UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
August 2007
Barclays PLC and
Barclays Bank PLC
(Names of Registrants)
1 Churchill Place
London E14 5HP
England
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No x
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b):
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This Report is a joint Report on Form 6-K filed by Barclays PLC and Barclays
Bank PLC. All of the issued ordinary share capital of Barclays Bank PLC is
owned by Barclays PLC.
This Report comprises:
Information given to The London Stock Exchange and furnished pursuant to
General Instruction B to the General Instructions to Form 6-K.
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EXHIBIT INDEX
Interim Results - 02 August 2007
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each of
the registrants has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BARCLAYS PLC
(Registrant)
Date: August 02, 2007 By: /s/ Patrick Gonsalves
----------------------
Patrick Gonsalves
Deputy Secretary
BARCLAYS BANK PLC
(Registrant)
Date: August 02, 2007 By: /s/ Patrick Gonsalves
----------------------
Patrick Gonsalves
Joint Secretary
Interim Results
Announcement
30th June 2007
2nd August 2007
BARCLAYS PLC
INTERIM RESULTS ANNOUNCEMENT FOR 2007
TABLE OF CONTENTS
PAGE
Summary of key information 2
Performance summary 3
Financial highlights 4
Group Chief Executive's Review 5
Group Finance Director's Review 7
Consolidated income statement 11
Consolidated balance sheet 12
Results by business 14
Results by nature of income and expense 42
Analysis of amounts included in the balance sheet 57
Performance management 61
Additional information 69
Notes 75
Consolidated statement of recognised income and expense 90
Summary consolidated cash flow statement 91
Other information 92
Appendix 1-Absa Group Limited results 94
Index 96
BARCLAYS PLC, 1 CHURCHILL PLACE, LONDON, E14 5HP, ENGLAND, UNITED KINGDOM.
TELEPHONE: +44 (0) 20 7116 1000. COMPANY NO. 48839
The information in this announcement, which was approved by the Board of
Directors on 1st August 2007, does not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985 (the 'Act'). Statutory accounts
for the year ended 31st December 2006, which included certain information
required for the Joint Annual Report on Form 20-F of Barclays PLC and Barclays
Bank PLC to the US Securities and Exchange Commission (SEC) and which contained
an unqualified audit report under Section 235 of the Act and which did not make
any statements under Section 237 of the Act, have been delivered to the
Registrar of Companies in accordance with Section 242 of the Act.
Unless otherwise stated, the income statement analyses compare the six months to
30th June 2007 to the corresponding six months of 2006. Balance sheet
comparisons, unless otherwise stated, relate to the corresponding position at
31st December 2006. Average balance sheet comparisons relate the six months to
30th June 2007 to the corresponding six months of 2006.
Forward-looking statements
This document contains certain forward-looking statements within the meaning of
Section 21E of the US Securities Exchange Act of 1934, as amended, and Section
27A of the US Securities Act of 1933, as amended, with respect to certain of
Barclays plans and its current goals and expectations relating to its future
financial condition and performance and which involve a number of risks and
uncertainties. Barclays cautions readers that no forward-looking statement is a
guarantee of future performance and that actual results could differ materially
from those contained in the forward-looking statements. Forward-looking
statements sometimes use words such as 'aim', 'anticipate', 'target', 'expect',
'estimate', 'intend', 'plan', 'goal', 'believe', or other words of similar
meaning. Examples of forward-looking statements include, among others,
statements regarding Barclays future financial position, income growth,
impairment charges, business strategy, projected costs and estimates of capital
expenditure and revenue benefits, projected levels of growth in the banking and
financial markets, future financial and operating results, future financial
position, projected costs and estimates of capital expenditures, the
consummation of the business combination between ABN AMRO and Barclays within
the expected timeframe and on the expected terms (if at all), the benefits of
the business combination transaction involving ABN AMRO and Barclays, including
the achievement of synergy targets, and plans and objectives for future
operations of ABN AMRO, Barclays and the combined group and other statements
that are not historical fact.
By their nature, forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances which are subject to, among other
things, domestic and global economic and business conditions, market related
risks such as changes in interest rates and exchange rates, the policies and
actions of governmental and regulatory authorities, changes in legislation, the
timing and successful implementation of the proposed business combination
between ABN AMRO and Barclays, progress in the integration of Absa into the
Group's business and the achievement of synergy targets related to Absa, the
outcome of pending and future litigation, and the impact of competition-a number
of which factors are beyond the Group's control. As a result, the Group's actual
future results may differ materially from the plans, goals, and expectations set
forth in the Group's forward-looking statements. Additional risks and factors
are identified in Barclays filings with the U.S. Securities and Exchange
Commission (SEC) including Barclays Annual Report on Form 20-F for the fiscal
year ended December 31, 2006, which are available on Barclays website at
www.barclays.com and on the SEC's website at www.sec.gov. Any forward-looking
statements made by or on behalf of Barclays speak only as of the date they are
made. Barclays does not undertake to update forward-looking statements to
reflect any changes in expectations with regard thereto or any changes in
events, conditions or circumstances on which any such statement is based. The
reader should, however, consult any additional disclosures that Barclays has
made or may make in documents they have filed or may file with the SEC.
Future SEC Filings : Important Information
In connection with the proposed business combination transaction between ABN
AMRO and Barclays, Barclays has filed with the SEC a Registration Statement on
Form F-4 ("Form F-4"), which includes a preliminary version of the Barclays
offer document/prospectus. The Form F-4 has not yet become effective. Barclays
expects that it will also file with the SEC a Statement on Schedule TO and other
relevant materials. In addition, ABN AMRO expects that it will file with the SEC
a Recommendation Statement on Schedule 14D-9 and other relevant materials.
Following the Form F-4 being declared effective by the SEC, Barclays intends to
mail the final offer document/prospectus to holders of ABN AMRO ordinary shares
located in the United States and Canada and to holders of ABN AMRO ADSs wherever
located.
Such final offer document/prospectus, however, is not currently available. For
information regarding the potential transaction, investors are urged to read the
final offer document/prospectus and any documents regarding the potential
transaction if and when they become available, because they will contain
important information.
Investors will be able to obtain a free copy of the Form F-4, the final offer
document/prospectus and other filings without charge, at the SEC's website
(www.sec.gov) if and when such documents are filed with the SEC. Copies of such
documents may also be obtained from ABN AMRO and Barclays without charge, if and
when they are filed with the SEC.
This document shall not constitute an offer to buy sell or issue or the
solicitation of an offer to buy, sell or issue any securities, nor shall there
be any sale of securities in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
Absa Definitions
'Absa Group Limited' refers to the consolidated results of the South African
group of which the parent company is listed on the Johannesburg Stock Exchange
(JSE Limited) in which Barclays owns a controlling stake.
'Absa' refers to the results for Absa Group Limited as consolidated into the
results of Barclays PLC; translated into Sterling with adjustments for
amortisation of intangible assets, certain head office adjustments, transfer
pricing and minority interests.
'International Retail and Commercial Banking-Absa' is the portion of Absa's
results that is reported by Barclays within the International Retail and
Commercial Banking business.
'Absa Capital' is the portion of Absa's results that is reported by Barclays
within the Barclays Capital business.
Glossary of terms
The cost:income ratio is defined as operating expenses compared to total income
net of insurance claims.
The cost:net income ratio is defined as operating expenses compared to total
income net of insurance claims less impairment charges.
The Return on average economic capital is defined as attributable profit
compared to average economic capital.
'Income' refers to total income net of insurance claims, unless otherwise
specified.
SUMMARY OF KEY INFORMATION
'Barclays made good progress on all key strategic priorities and delivered
another very strong set of results for shareholders. Double-digit growth in
earnings and dividends reflects an outstanding performance from Barclays
Capital, good profit growth in UK Banking, an improvement in UK unsecured
impairment and strong investment across the business'.
John Varley, Group Chief Executive
Half-year ended
Group Results 30.06.07 30.06.06 % Change
GBPm GBPm
Total income net of insurance
claims 11,902 10,969 9
Impairment charges (959) (1,057) (9)
Operating expenses (6,847) (6,269) 9
Profit before tax 4,101 3,673 12
Profit attributable to minority
interests (309) (294) 5
Profit attributable to equity
holders of the parent 2,634 2,307 14
Economic profit 1,609 1,385 16
p p
Earnings per share 41.4 36.3 14
Diluted earnings per share 40.1 35.1 14
Dividend per share 11.5 10.5 10
% %
Tier 1 Capital ratio 7.7 7.2
Return on average shareholders'
equity 25.6 25.8
Profit before tax by business(1) GBPm GBPm % Change
UK Banking 1,363 1,253 9
--------- ---------
UK Retail Banking 651 600 9
UK Business Banking 712 653 9
--------- ---------
Barclaycard 272 326 (17)
International Retail and
Commercial Banking 452 512 (12)
Barclays Capital 1,660 1,246 33
Barclays Global Investors 388 364 7
Barclays Wealth 173 129 34
(1) Summary excludes Head Office functions and other operations. Full analysis
of business profit before tax is on page 18.
PERFORMANCE SUMMARY
- Strong financial results reflect successful execution of strategy.
- Income growth of 9% was broadly based by business and geography and
reflected a particularly strong performance from Barclays Capital.
- Operating expenses increased 9% as we continued to invest for future growth
through increased headcount and distribution.
- Profit before tax increased 12% despite adverse currency movements against
Sterling.
- Earnings per share increased 14%.
- Approximately 50% of profits came from outside the UK.
- In UK Retail Banking, good income growth (partially offset by settlements on
overdraft fees), coupled with well controlled costs and improved impairment,
drove profit growth of 9%. UK Business Banking profit rose 9%. This was mainly
attributable to strong growth in fees and well controlled costs.
- We are on track to deliver a further two percentage point improvement in the
cost:income ratio of UK Banking during 2007, adding to the six percentage
point improvement achieved during 2005 and 2006.
