: £6,267m) as a result of very strong growth in interest rate, currency, equity, commodity and emerging market asset classes. There was excellent income growth in continental Europe, Asia, and Africa. Average DVaR increased 13% to £42m (2006: £37.1m) in line with income.
Secondary income, comprising principal transactions (net trading income and net investment income), is mainly generated from providing client financing and risk management solutions. Secondary income increased 11% (£578m) to £5,871m (2006: £5,293m).
Net trading income increased 5% (£177m) to £3,739m (2006: £3,562m) with strong contributions from fixed income, commodities, equities, foreign exchange and prime services businesses. These were largely offset by net losses in the business affected by sub-prime mortgage related write downs. The general widening of credit spreads that occurred over the course of the second half of 2007 also reduced the carrying value of the £57bn of issued notes held at fair value on the balance sheet, resulting in gains of £658m. Net investment income increased 66% (£380m) to £953m (2006: £573m) as a result of a number of private equity realisations, investment disposals in Asia and structured capital markets transactions. Net interest income increased 2% (£21m) to £1,179m (2006: £1,158m), driven by higher contributions from money markets. The corporate lending portfolio increased 29% to £52.3bn (2006: £40.6bn), largely due to an increase in drawn leveraged finance positions and a rise in drawn corporate loan balances.
Primary income, which comprises net fee and commission income from advisory and origination activities, grew 30% (£283m) to £1,235m (2006: £952m), with good contributions from bonds and loans.
Impairment charges and other credit provisions of £846m included £722m against ABS CDO Super Senior exposures, £60m from other credit market exposures and £58m relating to drawn leveraged finance underwriting positions. Other impairment charges on loans and advances amounted to a release of £7m (2006: £44m release) before impairment charges on available for sale assets of £13m (2006: £86m).
Operating expenses decreased 1% (£36m) to £3,973m (2006: £4,009m). The cost:net income ratio improved to 63% (2006: 64%) and the compensation cost:net income ratio improved by two percentage points to 47% (2006: 49%). Performance related pay, discretionary investment spend and short term contractor resources represented 42% (2006: 50%) of the cost base. Amortisation of intangible assets of £54m (2006: £13m) principally related to mortgage service rights.
Total headcount increased 3,000 during 2007 to 16,200 (2006: 13,200) including 800 from the acquisition of EquiFirst. The majority of organic growth was in Asia Pacific.
2006/05
Profit before tax increased 55% (£785m) to £2,216m (2005: £1,431m). This was the result of a very strong income performance, driven by higher business volumes, continued growth in client activity and favourable market conditions. Net income increased 42% (£1,831m) to £6,225m (2005: £4,394m). Profit before tax for Absa Capital was £71m (2005: £39m).
Income increased 39% (£1,762m) to £6,267m (2005: £4,505m) as a result of very strong growth across the Rates, Credit and Private Equity businesses. Income increased in all geographic regions. Average DVaR increased 16% to £37.1m (2005: £32.0m) significantly below the rate of income growth.
Secondary income increased 43% (£1,584m) to £5,293m (2005: £3,709m).
Net trading income increased 60% (£1,331m) to £3,562m (2005: £2,231m) with very strong contributions across the Rates and Credit
businesses, in particular, commodities, fixed income, equities, credit derivatives and emerging markets. The performance was driven by higher volumes of client led activity and favourable market conditions. Net investment income increased 39% (£160m) to £573m (2005: £413m) driven by investment realisations, primarily in Private Equity, offset by reduced contributions from credit products. Net interest income increased 9% (£93m) to £1,158m (2005: £1,065m) driven by a full year contribution from Absa Capital.
Primary income grew 23% (£176m) to £952m (2005: £776m). This reflected higher volumes and continued market share gains in a number of key markets, with strong contributions from issuances in bonds, European leveraged loans and convertibles.
Impairment charges of £42m (2005: £111m), including impairment on available for sale assets of £86m (2005: £nil), were 62% lower than prior year reflecting recoveries and the continued benign wholesale credit environment.
Operating expenses increased 35% (£1,046m) to £4,009m (2005: £2,963m), reflecting higher performance related costs, increased levels of activity and continued investment across the business. The cost:net income ratio improved to 64% (2005: 67%) and the compensation to net income ratio improved to 49% (2005: 51%). Performance related pay, discretionary investment spend and short-term contractor resource costs represented 50% of operating expenses (2005: 46%). Amortisation of intangible assets principally relates to mortgage service rights obtained as part of the purchase of HomEq.