- Headline profit of Barclaycard declined 17%. More than all of the headline
profit decline was due to the impact of property gains in the first half of
2006 and a loss on the disposal of part of the Monument portfolio during the
first half of 2007. Profit more than doubled relative to the second half of
2006 as a consequence of the reduction in impairment charges.
- In International Retail and Commercial Banking - excluding Absa, the first
half of 2006 included the gain on the sale of a property together with the
contribution of our former associate FirstCaribbean International Bank.
Adjusted for these, International Retail and Commercial Banking - excluding
Absa generated strong profit growth in the first half of 2007, driven by
significant increases in business volumes. Absa Group Limited announced very
strong profit growth in Rand terms, but the 20% depreciation of the Rand
versus Sterling caused period on period profit of International Retail and
Commercial Banking - Absa to be broadly steady.
- Barclays Capital delivered record results, with its two best quarters
ever. Profit rose 33%. This was due to a very strong income performance driven
by continued strong growth across asset classes and regions, in particular
across the structured credit and credit derivatives, equities and commodities
platforms, underpinned by the strength of the client franchise and its focus on
delivering risk management and financing solutions.
- In Barclays Global Investors profit rose 7% in Sterling, while both income and
profit were up substantially more in US Dollars. This reflected the continued
strength of the franchise and significant new flows and revenues into its
suite of exchange traded funds, alternative asset classes and quantitative
active strategies.
- The profit of Barclays Wealth rose 34%. This reflected strong income growth
from increased client funds and transaction volumes partially offset by
continued investment in the business.
- The Tier 1 capital ratio was stable at 7.7%.
FINANCIAL HIGHLIGHTS
Half-year ended
30.06.07 31.12.06 30.06.06
RESULTS GBPm GBPm GBPm
----------
Net interest income 4,589 4,739 4,404
Net fee and commission income 3,812 3,525 3,652
Principal transactions 3,207 2,001 2,575
Net premiums from insurance contracts 442 550 510
Other income 100 153 61
-------- -------- --------
Total income 12,150 10,968 11,202
Net claims and benefits paid on
insurance contracts (248) (342) (233)
-------- -------- --------
Total income net of insurance claims 11,902 10,626 10,969
Impairment charges (959) (1,097) (1,057)
-------- -------- --------
Net income 10,943 9,529 9,912
Operating expenses (6,847) (6,405) (6,269)
Share of post-tax results of
associates and joint ventures - 16 30
Profit on disposal of subsidiaries,
associates and JVs 5 323 -
-------- -------- --------
Profit before tax 4,101 3,463 3,673
-------- -------- --------
Profit attributable to equity holders
of the parent 2,634 2,264 2,307
Economic profit 1,609 1,319 1,385
PER ORDINARY SHARE p p p
--------------------
Earnings 41.4 35.6 36.3
Diluted earnings 40.1 34.5 35.1
Dividend 11.5 20.5 10.5
Net asset value 320 303 276
PERFORMANCE RATIOS % % %
--------------------
Return on average shareholders' equity 25.6 24.7 25.8
Cost:income ratio 58 60 57
Cost:net income ratio 63 67 63
30.06.07 31.12.06 30.06.06
BALANCE SHEET GBPm GBPm GBPm
---------------
Shareholders' equity excluding
minority interests 20,973 19,799 17,988
Minority interests 7,748 7,591 7,551
-------- -------- --------
Total shareholders' equity 28,721 27,390 25,539
Subordinated liabilities 15,067 13,786 13,629
-------- -------- --------
Total capital resources 43,788 41,176 39,168
-------- -------- --------
Total assets 1,158,262 996,787 986,124
Risk weighted assets 318,043 297,833 290,924
CAPITAL RATIOS % % %
----------------
Tier 1 ratio 7.7 7.7 7.2
Risk asset ratio 11.8 11.7 11.6
GROUP CHIEF EXECUTIVE'S REVIEW
I am pleased to report another strong half year for Barclays. We have delivered
excellent results for shareholders - with double-digit growth in earnings and
dividends - through the disciplined execution of our strategic priorities.
When I became chief executive three years ago, I set out for shareholders the
priorities we had identified for executing our strategy. We said we would strive
for higher growth; that profit diversification outside the UK would help us
achieve this growth; that an increasing ratio of non-net interest income to net
interest income would be a sign of increasing financial health and quality of
income; that we would improve our standing in the eyes of our customers, our
colleagues and our communities; that we would turn around the performance of our
UK Retail Bank; that we expected significant future growth in Barclays Capital
and Barclays Global Investors; and that our Wealth business would become an
engine for growth. We have been delivering on each of these priorities since
2004, applying in each of the businesses our common principle of 'earn, invest
and grow' - that is, investing strongly in the pursuit of growth while offering
our shareholders good short-term returns.
Our strong first half performance in 2007 demonstrates continued progress on
these priorities, and continued success in execution. Profit increased by a
further 12% on top of the outstanding 37% profit growth achieved at the interim
stage last year; earnings per share increased 14%, and we increased our dividend
by 10%. Our return on equity was 26%.
Our ambition is to be one of the handful of universal banks leading the global
financial services industry. We believe the universal banking model enables us
best to serve our customers and clients, and to capture superior returns on
equity.
Just a few years ago, Barclays was primarily a UK clearing bank. Our UK Banking
business lies at the heart of the strength of the Barclays brand and we serve
millions of customers in the United Kingdom. But we've been able to expand
rapidly outside the United Kingdom, such that, even as our UK businesses have
grown strongly, half of our profit is made outside the UK and over two-thirds of
our profit is made outside of the two main UK Banking businesses.
These half year results demonstrate that we are doing the things we said we
would. Our strategy of striving for higher growth via greater profit
diversification is generating increasing returns for our shareholders. We
believe that the capabilities we have assembled within Barclays equip us
strongly to take advantage of the significant opportunities that lie ahead for
the financial services industry.
We judge our performance by how we convert relevance to customers and clients
into Total Shareholder Return (TSR) and economic profit, measuring ourselves
against multi-year performance goals. In 2003, we set a four-year goal of
delivering top quartile TSR relative to a peer group of financial services
companies. We estimated that achieving that goal would require the generation of
annual growth in economic profit of 10%-13% per annum, which implied a
cumulative total of between GBP6.5bn and GBP7bn of economic profit from the
beginning of 2004 to the end of 2007. As we head into the last half year of our
current four year goal period, we rank in the second quartile in TSR over the
period. But we have already delivered a cumulative total of GBP7.6bn economic
profit, well ahead of the target, with a further six months to go.
We will set new economic profit and TSR goals at the beginning of next year.
As we report another set of strong interim results we are, of course, also
heavily engaged in pursuit of a merger with ABN AMRO. Our goal in achieving that
merger is the same as our standalone goal: higher growth and higher returns for
shareholders as a result. We believe that in combination with ABN AMRO we would
create a powerful new competitive force on behalf of customers and employees; a
universal bank with greater product and customer reach than Barclays standalone;
and the opportunity to capture a significant and sustained increment over the
already high growth that we expect to achieve in the years ahead. Our pursuit of
the merger does not change our strategy, but it would facilitate significant
acceleration.
We have recently announced that China Development Bank (CDB) and Temasek will
become significant shareholders in Barclays. I am delighted to welcome them as
major shareholders. I believe that their investment indicates that they share
our belief in the growth prospects of Barclays, as well as in the growth
prospects of Barclays in a combination with ABN AMRO.
We are particularly excited about the opportunities presented by the strategic
collaboration agreement with CDB. We believe that the further earnings growth
unlocked by that agreement is material, that it creates further exposure to Asia
which fits well with our strategy, and that it will create further benefits for
all shareholders.
We enter the second half of 2007 with good business momentum across Barclays,
driven by a strong first half resulting from high levels of customer activity.
Whilst we report at a time of turbulence in the capital markets, Barclays
Capital's net income for July was ahead of last year, and the UK and global
economic outlook continues to be broadly positive. We are well positioned to
grow further in the years ahead.
John Varley
Group Chief Executive
GROUP FINANCE DIRECTOR'S REVIEW
Group performance
In the first half of 2007, Barclays continued to make substantial progress on
its strategic priorities, further diversifying the profit base and delivering
record financial results. Profits and earnings grew at a double digit rate
relative to the very strong performance recorded in the first half of 2006.
Profit before tax increased 12% to GBP4,101m (2006: GBP3,673m). This was
achieved despite significant adverse currency movements against Sterling.
Earnings per share rose 14% to 41.4p (2006: 36.3p). Profit grew at a rate higher
than the rate of growth of both daily value at risk and risk weighted assets.
Group income rose 9% to GBP11,902m (2006: GBP10,969m). Income growth, which was
led by a particularly strong performance in Barclays Capital, was broadly based
by business and by geography.
Group operating expenses increased 9% to GBP6,847m (2006: GBP6,269m). We
continued to invest in future business growth, with increased headcount in
Barclays Capital, Barclays Global Investors and Absa, and significant growth in
the branch network in International Retail and Commercial Banking. Operating
expenses included gains on the sale of properties of GBP147m (2006: GBP238m)
largely in UK Retail Banking, which were substantially reinvested in the
business.
Group impairment charges improved 9% to GBP959m (2006: GBP1,057m). The 2006
impairment charge included GBP83m relating to available for sale assets. The
improvement also reflected reduced flows into delinquency and lower arrears
balances in the UK cards and consumer loans business. The number of UK personal
customers missing a payment continued to fall. UK Retail Banking mortgage
impairment charges remained negligible. Impairment levels in the wholesale
sector continued to be stable, with low levels of defaults.
Business performance - Global Retail and Commercial Banking
UK Banking continued to pursue the strategic priority of building the best bank
in the UK. Profit before tax increased 9% to GBP1,363m driven by solid growth in
income. The cost:income ratio improved one percentage point to 48%. Excluding
the impact of settlement on overdraft fees from prior years, the cost:income
ratio improved two percentage points. On this basis we continue to target a two
percentage point improvement in the cost:income ratio for the full year 2007.
UK Retail Banking profit before tax grew 9% to GBP651m. Income of GBP2,121m
included the impact of settlements on overdraft fees from prior years of GBP87m.
Excluding this item, income grew 5%. There was a strong performance in Personal
Customer Retail Savings and good performances in Local Business and Current
Accounts. We performed strongly in mortgage origination, processing capacity and
retentions leading to a net market share of 6% of net lending in the first half
of the year. We invested substantially all of the GBP113m gains on property
sales into the business, upgrading distribution capabilities including
completing the migration of Woolwich customers to Barclays products and
infrastructure; transforming the performance of the mortgage business; improving
the product range; and improving core operations and processes. Overall costs
were well controlled and in line with the prior year. Impairment charges fell 9%
benefiting from active management of consumer credit.
UK Business Banking delivered good growth in profit before tax of 9% to GBP712m.
Growth in loans and deposits with improved margins and strong growth in fees
drove income up 8%. Costs rose 3%, leading to a two percentage point improvement
in the cost:income ratio to 33%.
Barclaycard profit before tax of GBP272m was 17% lower than the first half of
2006 but more than double the second half of 2006. Steady income reflected
strong growth in Barclaycard International offset by a reduction in UK card
extended credit balances. Impairment charges fell 9% to GBP443m. More selective
customer recruitment, limit management, and improved collections led to a
reduction of flows into delinquency and lower levels of arrears balances. Costs
rose 16%, of which 9% is attributable to a property gain included in the 2006
figures. We continued to invest in Barclaycard International and in UK
partnerships. Barclaycard US continued to make progress and moved into profit.
International Retail and Commercial Banking profit before tax declined 12% to
GBP452m. Results in 2006 reflected a GBP55m gain on the sale and leaseback of
property, and a GBP21m post tax profit share from the associate FirstCaribbean
International Bank (FCIB). Results in 2007 reflected the impact of the 20%
depreciation of the Rand against Sterling.
International Retail and Commercial Banking - excluding Absa achieved profit
before tax of GBP142m (2006: GBP195m). Excluding the prior year GBP55m gain on
the sale and leaseback of property and a GBP21m post tax profit share from the
associate FCIB, profit before tax grew 19%. Income growth of 16% was driven by
strong balance sheet growth and increased net fees and commissions income.
Excluding the prior year property gain, costs grew 15% as we continued to invest
in distribution capacity and technology. We opened 173 new branches in the first
half of 2007.
International Retail and Commercial Banking - Absa Sterling profit fell GBP7m to
GBP310m, after absorbing a 20% decline in the value of the Rand. Absa Group
Limited profit before tax grew 32% in Rand terms, reflecting very strong growth
in Retail Banking, Absa Corporate and Business Bank and Absa Capital. Loans and
advances increased 20% from 30th June 2006 and deposits grew 13%. We have
delivered synergies of R650m for the half year to 30th June 2007. On an
annualised basis we are therefore close to delivering the R1.4bn targeted by
December 2009.
Business Performance - Investment Banking and Investment Management
Barclays Capital delivered record profit before tax with a 33% increase to
GBP1,660m. Income growth of 21% was broadly based across asset classes and
geographies. Growth was particularly strong in areas where we have invested in
recent years, including commodity, credit and equity products. Profit growth was
accompanied by improvements in productivity: income and profit grew
significantly faster than Daily Value at Risk, risk weighted assets, economic
capital and costs. The cost:net income ratio improved three percentage points to
60%. We continued to invest for future growth, increasing headcount by 2,500,
including 1,400 from the acquisition of EquiFirst, a US mortgage origination
business.
Barclays Global Investors (BGI) profit before tax increased 7% to GBP388m.
Income growth of 12% was primarily attributable to increased management fees,
particularly in the iShares and active businesses, and securities lending.
Profit and income growth were both affected by the 9% depreciation of the US
Dollar against Sterling. BGI costs increased 15% as we continued the strategic
investment programme with a build-out across multiple products and platforms and
ongoing investment to support the growth of the business. The cost:income ratio
rose to 59% (2006: 57%). Assets under management grew US$199bn to US$2 trillion,
including net new assets of $50bn (2006: $30bn).
Barclays Wealth profit before tax rose 34% to GBP173m. This reflected income
growth of 10% driven by increased client funds, greater transaction volumes,
favourable market conditions and increased income from life assurance. Costs
were well controlled as business volumes rose and the cost:income ratio improved
six percentage points to 72% (2006: 78%). Redress costs declined. The business
continued to invest in client-facing staff and infrastructure and to upgrade
technology to build a platform for future growth. Total client assets increased
20% to GBP126.8bn.
Head office functions and other operations
In Head office functions and other operations the loss before tax increased
GBP50m to GBP207m. 2006 results included a GBP59m gain in respect of the hedging
of the translation of the Absa foreign currency earnings.
Capital management
At 30 June 2007, our Tier 1 Capital ratio was stable at 7.7%.
We maintained our progressive approach to dividends and increased the dividend
to shareholders by 10%.
We commenced parallel running for Basel II at the end of 2006 and have since
completed our second parallel run. We continue to expect a modest reduction in
our capital demand under Basel II, with slightly lower risk weighted assets. Our
overall expectation is for our regulatory capital position to be broadly
unchanged. For 2007 we continue to report our capital ratios under Basel I.
Chris Lucas
Group Finance Director
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
-------- -------- --------
Interest income 12,037 11,261 10,544
Interest expense (7,448) (6,522) (6,140)
-------- -------- --------
Net interest income 4,589 4,739 4,404
-------- -------- --------
Fee and commission income 4,292 3,928 4,077
Fee and commission expense (480) (403) (425)
-------- -------- --------
Net fee and commission income 3,812 3,525 3,652
-------- -------- --------
Net trading income 2,811 1,413 2,201
Net investment income 396 588 374
-------- -------- --------
Principal transactions 3,207 2,001 2,575
Net premiums from insurance contracts 442 550 510
Other income 100 153 61
-------- -------- --------
Total income 12,150 10,968 11,202
Net claims and benefits incurred on
insurance contracts (248) (342) (233)
-------- -------- --------
Total income net of insurance claims 11,902 10,626 10,969
Impairment charges (959) (1,097) (1,057)
-------- -------- --------
Net income 10,943 9,529 9,912
-------- -------- --------
Operating expenses excluding amortisation of
intangible assets (6,760) (6,332) (6,206)
Amortisation of intangible assets (87) (73) (63)
-------- -------- --------
Operating expenses (6,847) (6,405) (6,269)
Share of post-tax results of associates and
joint ventures - 16 30
Profit on disposal of subsidiaries,
associates and joint ventures 5 323 -
-------- -------- --------
Profit before tax 4,101 3,463 3,673
Tax (1,158) (869) (1,072)
-------- -------- --------
Profit after tax 2,943 2,594 2,601
-------- -------- --------
Profit attributable to minority interests 309 330 294
Profit attributable to equity holders of the
parent 2,634 2,264 2,307
-------- -------- --------
2,943 2,594 2,601
-------- -------- --------
p p p
Basic earnings per ordinary share 41.4 35.6 36.3
Diluted earnings per ordinary share 40.1 34.5 35.1
Dividends per ordinary share:
Interim dividend 11.5 - 10.5
Final dividend - 20.5 -
Dividend GBP731m GBP1,311m GBP666m
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at
30.06.07 31.12.06 30.06.06
Assets GBPm GBPm GBPm
Cash and balances at central banks 4,785 7,345 6,777
Items in the course of collection from other banks 2,533 2,408 2,600
Trading portfolio assets 217,573 177,867 181,857
Financial assets designated at fair value:
- held on own account 46,171 31,799 18,833
- held in respect of linked liabilities to customers
under investment contracts 92,194 82,798 79,334
Derivative financial instruments 174,225 138,353 136,901
Loans and advances to banks 43,191 30,926 35,330
Loans and advances to customers 321,243 282,300 282,097
Available for sale financial investments 47,764 51,703 53,716
Reverse repurchase agreements and cash collateral
on securities borrowed 190,546 174,090 171,869
Other assets 6,289 5,850 5,866
Current tax assets 345 557 -
Investments in associates and joint ventures 228 228 560
Goodwill 6,635 6,092 5,968
Intangible assets 1,228 1,215 1,125
Property, plant and equipment 2,538 2,492 2,515
Deferred tax assets 774 764 776
--------- -------- --------
Total assets 1,158,262 996,787 986,124
--------- -------- --------
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at
30.06.07 31.12.06 30.06.06
Liabilities GBPm GBPm GBPm
Deposits from banks 87,429 79,562 86,221
Items in the course of collection due to
other banks 2,206 2,221 2,700
Customer accounts 292,444 256,754 253,200
Trading portfolio liabilities
Financial liabilities designated at fair 79,252 71,874 74,719
value 63,490 53,987 43,594
Liabilities to customers under investment
contracts 93,735 84,637 81,380
Derivative financial instruments 177,774 140,697 138,982
Debt securities in issue 118,745 111,137 102,198
Repurchase agreements and cash collateral
on securities lent 181,093 136,956 146,165
Other liabilities 10,908 10,337 10,767
Current tax liabilities 1,003 1,020 592
Insurance contract liabilities, including
unit-linked liabilities 3,770 3,878 3,558
Subordinated liabilities 15,067 13,786 13,629
Deferred tax liabilities 258 282 430
Provisions 527 462 474
Retirement benefit liabilities 1,840 1,807 1,976
--------- -------- --------
Total liabilities 1,129,541 969,397 960,585
--------- -------- --------
Shareholders' equity
Called up share capital 1,637 1,634 1,628
Share premium account 5,859 5,818 5,720
Other reserves 271 390 587
Retained earnings 13,461 12,169 10,279
Less: treasury shares (255) (212) (226)
--------- -------- --------
Shareholders' equity excluding minority
interests 20,973 19,799 17,988
Minority interests 7,748 7,591 7,551
--------- -------- --------
Total shareholders' equity 28,721 27,390 25,539
--------- -------- --------
--------- -------- --------
Total liabilities and shareholders'
equity 1,158,262 996,787 986,124
--------- -------- --------
RESULTS BY BUSINESS
The following section analyses the Group's performance by business. This
reflects the business segment restatements as disclosed on 19th June 2007 (see
page 69). For management and reporting purposes, Barclays is organised into the
following business groupings:
Global Retail and Commercial Banking
- UK Banking, comprising
- UK Retail Banking
- UK Business Banking
- Barclaycard
- International Retail and Commercial Banking, comprising
- International Retail and Commercial Banking - excluding Absa
- International Retail and Commercial Banking - Absa.