Total headcount increased 3,300 during 2006 to 13,200 (2005: 9,900) and included 1,300 from the acquisition of HomEq. Organic growth was broadly based across all regions and reflected further investments in the front office, systems development and control functions to support continued business expansion.
Investment Banking and Investment Management
Barclays Global Investors
Who we are
Barclays Global Investors (BGI) is one of the world's largest asset managers and a leading global provider of investment management products and services. We are the global leader in assets and products in the exchange traded funds business, with over 320 funds for institutions and individuals trading globally. BGI’s investment philosophy is founded on managing all dimensions of performance: a consistent focus on controlling risk, return and cost.
With a 3,000-plus strong workforce, we currently have over £1trn in assets under management, for 3,000 clients around the world.
What we do
BGI offers structured investment strategies such as indexing, global asset allocation and risk controlled active products including hedge funds and provides related investment services such as securities lending, cash management and portfolio transition services.
BGI collaborates with the other Barclays businesses, particularly Barclays Capital and Barclays Wealth, to develop and market products and leverage capabilities to better serve the client base.
Highlights
£1,926 m
Income
£734 m
Profit before tax
Performance indicators
Download table as excel file| Key facts | 2007 | 2006 | 2005 | ||||
| Net new assets in period (£) | £42bn | £37bn | £48bn | ||||
| Assets under management | |||||||
| (US$): | US$2,079bn | US$1,814bn | US$1,513bn | ||||
| – indexed | US$1,225bn | US$1,108bn | US$980bn | ||||
| – iShares | US$408bn | US$287bn | US$193bn | ||||
| – active | US$446bn | US$419bn | US$340bn | ||||
| Net new assets in period (US$) | US$86bn | US$68bn | US$88bn | ||||
| Number of iShares products | 324 | 191 | 149 | ||||
| Number of institutional clients | 3,000 | 2,900 | 2,800 | ||||
Investment Banking and Investment Management
Barclays Global Investors
Performance
Download table as excel file| 2007 | 2006 | 2005 | |||||||||||||||||
| £m | £m | £m | |||||||||||||||||
| Income statement information | |||||||||||||||||||
| Net interest (expense)/income | (8) | 10 | 15 | ||||||||||||||||
| Net fee and commission income | 1,936 | 1,651 | 1,297 | ||||||||||||||||
| Net trading income | 5 | 2 | 2 | ||||||||||||||||
| Net investment (expense)/income | (9) | 2 | 4 | ||||||||||||||||
| Principal transactions | (4) | 4 | 6 | ||||||||||||||||
| Other income | 2 | – | – | ||||||||||||||||
| Total income | 1,926 | 1,665 | 1,318 | ||||||||||||||||
| Operating expenses excluding amortisation of intangible assets | (1,184) | (946) | (775) | ||||||||||||||||
| Amortisation of intangible assets | (8) | (5) | (4) | ||||||||||||||||
| Operating expenses | (1,192) | (951) | (779) | ||||||||||||||||
| Profit before tax | 734 | 714 | 540 | ||||||||||||||||
| Balance sheet information | |||||||||||||||||||
| Total assets | £89.2bn | £80.5bn | £80.9bn | ||||||||||||||||
| Performance ratios | |||||||||||||||||||
| Return on average economic capital | 241% | 228% | 248% | ||||||||||||||||
| Cost:income ratio | 62% | 57% | 59% | ||||||||||||||||
| Other financial measures | |||||||||||||||||||
| Economic profit | £430m | £376m | £299m | ||||||||||||||||
| Risk weighted assets | £2.0bn | £1.4bn | £1.5bn | ||||||||||||||||
| Average net income generated per member of staff (’000) | £631 | £666 | £628 | ||||||||||||||||
2007/06
Barclays Global Investors delivered solid growth in profit before tax, which increased 3% (£20m) to £734m (2006: £714m). Very strong US Dollar income and strong profit growth was partially offset by the 8% depreciation in the average value of the US Dollar against Sterling.
Income grew 16% (£261m) to £1,926m (2006: £1,665m).
Net fee and commission income grew 17% (£285m) to £1,936m (2006: £1,651m). This was primarily attributable to increased management fees and securities lending. Incentive fees increased 6% (£12m) to £198m (2006: £186m). Higher asset values, driven by higher market levels and good net new inflows, contributed to the growth in income.