Investment Banking and Investment Management
- Barclays Capital
- Barclays Global Investors
- Barclays Wealth
Head office functions and other operations
UK Banking
UK Banking delivers banking solutions to Barclays UK retail and business banking
customers. It offers 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. UK Banking is managed through
two business areas, UK Retail Banking and UK Business Banking.
UK Retail Banking
UK Retail Banking comprises Personal Customers, Home Finance, Local Business,
Consumer Loans and Barclays Financial Planning. This cluster of businesses aims
to build broader and deeper relationships with its Personal and Local Business
customers through providing a wide range of products and financial services.
Personal Customers and Home Finance provide access to current account and
savings products, Woolwich branded mortgages and general insurance. Consumer
Loans provides unsecured loan and protection products and Barclays Financial
Planning provides investment advice and products. Local Business provides
banking services, including money transmission, to small businesses.
UK Business Banking
UK Business Banking provides relationship banking to Barclays larger and medium
business customers in the UK. Customers are served by a network of relationship
and industry sector specialist managers who provide local access to an extensive
range of products and services, as well as offering business information and
support. Customers are also offered access to the products and expertise of
other businesses in the Group, particularly Barclays Capital and Barclaycard. UK
Business Banking provides asset financing and leasing solutions through a
specialist business.
Barclaycard
Barclaycard is a multi-brand credit card business which also processes card
payments for retailers and merchants and issues credit and charge cards to
corporate customers and the UK Government. It is one of Europe's leading credit
card businesses and has an increasing presence in the United States.
In the UK, Barclaycard comprises Barclaycard, SkyCard and FirstPlus secured
lending.
Outside the UK, Barclaycard provides credit cards in the United States, Germany,
Spain, Italy, Portugal, Africa, India and the United Arab Emirates. In the
Nordic region, Barclaycard operates through Entercard, a joint venture with
ForeningsSparbanken (Swedbank).
Barclaycard works closely with other parts of the Group, including UK Retail
Banking, UK Business Banking and International Retail and Commercial Banking, to
leverage their distribution capabilities.
International Retail and Commercial Banking
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 the regulatory and commercial
environments within each country. For reporting purposes the operations are
grouped into two components: International Retail and Commercial Banking -
excluding Absa and International Retail and Commercial Banking - Absa.
International Retail and Commercial Banking works closely with all other parts
of the Group to leverage synergies from product and service propositions.
International Retail and Commercial Banking - excluding Absa
International Retail and Commercial Banking - excluding Absa provides a range of
banking services to retail and corporate customers in Western Europe and
Emerging Markets, including current accounts, savings, investments, mortgages
and loans. Western Europe includes Spain, Italy, France and Portugal. Emerging
Markets includes Africa, India and the Middle East.
International Retail and Commercial Banking - Absa
International Retail and Commercial Banking - Absa represents Barclays
consolidation of Absa, excluding Absa Capital which is included as part of
Barclays Capital. Absa Group Limited is one of South Africa's largest financial
services organisations serving personal, commercial and corporate customers
predominantly in South Africa. 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.
Barclays Capital
Barclays Capital is a leading global investment bank which provides large
corporate, institutional and government clients with solutions to their
financing and risk management needs.
Barclays Capital services 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.
Barclays Global Investors
Barclays Global Investors (BGI) is one of the world's largest asset managers and
a leading global provider of investment management products and services.
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. In addition, BGI is the global leader in
assets and products in the exchange traded funds business, with over 290 funds
for institutions and individuals trading in nineteen markets globally. BGI's
investment philosophy is founded on managing all dimensions of performance: a
consistent focus on controlling risk, return and cost. 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.
Barclays Wealth
Barclays Wealth serves affluent, high net worth and intermediary clients
worldwide, providing private banking, asset management, stockbroking, offshore
banking, wealth structuring, financial planning services and manages the closed
life assurance activities of Barclays and Woolwich in the UK.
Barclays Wealth works closely with all other parts of the Group to leverage
synergies from client relationships and product capabilities.
Head office functions and other operations
Head office functions and other operations comprises:
- Head office and central support functions
- Businesses in transition
- Consolidation adjustments.
Head office and central support functions comprises the following areas:
Executive Management, Finance, Treasury, Corporate Affairs, Human Resources,
Strategy and Planning, Internal Audit, Legal, Corporate Secretariat, Property,
Tax, Compliance and Risk. Costs incurred wholly on behalf of the businesses are
recharged to them.
Businesses in transition principally relate to certain lending portfolios that
are centrally managed with the objective of maximising recovery from the assets.
Consolidation adjustments largely reflect the elimination of intra-segment
transactions.
Analysis of profit attributable to equity holders of the parent
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
UK Banking 1,363 1,293 1,253
-------- -------- --------
UK Retail Banking 651 581 600
UK Business Banking 712 712 653
-------- -------- --------
Barclaycard 272 132 326
International Retail and Commercial
Banking 452 704 512
-------- -------- --------
International Retail and Commercial
Banking-ex Absa 142 323 195
International Retail and Commercial
Banking-Absa 310 381 317
-------- -------- --------
Barclays Capital 1,660 970 1,246
Barclays Global Investors 388 350 364
Barclays Wealth 173 116 129
Head office functions and other
operations (207) (102) (157)
-------- -------- --------
Profit before tax 4,101 3,463 3,673
Tax (1,158) (869) (1,072)
-------- -------- --------
Profit after tax 2,943 2,594 2,601
Profit attributable to minority (309) (330) (294)
interests
-------- -------- --------
Profit attributable to equity holders
of the parent 2,634 2,264 2,307
-------- -------- --------
Total assets
As at
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
UK Banking 153,772 147,576 141,970
-------- -------- --------
UK Retail Banking 84,266 81,692 78,485
UK Business Banking 69,506 65,884 63,485
-------- -------- --------
Barclaycard 20,406 20,082 19,155
International Retail and Commercial
Banking 75,236 68,588 64,916
-------- -------- --------
International Retail and Commercial
Banking-ex Absa 42,434 38,191 35,616
International Retail and Commercial
Banking-Absa 32,802 30,397 29,300
-------- -------- --------
Barclays Capital 796,389 657,922 659,328
Barclays Global Investors 90,440 80,515 77,298
Barclays Wealth 16,663 15,022 14,170
Head office functions and other 5,356 7,082 9,287
operations --------- -------- --------
1,158,262 996,787 986,124
--------- -------- --------
Risk weighted assets
As at
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
UK Banking 93,261 92,981 92,805
-------- -------- --------
UK Retail Banking 42,498 43,020 42,021
UK Business Banking 50,763 49,961 50,784
-------- -------- --------
Barclaycard 17,053 17,035 15,698
International Retail and Commercial Banking 45,299 40,810 41,884
-------- -------- --------
International Retail and Commercial
Banking-ex Absa 23,520 20,082 21,211
International Retail and Commercial
Banking-Absa 21,779 20,728 20,673
-------- -------- --------
Barclays Capital 152,467 137,635 130,533
Barclays Global Investors 1,616 1,375 1,378
Barclays Wealth 6,871 6,077 5,202
Head office functions and other operations 1,476 1,920 3,424
-------- -------- --------
318,043 297,833 290,924
-------- -------- --------
Further analysis of total assets and risk weighted assets, can be found on page
60.
UK Banking
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net interest income 2,270 2,287 2,180
Net fee and commission income 951 985 947
-------- -------- --------
Net trading income 2 - 2
Net investment income 30 11 17
-------- -------- --------
Principal transactions 32 11 19
Net premiums from insurance contracts 87 141 143
Other income 54 61 2
-------- -------- --------
Total income 3,394 3,485 3,291
Net claims and benefits on insurance
contracts (22) (7) (28)
-------- -------- --------
Total income net of insurance claims 3,372 3,478 3,263
Impairment charges (400) (481) (406)
-------- -------- --------
Net income 2,972 2,997 2,857
-------- -------- --------
Operating expenses excluding amortisation
of intangible assets (1,606) (1,782) (1,605)
Amortisation of intangible assets (4) (1) (1)
-------- -------- --------
Operating expenses (1,610) (1,783) (1,606)
Share of post-tax results of associates and
joint ventures 1 3 2
Profit on disposal of subsidiaries,
associates and joint ventures - 76 -
-------- -------- --------
Profit before tax 1,363 1,293 1,253
-------- -------- --------
Cost:income ratio 48% 51% 49%
Cost:net income ratio 54% 59% 56%
Risk Tendency GBP870m GBP790m GBP705m
Return on average economic capital 30% 27% 24%
Economic profit GBP654m GBP734m GBP593m
As at
30.06.07 31.12.06 30.06.06
Loans and advances to customers GBP137.6bn GBP131.0bn GBP127.8bn
Customer accounts GBP144.3bn GBP139.7bn GBP133.4bn
Total assets GBP153.8bn GBP147.6bn GBP142.0bn
Risk weighted assets GBP93.3bn GBP93.0bn GBP92.8bn
Key Facts
Number of UK branches 1,810 2,014 2,014
UK Banking profit before tax increased 9% (GBP110m) to GBP1,363m (2006:
GBP1,253m) driven principally by solid income growth. Gains from the sale and
leaseback of properties of GBP138m (2006: GBP145m) included in operating
expenses were substantially offset by investment expenditure primarily to
accelerate the development of UK Retail Banking.
The cost:income ratio improved one percentage point to 48%. Excluding
settlements on overdraft fees from prior years, the cost:income ratio improved
two percentage points. On this basis, UK Banking continues to target a two
percentage point improvement in 2007, a further extension of the six percentage
point aggregate improvement in 2005 and 2006.
As part of the Woolwich transition and overall investment programme in our UK
distribution network, we have co-located branches within 300 metres of each
other, either to the preferred site or to a new location that best enables us to
serve customer needs.
UK Retail Banking
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net interest income 1,407 1,407 1,358
Net fee and commission income 600 654 636
Net premiums from insurance contracts 87 141 143
Other income 49 42 -
-------- -------- --------
Total income 2,143 2,244 2,137
Net claims and benefits on insurance
contracts (22) (7) (28)
-------- -------- --------
Total income net of insurance claims 2,121 2,237 2,109
Impairment charges (277) (329) (306)
-------- -------- --------
Net income 1,844 1,908 1,803
-------- -------- --------
Operating expenses excluding amortisation
of intangible assets (1,191) (1,328) (1,203)
Amortisation of intangible assets (3) (1) -
-------- -------- --------
Operating expenses (1,194) (1,329) (1,203)
Share of post-tax results of associates
and joint ventures 1 2 -
-------- -------- --------
Profit before tax 651 581 600
-------- -------- --------
Cost:income ratio 56% 59% 57%
Cost:net income ratio 65% 70% 67%
Risk Tendency GBP580m GBP500m GBP430m
Return on average economic capital 28% 30% 26%
Economic profit GBP315m GBP323m GBP266m
As at
30.06.07 31.12.06 30.06.06
Loans and advances to customers GBP77.5bn GBP74.7bn GBP72.2bn
Customer accounts GBP84.5bn GBP82.3bn GBP79.1bn
Total assets GBP84.3bn GBP81.7bn GBP78.5bn
Risk weighted assets GBP42.5bn GBP43.0bn GBP42.0bn
Key Facts
Number of UK current accounts 11.4m 11.5m 11.3m
Number of UK savings accounts 11.1m 11.0m 10.9m
Total UK mortgage balances (residential) GBP65.0bn GBP61.7bn GBP59.1bn
Number of household insurance policies 839,000 825,000 727,000
Number of Local Business customers 637,000 630,000 641,000
UK Retail Banking profit before tax increased 9% (GBP51m) to GBP651m (2006:
GBP600m), driven by good income growth which was offset by settlements on
overdraft fees, well controlled costs and improved impairment.
Income increased GBP12m to GBP2,121m (2006: GBP2,109m). There was strong growth
in Personal Customer Retail Savings and good growth in Personal Customers
Current Accounts and Local Business. This was offset by GBP87m settlements on
overdraft fees from prior years. Excluding this item, income grew GBP99m or 5%.
Net interest income increased 4% (GBP49m) to GBP1,407m (2006: GBP1,358m). 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 GBP80.2bn (2006: GBP74.9bn), supported by the
launch of new products.
Mortgage volumes improved significantly, driven by a focus on improving
capacity, customer service, value and promotion. UK residential mortgage
balances were GBP65.0bn at the end of the period (31st December 2006:
GBP61.7bn), an approximate market share of 6% (31st December 2006: 6%). Gross
advances were 45% higher at GBP10.5bn (2006: GBP7.3bn). Net lending was GBP3.2bn
(2006: net outflow GBP0.3bn), a market share of net lending of 6% (2006: net
outflow 1%). The asset margin was reduced by the flow of new mortgages and base
rate changes. The loan to value ratio within the residential mortgage book on a
current valuation basis was 32% (2006: 34%).
Consumer lending balances showed a moderate fall, reflecting the impact of
tighter lending criteria.
Net fee and commission income decreased 6% (GBP36m) to GBP600m (2006: GBP636m).
There was good current account income growth in Personal Customers and Local
Business. Barclays Financial Planning achieved good income growth through higher
value and structured product sales. This was more than offset by settlements on
overdraft fees.
Net premiums from insurance underwriting activities reduced 39% (GBP56m) to
GBP87m (2006: GBP143m). There continued to be lower customer take-up of loan
protection insurance. Net claims and benefits on insurance contracts fell to
GBP22m (2006: GBP28m).
Other income increased to GBP49m (2006: nil), representing the benefit from
reinsurance.
Impairment charges decreased 9% (GBP29m) to GBP277m (2006: GBP306m) reflecting
lower charges in unsecured consumer loans. This was driven by reduced flows into
delinquency, lower levels of arrears and stable charge-offs.
Operating expenses fell GBP9m to GBP1,194m (2006: GBP1,203m). Gains from the
sale and leaseback of property of GBP113m (2006: GBP116m) were substantially
reinvested in the business to upgrade distribution capabilities, with particular
focus on converting the branch network, improving the product range to meet
customer needs and improving operations and processes.
The cost:income ratio improved one percentage point to 56%.
UK Business Banking
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net interest income 863 880 822
Net fee and commission income 351 331 311
-------- -------- --------
Net trading income 2 - 2
Net investment income 30 11 17
-------- -------- --------
Principal transactions 32 11 19
Other income 5 19 2
-------- -------- --------
Total income 1,251 1,241 1,154
Impairment charges (123) (152) (100)
-------- -------- --------
Net income 1,128 1,089 1,054
-------- -------- --------
Operating expenses excluding amortisation
of intangible assets (415) (454) (402)
Amortisation of intangible assets (1) - (1)
-------- -------- --------
Operating expenses (416) (454) (403)
Share of post-tax results of associates and
joint ventures - 1 2
Profit on disposal of subsidiaries,
associates and joint ventures - 76 -
-------- -------- --------
Profit before tax 712 712 653
-------- -------- --------
Cost:income ratio 33% 37% 35%
Cost:net income ratio 37% 42% 38%
Risk Tendency GBP290m GBP290m GBP275m
Return on average economic capital 31% 39% 35%
Economic profit GBP339m GBP411m GBP327m
As at
30.06.07 31.12.06 30.06.06
Loans and advances to customers GBP60.1bn GBP56.3bn GBP55.6bn
Customer accounts GBP59.8bn GBP57.4bn GBP54.3bn
Total assets GBP69.5bn GBP65.9bn GBP63.5bn
Risk weighted assets GBP50.8bn GBP50.0bn GBP50.8bn
Key Facts
Total number of Business Banking customers 151,000 150,000 147,000
UK Business Banking profit before tax increased 9% (GBP59m) to GBP712m (2006:
GBP653m), driven by continued good income growth. UK Business Banking maintained
its market share of primary customer relationships.
Income increased 8% (GBP97m) to GBP1,251m (2006: GBP1,154m) The uplift in income
was broadly based across income categories.
Net interest income improved 5% (GBP41m) to GBP863m (2006: GBP822m) driven by
solid balance sheet growth. There was continued growth in all business areas, in
particular Larger Business. Average deposit balances increased 6% to GBP46.5bn
(2006: GBP43.7bn) with good growth across product categories. Average lending
balances grew 2% to GBP52.3bn (2006: GBP51.1bn) reflecting the disposal of
GBP1.1bn assets in the vehicle leasing and European vendor finance businesses
sold in the second half of 2006. The liabilities margin improved and the assets
margin was broadly stable.
Net fee and commission income increased 13% (GBP40m) to GBP351m (2006: GBP311m)
due to strong growth in lending fees, syndication fees and transaction related
income.
Income from principal transactions was GBP32m (2006: GBP19m), primarily
reflecting strong gains from venture capital and private equity realisations.
Impairment increased 23% (GBP23m) to GBP123m (2006: GBP100m), mainly as a
consequence of Larger Business credit charges trending towards risk tendency.
Impairment charges in Medium Business and Asset & Sales Financing reduced.
Operating expenses increased 3% (GBP13m) to GBP416m (2006: GBP403m) reflecting
tight cost control. Operating expenses included gains of GBP25m (2006: GBP29m)
on the sale and leaseback of property which were reinvested in the business,
including costs relating to the acceleration of the rationalisation of operating
sites and technology infrastructure.
The cost:income ratio improved two percentage points to 33% (2006: 35%).
Barclaycard
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net interest income 700 705 678
Net fee and commission income 544 544 562
Net trading income 2 - -
Net investment income - - 15
Net premiums from insurance contracts 21 11 7
Other income (27) - -
-------- -------- --------
Total income 1,240 1,260 1,262
Net claims and benefits on insurance
contracts (7) (4) (4)
-------- -------- --------
Total income net of insurance claims 1,233 1,256 1,258
Impairment charges (443) (579) (488)
-------- -------- --------
Net income 790 677 770
-------- -------- --------
Operating expenses excluding amortisation
of intangible assets (505) (527) (437)
Amortisation of intangible assets (11) (9) (8)
-------- -------- --------
Operating expenses (516) (536) (445)
Share of post-tax results of associates
and joint ventures (2) (9) 1
-------- -------- --------
Profit before tax 272 132 326
-------- -------- --------
Cost:income ratio 42% 43% 35%
Cost:net income ratio 65% 79% 58%
Risk Tendency GBP1,000m GBP1,135m GBP1,105m
Return on average economic capital 19% 12% 20%
Economic profit GBP101m GBP22m GBP115m
As at
30.06.07 31.12.06 30.06.06
Loans and advances to customers GBP18.3bn GBP18.2bn GBP17.4bn
Total assets GBP20.4bn GBP20.1bn GBP19.2bn
Risk weighted assets GBP17.1bn GBP17.0bn GBP15.7bn
Key Facts
Number of Barclaycard UK customers 9.6m 9.8m 11.2m
Number of retailer relationships 95,000 93,000 95,000
UK credit cards - average outstanding
balances GBP8.5bn GBP9.2bn GBP9.6bn
UK credit cards - average extended credit
balances GBP7.0bn GBP7.8bn GBP8.2bn
International - average extended credit
balances GBP3.1bn GBP2.6bn GBP2.3bn
International - cards in issue 7.6m 6.4m 5.3m
Barclaycard profit before tax decreased 17% (GBP54m) to GBP272m (2006: GBP326m).