Operating expenses increased 25% (£241m) to £1,192m (2006: £951m) as a result of significant investment in key product and channel growth initiatives and in infrastructure as well as growth in the underlying business. Operating expenses included charges of £80m (2006: £nil) related to selective support of liquidity products managed in the US. The cost:income ratio rose five percentage points to 62% (2006: 57%).
Headcount increased 700 to 3,400 (2006: 2,700). Headcount increased in all geographical regions and across product groups and the support functions, reflecting continued investment to support further growth.
Total assets under management increased 13% (£117bn) to £1,044bn (2006: £927bn) comprising £42bn of net new assets, £12bn attributable to the acquisition of Indexchange Investment AG (Indexchange), £66bn of favourable market movements and £3bn of adverse exchange movements. In US$ terms assets under management increased 15% US$265bn to US$2,079bn (2006: US$1,814bn), comprising US$86bn of net new assets, US$23bn attributable to acquisition of Indexchange, US$127bn of favourable market movements and US$29bn of positive exchange rate movements.
2006/05
Barclays Global Investors delivered another year of outstanding results. Profit before tax increased 32% (£174m) to £714m (2005: £540m), reflecting very strong income growth and higher operating margins. The performance was broadly based across products, distribution channels and geographies.
Net fee and commission income increased 27% (£354m) to £1,651m (2005: £1,297m). This growth was attributable to increased management fees, particularly in the iShares and active businesses, and securities lending, offset by lower incentive fees. Incentive fees decreased 9% (£18m) to £186m (2005: £204m). Higher asset values, driven by higher market levels and good net new inflows, contributed to the growth in income.
Operating expenses increased 22% (£172m) to £951m (2005: £779m) as a result of significant investment in key growth initiatives, ongoing
investment in product development and infrastructure and higher performance-based expenses. The cost:income ratio improved two percentage points to 57% (2005: 59%).
Total headcount rose 400 to 2,700 (2005: 2,300). Headcount increased in all regions, across product groups and the support functions, reflecting continued investment to support strategic initiatives.
Total assets under management increased 5% (£46bn) to £927bn (2005: £881bn) primarily due to net new inflows of £37bn. The positive market move impact of £98bn was largely offset by £89bn of adverse exchange rate movements. In US$ terms assets under management increased by US$301bn to US$1,814bn (2005: US$1,513bn), comprising US$68bn of net new assets, US$177bn of favourable market movements and US$56bn of positive exchange rate movements.
Investment Banking and Investment Management
Barclays Wealth
Who we are
Barclays Wealth focuses on high net worth, affluent and intermediary clients worldwide. We have over 6,900 staff in 20 countries and have total client assets of £133bn. Barclays Wealth includes the closed life assurance activities of Barclays and Woolwich, and Walbrook, an independent fiduciary services company acquired in 2007.
What we do
Barclays Wealth provides private banking, asset and investment management, stockbroking, offshore banking, wealth structuring and financial planning services.
We work closely with all other parts of the Group to leverage synergies from client relationships and product capabilities, for example, offering world-class investment solutions with institutional quality products and services from Barclays Capital and Barclays Global Investors.
Highlights
£1,287 m
Income
£307 m
Profit before tax
Performance indicators
Download table as excel file| Key facts | 2007 | 2006 | 2005 | ||
| Total client assets | £132.5bn | £116.1bn | £97.5bn | ||
Investment Banking and Investment Management
Barclays Wealth
Performance
Download table as excel file| 2007 | 2006 | 2005 | |||||||||||||||||
| £m | £m | £m | |||||||||||||||||
| Income statement information | |||||||||||||||||||
| Net interest income | 431 | 392 | 346 | ||||||||||||||||
| Net fee and commission income | 739 | 674 | 593 | ||||||||||||||||
| Net trading income | 3 | 2 | – | ||||||||||||||||
| Net investment income | 52 | 154 | 264 | ||||||||||||||||
| Principal transactions | 55 | 156 | 264 | ||||||||||||||||
| Net premiums from insurance contracts | 195 | 210 | 195 | ||||||||||||||||
| Other income | 19 | 16 | 11 | ||||||||||||||||
| Total income | 1,439 | 1,448 | 1,409 | ||||||||||||||||
| Net claims and benefits incurred on insurance contracts | (152) | (288) | (375) | ||||||||||||||||
| Total income net of insurance claims | 1,287 | 1,160 | 1,034 | ||||||||||||||||
| Impairment charges |