2007 results reflected a GBP27m loss on disposal of part of the Monument card
portfolio. 2006 results reflected a property gain of GBP38m. Excluding these
items, profit before tax rose 4%. A solid net income performance was partially
offset by increased investment in Barclaycard US, new emerging markets and new
UK partnerships.
Income fell 2% (GBP25m) to GBP1,233m (2006: GBP1,258m). Excluding the GBP27m
loss on disposal of part of the Monument card portfolio in the first half of
2007, income remained flat at GBP1,260m, reflecting very strong growth in
Barclaycard International, particularly Barclaycard US, partially offset by a
decrease in UK Cards revenue.
Net interest income increased 3% (GBP22m) to GBP700m (2006: GBP678m). This was
driven by strong organic growth in international average extended credit card
balances, up 35% to GBP3.1bn, average secured consumer lending balances up 40%
to GBP4.2bn, partially offset by lower UK average extended credit card balances
which fell 15% to GBP7.0bn. Margins fell to 6.87% (2006: 7.32%) due to a change
in the product mix with a higher weighting to secured lending.
Net fee and commission income fell 3% (GBP18m) to GBP544m (2006: GBP562m) with
growth in Barclaycard International offset by the impact of the Office of Fair
Trading's findings on late and overlimit fees in the UK which were implemented
in August 2006.
Impairment charges improved 9% (GBP45m) to GBP443m (2006: GBP488m) reflecting
reduced flows into delinquency, lower levels of arrears and lower charge-offs in
UK Cards. We made changes to our methodologies as part of efforts to standardise
our impairment approach in anticipation of Basel II. The net positive impact of
these changes in methodology was offset by an increase in impairment in the
secured loans portfolio.
Operating expenses increased 16% (GBP71m) to GBP516m (2006: GBP445m). Excluding
the property gain of GBP38m in the first half of 2006, operating expenses
increased 7% (GBP33m) driven by continued investment in international businesses
in Europe, the US and new emerging markets and the launch of new partnerships
with Thomas Cook and Argos in the UK.
Barclaycard International continued to gain momentum and moved into
profitability in the first half of 2007 delivering GBP26m profit before tax
(2006: GBP8m loss before tax). New credit card products were launched in India
and the United Arab Emirates. The Entercard joint venture, which is based in
Scandinavia, continued to perform ahead of plan. Barclaycard US moved into
profit with very strong average balance growth and a number of new card
partnerships including Aer Lingus and ATA Airlines.
International Retail and Commercial Banking
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net interest income 844 809 844
Net fee and commission income 598 593 628
-------- -------- --------
Net trading income 18 3 3
Net investment income 97 141 47
-------- -------- --------
Principal transactions 115 144 50
Net premiums from insurance contracts 162 177 174
Other income 42 40 34
-------- -------- --------
Total income 1,761 1,763 1,730
Net claims and benefits on insurance
contracts (115) (125) (119)
-------- -------- --------
Total income net of insurance claims 1,646 1,638 1,611
Impairment charges (93) (99) (68)
-------- -------- --------
Net income 1,553 1,539 1,543
-------- -------- --------
Operating expenses excluding amortisation
of intangible assets (1,075) (1,064) (1,013)
Amortisation of intangible assets (32) (40) (45)
-------- -------- --------
Operating expenses (1,107) (1,104) (1,058)
Share of post-tax results of associates
and joint ventures 1 22 27
Profit on disposal of subsidiaries,
associates and joint ventures 5 247 -
-------- -------- --------
Profit before tax 452 704 512
-------- -------- --------
Cost:income ratio 67% 67% 66%
Cost:net income ratio 71% 72% 69%
Risk Tendency GBP315m GBP220m GBP195m
Return on average economic capital 17% 42% 28%
Economic profit GBP85m GBP324m GBP169m
As at
30.06.07 31.12.06 30.06.06
Loans and advances to customers GBP58.6bn GBP53.2bn GBP50.2bn
Customer accounts GBP24.9bn GBP22.1bn GBP22.6bn
Total assets GBP75.2bn GBP68.6bn GBP64.9bn
Risk weighted assets GBP45.3bn GBP40.8bn GBP41.9bn
Key Facts
Number of international branches 1,838 1,653 1,587
International Retail and Commercial Banking profit before tax decreased GBP60m
to GBP452m (2006: GBP512m). Very strong profit growth in Rand terms in
International Retail and Commercial Banking - Absa, was offset by depreciation
in the Rand. International Retail and Commercial Banking - excluding Absa
results for 2006 included a GBP55m gain from the sale and leaseback of property
in Spain and a GBP21m share of post-tax results of the associate FirstCarribean
International Bank which was sold in 2006.
A significant investment was made in infrastructure and distribution, including
opening 185 new branches across Western Europe, Emerging Markets and Absa.
International Retail and Commercial Banking - excluding Absa
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net interest income 334 311 293
Net fee and commission income 208 181 185
-------- -------- --------
Net trading income 20 5 12
Net investment income 50 37 29
-------- -------- --------
Principal transactions 70 42 41
Net premiums from insurance contracts 45 61 50
Other income 5 6 14
-------- -------- --------
Total income 662 601 583
Net claims and benefits on insurance
contracts (60) (73) (65)
-------- -------- --------
Total income net of insurance claims 602 528 518
Impairment charges (24) (25) (16)
-------- -------- --------
Net income 578 503 502
-------- -------- --------
Operating expenses excluding amortisation
of intangible assets (435) (441) (324)
Amortisation of intangible assets (5) (5) (4)
-------- -------- --------
Operating expenses (440) (446) (328)
Share of post-tax results of associates and
joint ventures - 19 21
Profit on disposal of subsidiaries, 4 247 -
associates and joint ventures -------- -------- --------
Profit before tax 142 323 195
-------- -------- --------
Cost:income ratio 73% 85% 63%
Cost:net income ratio 76% 89% 65%
Risk Tendency GBP105m GBP75m GBP70m
Return on average economic capital 14% 48% 22%
Economic profit GBP31m GBP233m GBP76m
As at
30.06.07 31.12.06 30.06.06
Loans and advances to customers GBP32.4bn GBP29.0bn GBP26.8bn
Customer accounts GBP12.5bn GBP11.0bn GBP10.5bn
Total assets GBP42.4bn GBP38.2bn GBP35.6bn
Risk weighted assets GBP23.5bn GBP20.1bn GBP21.2bn
Key Facts
Number of international branches 1,026 853 800
Number of continental European customers 936,000 819,000 799,000
Number of continental European mortgage
customers 263,000 252,000 227,000
Continental European mortgages - average
balances (Euros) EUR29.1bn EUR25.9bn EUR24.9bn
The profit before tax of International Retail and Commercial Banking - excluding
Absa (which comprises Western Europe and Emerging Markets) decreased 27%
(GBP53m) to GBP142m (2006: GBP195m). Excluding a GBP55m gain from the sale and
leaseback of property and a GBP21m share of post-tax results of the associate
FirstCaribbean International Bank, both included in 2006, profit before tax
increased 19%. This reflected both strong income growth and investment in the
expansion of the distribution network and in technology.
Income increased 16% (GBP84m) to GBP602m (2006: GBP518m) driven by strong
performances in Western Europe and Emerging Markets.
Net interest income increased 14% (GBP41m) to GBP334m (2006: GBP293m),
reflecting very strong balance sheet growth. Total average customer loans
increased 19% to GBP30.9bn (2006: GBP26.0bn) with lending margins broadly
stable. Mortgage balance growth in Western Europe was very strong, with average
Euro balances up 17% to GBP29.1bn (2006: GBP24.9bn). Average customer deposits
increased 18% to GBP11.7bn (2006: GBP9.9bn) driven by growth in Western Europe
and Emerging Markets. Liability margins declined primarily as a result of margin
compression in Emerging Markets.
Net fee and commission income grew 12% (GBP23m) to GBP208m (2006: GBP185m). This
reflected a strong performance in Spain and France, driven by higher service and
insurance commissions.
Principal transactions increased GBP29m to GBP70m (2006: GBP41m), reflecting
higher equity investment income in Spain and higher life assurance income.
Impairment charges rose GBP8m to GBP24m (2006: GBP16m). The increase, from a low
historical base, reflected strong growth and lower recoveries.
Operating expenses grew 34% (GBP112m) to GBP440m (2006: GBP328m). Excluding a
GBP55m gain from the sale and leaseback of property in Spain in 2006, operating
expenses increased 15% driven by the accelerated expansion of the distribution
network across Western Europe and Emerging Markets and investments in
technology. We opened 173 new branches.
Western Europe continued to perform strongly. Profit before tax increased 17%
(GBP18m) to GBP124m (2006: GBP106m), excluding one-off gains on asset sales of
GBP55m and integration costs of GBP16m in 2006.
Barclays Spain profit before tax increased 28% (GBP21m) to GBP96m (2006:
GBP75m), adjusted for integration costs and the gains on asset sales in 2006.
This was driven by higher service and insurance commissions, increased customer
lending and higher equity investment income. France also performed well driven
by good growth in the balance sheet, higher service commissions and good cost
control. Income grew strongly in Italy as a result of the opening of new
branches and a broadening of the product offering but this was more than offset
by higher investment costs. Profit before tax decreased in Portugal, with strong
income growth more than offset by increased investment in the rapid expansion of
the business.
Emerging Markets profit before tax increased 25% (GBP15m) to GBP74m (2006:
GBP59m) driven by a strong rise in income as a result of very strong balance
sheet growth across a broad range of markets. This was partially offset by
increased investment in the business including branch openings and the launch of
retail banking services in India.
International Retail and Commercial Banking - Absa
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net interest income 510 498 551
Net fee and commission income 390 412 443
-------- -------- --------
Net trading income (2) (2) (9)
Net investment income 47 104 18
-------- -------- --------
Principal transactions 45 102 9
Net premiums from insurance contracts 117 116 124
Other income 37 34 20
-------- -------- --------
Total income 1,099 1,162 1,147
Net claims and benefits on insurance
contracts (55) (52) (54)
-------- -------- --------
Total income net of insurance claims 1,044 1,110 1,093
Impairment charges (69) (74) (52)
-------- -------- --------
Net income 975 1,036 1,041
-------- -------- --------
Operating expenses excluding amortisation
of intangible assets (640) (623) (689)
Amortisation of intangible assets (27) (35) (41)
-------- -------- --------
Operating expenses (667) (658) (730)
Share of post-tax results of associates and
joint ventures 1 3 6
Profit on disposal of subsidiaries, 1 - -
associates and joint ventures -------- -------- --------
Profit before tax 310 381 317
-------- -------- --------
Cost:income ratio 64% 59% 67%
Cost:net income ratio 68% 64% 70%
Risk Tendency GBP210m GBP145m GBP125m
Return on average economic capital 21% 32% 37%
Economic profit GBP54m GBP91m GBP93m
As at
30.06.07 31.12.06 30.06.06
Loans and advances to customers GBP26.2bn GBP24.2bn GBP23.4bn
Customer accounts GBP12.4bn GBP11.1bn GBP12.1bn
Total assets GBP32.8bn GBP30.4bn GBP29.3bn
Risk weighted assets GBP21.8bn GBP20.7bn GBP20.7bn
Key Facts
Number of branches 812 800 787
Number of ATMs 7,455 7,053 6,256
Number of retail customers 8.7m 8.3m 8.0m
Number of corporate customers 87,000 84,000 80,000
International Retail and Commercial Banking - Absa profit before tax decreased
2% to GBP310m (2006: GBP317m).
Appendix 1 on page 94 summarises the Rand results of Absa Group Limited for the
six months to 30th June 2007 as reported to the JSE Limited.
Impact on Barclays results
Absa Group Limited's profit before tax of R6,429m (2006: R4,879m) is translated
into Barclays results at an average exchange rate for the six months to 30th
June 2007 of R14.11/GBP (2006: R11.31/GBP), a 20% depreciation in the average
rate of the Rand against Sterling. Consolidation adjustments reflected the
amortisation of intangible assets of GBP27m (2006: GBP41m) and internal funding
and other adjustments of GBP52m (2006: GBP28m). The resulting profit before tax
of GBP377m (2006: GBP362m) is represented within International Retail and
Commercial Banking - Absa GBP310m, (2006: GBP317m) and Barclays Capital, GBP67m
(2006: GBP45m).
Absa Group Limited's total assets at 30th June 2007 were R553,893m (31st
December 2006: R495,112m), growth of 12%. This is translated into Barclays
results at a period-end exchange rate of R14.12/GBP (31st December 2006: R13.71/
GBP). The capital investment remains hedged against currency movements.
Barclays Capital
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net interest income 567 663 495
Net fee and commission income 614 436 516
-------- -------- --------
Net trading income 2,761 1,423 2,139
Net investment income 206 296 277
-------- -------- --------
Principal transactions 2,967 1,719 2,416
Other income 5 12 10
-------- -------- --------
Total income 4,153 2,830 3,437
Impairment charges (10) 28 (70)
-------- -------- --------
Net income 4,143 2,858 3,367
-------- -------- --------
Operating expenses excluding amortisation of
intangible assets (2,453) (1,876) (2,120)
Amortisation of intangible assets (30) (12) (1)
-------- -------- --------
Operating expenses (2,483) (1,888) (2,121)
-------- -------- --------
Profit before tax 1,660 970 1,246
-------- -------- --------
Cost:income ratio 60% 67% 62%
Cost:net income ratio 60% 66% 63%
Compensation:net income ratio 47% 48% 49%
Average DVaR GBP39.3m GBP38.0m GBP36.2m
Risk Tendency GBP110m GBP95m GBP125m
Return on average economic capital 54% 36% 47%
Average net income generated per member of
staff (1) ('000) GBP329 GBP249 GBP330
Economic profit GBP969m GBP510m GBP671m
As at
30.06.07 31.12.06 30.06.06
Total assets GBP796.4bn GBP657.9bn GBP659.3bn
Risk weighted assets GBP152.5bn GBP137.6bn GBP130.5bn
Corporate lending portfolio GBP44.5bn GBP40.6bn GBP41.4bn
Key Facts 30.06.07 30.06.06
League League
table Issuance table Issuance
position value position value
All international bonds (all 1st US$187.7bn 2nd US$111.0bn
currencies)
Sterling bonds 1st GBP10.9bn 2nd GBP10.9bn
International securitisations 1st US$41.7bn 4th US$16.5bn
US investment grade corporate 5th US$2.8bn 7th US$3.2bn
bonds
(1) Adjusted to exclude contribution and headcount from HomEq and EquiFirst
Barclays Capital delivered record results in the first half of 2007 with its two
best quarters ever. Profit before tax increased 33% (GBP414m) to GBP1,660m
(2006: GBP1,246m). This was the result of a very strong income performance,
driven by good growth across asset classes and geographical regions underpinned
by the strength of the client franchise. Net income increased 23% (GBP776m) to
GBP4,143m (2006: GBP3,367m). Absa Capital delivered a very strong growth in
profit before tax of 49% to GBP67m (2006: GBP45m) in the first half of 2007,
despite a 20% depreciation in the Rand against Sterling.
Income increased 21% (GBP716m) to GBP4,153m (2006: GBP3,437m) as a result of
very strong growth in commodity, credit, equity, emerging market, mortgage and
currency asset classes. Income grew in all geographical regions. Average DVaR
increased 9% to GBP39.3m (2006: GBP36.2m).
Secondary income, comprising principal transactions (net trading income and net
investment income) and net interest income, is mainly generated from providing
client financing and risk management solutions. Secondary income increased 21%
(GBP623m) to GBP3,534m (2006: GBP2,911m).
Net trading income increased 29% (GBP622m) to GBP2,761m (2006: GBP2,139m) with
strong contributions across the Rates and Credit businesses, particularly fixed
income, commodities, equity derivatives, structured credit and credit
derivatives. There was very strong growth in primary bonds, emerging markets,
mortgage backed securities and credit trading. Net investment income decreased
26% (GBP71m) to GBP206m (2006: GBP277m) due to lower investment realisations
primarily in private equity and structured capital markets. Net interest income
increased 15% (GBP72m) to GBP567m (2006: GBP495m) driven by higher contributions
from money markets and the credit portfolio. Corporate lending increased 7% to
GBP44.5bn (31st December 2006: GBP40.6bn).
Primary income, which comprises net fee and commission income from advisory and
origination activities, grew 19% (GBP98m) to GBP614m (2006: GBP516m). This
reflected higher volumes and continued market share gains in a number of key
markets.
Impairment charges of GBP10m (2006: GBP70m) reflected the stable wholesale
credit environment and recoveries in the period. The prior year included non
credit-related impairment charges on available for sale assets of GBP83m.
Operating expenses increased 17% (GBP362m) to GBP2,483m (2006: GBP2,121m),
largely driven by incremental performance related costs. The cost:net income
ratio improved three percentage points to 60% (2006: 63%) and the compensation
cost to net income ratio improved to 47% (2006: 49%). Barclays Capital has
maintained its cost base flexibility with performance related pay, discretionary
investment spend and short term contractor resources representing 54% (2006:
54%) of the cost base. Amortisation of intangible assets of GBP30m (2006: GBP1m)
principally relates to mortgage service rights.
Total headcount increased 2,500 during the first half of 2007 to 15,700 (31st
December 2006: 13,200) and included 1,400 from the acquisition of EquiFirst
completed on 30th March 2007. 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.
Barclays Global Investors
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net interest (expense)/income (2) 3 7
Net fee and commission income 940 814 837
-------- -------- --------
Net trading income 1 1 1
Net investment income 3 2 -
-------- -------- --------
Principal transactions 4 3 1
Other income 1 - -
-------- -------- --------
Total income 943 820 845
-------- -------- --------
Operating expenses excluding amortisation
of intangible assets (551) (467) (479)
Amortisation of intangible assets (4) (3) (2)
-------- -------- --------
Operating expenses (555) (470) (481)
-------- -------- --------
Profit before tax 388 350 364
-------- -------- --------
Cost:income ratio 59% 57% 57%
Average income generated per member of
staff ('000) GBP325 GBP306 GBP360
Return on average economic capital 238% 202% 260%
Economic profit GBP210m GBP181m GBP195m
As at
30.06.07 31.12.06 30.06.06
Total assets GBP90.4bn GBP80.5bn GBP77.3bn
Risk weighted assets GBP1.6bn GBP1.4bn GBP1.4bn
Key Facts
Assets under management(GBP): GBP1,003bn GBP927bn GBP877bn
-------- -------- --------
-indexed GBP589bn GBP566bn GBP554bn
-iShares GBP179bn GBP147bn GBP124bn
-active GBP235bn GBP214bn GBP199bn
-------- -------- --------
Net new assets in period (GBP) GBP25bn GBP20bn GBP17bn
Assets under management(US$): US$2,013bn US$1,814bn US$1,623bn
-------- -------- --------
-indexed US$1,183bn US$1,108bn US$1,024bn
-iShares US$359bn US$287bn US$230bn
-active US$471bn US$419bn US$369bn
-------- -------- --------
Net new assets in period (US$) US$50bn US$38bn US$30bn
Number of iShares products 294 191 164
Number of institutional clients 3,000 2,900 2,800
Barclays Global Investors delivered good growth in profit before tax, which
increased 7% (GBP24m) to GBP388m (2006: GBP364m). Very strong US Dollar income
and profit growth was partially offset by the depreciation in the US Dollar. The
growth was broadly based across products, distribution channels and geographies.
Net fee and commission income improved 12% (GBP103m) to GBP940m (2006: GBP837m).
This growth was primarily attributable to increased management fees,
particularly in the iShares and active businesses, and securities lending.
Incentive fees increased 2% (GBP2m) to GBP109m (2006: GBP107m). Higher asset
values, driven by higher market levels and good net new inflows, contributed to
the growth in income.
Operating expenses increased 15% (GBP74m) to GBP555m (2006: GBP481m) as a result
of significant investment in key growth initiatives and ongoing investment in
product development and infrastructure. The cost:income ratio rose two
percentage points to 59% (2006: 57%).
Headcount increased 400 to 3,100 (31st December 2006: 2,700). Headcount
increased in all geographical regions and across product groups and the support
functions, reflecting continued investment to support further growth.
Total assets under management increased 8% (GBP76bn) to GBP1,003bn (31st
December2006: GBP927bn) including net new inflows of GBP25bn and GBP12bn
attributable to the acquisition of Indexchange Investment AG (Indexchange). The
positive market move impact of GBP57bn was partially offset by GBP18bn of
adverse exchange rate movements. In US$ terms assets under management increased
by US$199bn to US$2,013bn (31st December 2006: US$1,814bn), comprising US$50bn
of net new assets, US$23bn attributable to acquisition of Indexchange, US$115bn
of favourable market movements and US$11bn of positive exchange rate movements.
The acquisition of Indexchange, a European exchange traded funds business,
completed on 8th February 2007.
Barclays Wealth
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net interest income 205 200 192
Net fee and commission income 359 329 345
-------- -------- --------
Net trading income 7 1 1
Net investment income 59 130 24
-------- -------- --------
Principal transactions 66 131 25
Net premium from insurance contracts 100 117 93
Other income 9 11 5
-------- -------- --------
Total income 739 788 660
Net claims and benefits from insurance
contracts (104) (206) (82)
-------- -------- --------
Total Income net of insurance claims 635 582 578
Impairment charges (2) (1) (1)
-------- -------- --------
Net income 633 581 577
-------- -------- --------
Operating expenses excluding amortisation
of intangible assets (458) (463) (446)
Amortisation of intangible assets (2) (2) (2)
-------- -------- --------
Operating expenses (460) (465) (448)
-------- -------- --------
Profit before tax 173 116 129
-------- -------- --------
Cost:income ratio 72% 80% 78%
Risk Tendency GBP10m GBP10m GBP10m
Return on average economic capital 56% 30% 51%
Average net income per member of staff
('000) GBP94 GBP89 GBP92
Economic profit GBP114m GBP43m GBP87m
As at
30.06.07 31.12.06 30.06.06
Customer accounts GBP30.9bn GBP28.3bn GBP28.0bn
Loans and advances to customers GBP7.1bn GBP6.2bn GBP5.5bn
Total assets GBP16.7bn GBP15.0bn GBP14.2bn
Risk weighted assets GBP6.9bn GBP6.1bn GBP5.2bn
Key Facts
Total client assets GBP126.8bn GBP116.1bn GBP105.9bn
Barclays Wealth profit before tax showed very strong growth of 34% (GBP44m) to
GBP173m (2006: GBP129m). Performance was driven by broadly based income growth,
favourable market conditions, reduced redress costs and tight cost control. This
was partially offset by additional volume related costs and increased investment
in people and infrastructure to support future growth.
Income increased 10% (GBP57m) to GBP635m (2006: GBP578m).
Net interest income increased 7% (GBP13m) to GBP205m (2006: GBP192m) reflecting
growth in both customer deposits and customer lending. Average deposits grew 6%
to GBP29.1bn (2006: GBP27.5bn). Average lending grew 23% to GBP6.5bn (2006:
GBP5.3bn) driven by increased lending to private banking and intermediary
clients. Deposit margins were stable at 1.08% whilst asset margins increased to
1.12% (2006: 1.07%).
Net fee and commission income grew 4% (GBP14m) to GBP359m (2006: GBP345m). This
reflected growth in client assets and higher transactional income, including
increased sales of investment products to affluent and high net worth clients.
Principal transactions increased to GBP66m (2006: GBP25m) driven by a
significant increase in the value of the unit linked insurance contracts largely
offset by a GBP22m increase in net claims and benefits on insurance contracts to
GBP104m (2006: GBP82m).
Operating expenses increased 3% to GBP460m (2006: GBP448m) with greater volume
related and investment costs partially offset by efficiency gains and lower
customer redress costs of GBP18m (2006: GBP34m). Ongoing investment costs
included increased hiring of client facing staff and improvements to
infrastructure with the upgrade of technology and operations platforms. The
cost:income ratio improved six percentage points to 72% (2006: 78%).
Total client assets, comprising customer deposits and client investments,
increased 20% (GBP20.9bn) to GBP126.8bn (2006: GBP105.9bn) reflecting strong net
new asset inflows, favourable market conditions and the acquisition of Walbrook,
an independent fiduciary services company, which completed on 18th May 2007.
Head office functions and other operations
Half-year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net interest income 5 72 8
Net fee and commission income (194) (176) (183)
-------- -------- --------
Net trading income/(loss) 20 (15) 55
Net investment income 1 8 (6)
-------- -------- --------
Principal transactions 21 (7) 49
Net premiums from insurance contracts 72 104 93
Other income 16 29 10
-------- -------- --------
Total income (80) 22 (23)
Impairment (charges)/releases (11) 35 (24)
-------- -------- --------
Net income (91) 57 (47)
-------- -------- --------
Operating expenses excluding amortisation
of intangible assets (112) (153) (106)
Amortisation of intangible assets (4) (6) (4)
-------- -------- --------
Operating expenses (116) (159) (110)
-------- -------- --------
Loss before tax (207) (102) (157)
-------- -------- --------
Risk Tendency GBP5m GBP10m GBP25m
As at
30.06.07 31.12.06 30.06.06
Total assets GBP5.4bn GBP7.1bn GBP9.3bn
Risk weighted assets GBP1.5bn GBP1.9bn GBP3.4bn
Head office functions and other operations loss before tax increased GBP50m to
GBP207m (2006: loss GBP157m).
Net interest income fell GBP3m to GBP5m (2006: GBP8m) and included the cost of
hedging the foreign exchange risk on the Group's equity investment in Absa,
which amounted to GBP42m (2006: GBP39m).
Group segmental reporting is performed in accordance with Group accounting
policies. This means that inter-segment transactions are recorded in each
segment as if undertaken on an arm's length basis. Adjustments necessary to
eliminate the inter-segment transactions are included in Head office functions
and other operations.
The impact of such inter-segment adjustments increased GBP28m to GBP109m (2006:
GBP81m). These adjustments related to internal fees for structured capital
market activities of GBP79m (2006: GBP41m) and fees paid to Barclays Capital for
capital raising and risk management advice of GBP18m (2006: GBP8m), both of
which reduced net fee and commission income in Head Office. The impact on the
inter-segment adjustments of the timing of the recognition of insurance
commissions included in Barclaycard and UK Retail was a reduction in Head Office
income of GBP17m (2006: GBP35m). This net reduction was reflected in a decrease
in net fee and commission income of GBP89m (2006: GBP128m) and an increase in
net premium income of GBP72m (2006: GBP93m).
Principal transactions decreased GBP28m to GBP21m (2006: GBP49m). 2007 included
a profit of GBP2m (2006: GBP59m) in respect of the economic hedge of the
translation exposure arising from Absa foreign currency earnings.
The impairment charge fell GBP13m to GBP11m (2006: GBP24m).
Operating expenses increased GBP6m to GBP116m (2006: GBP110m).
RESULTS BY NATURE OF INCOME AND EXPENSE
Net interest income
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Cash and balances with central banks 12 9 7
Financial investments 1,444 1,405 1,406
Loans and advances to banks 608 455 523
Loans and advances to customers 9,054 8,407 7,883
Other 919 985 725
-------- -------- --------
Interest income 12,037 11,261 10,544
-------- -------- --------
Deposits from banks (1,471) (1,556) (1,263)
Customer accounts (1,902) (1,232) (1,844)
Debt securities in issue (2,994) (2,894) (2,388)
Subordinated liabilities (398) (437) (340)
Other (683) (403) (305)
-------- -------- --------
Interest expense (7,448) (6,522) (6,140)
-------- -------- --------
Net interest income 4,589 4,739 4,404
-------- -------- --------
Group net interest income increased 4% (GBP185m) to GBP4,589m (2006: GBP4,404m)
reflecting balance sheet growth across a number of businesses.
A component of the benefit of free funds included in Group net interest income
is the structural hedge which functions to reduce the impact of the volatility
of short-term interest rate movements. The contribution of the structural hedge
decreased to GBP126m expense (2006: GBP47m income), largely due to the impact of
relatively higher short-term interest rates and lower medium-term rates.
Interest income includes GBP53m (2006: GBP48m) accrued on impaired loans.
Business margins
Half Year ended
30.06.07 31.12.06 30.06.06
% % %
UK Retail Banking assets 1.20 1.28 1.35
UK Retail Banking liabilities 2.15 2.08 2.01
UK Business Banking assets 1.85 1.98 1.86
UK Business Banking liabilities 1.50 1.48 1.44
Barclaycard assets 6.87 6.96 7.32
International Retail and Commercial
Banking-ex Absa assets 1.25 1.34 1.24
International Retail and Commercial Banking -
ex Absa liabilities 1.82 1.99 2.12
International Retail and Commercial
Banking-Absa assets(1) 2.85 2.94 3.10
International Retail and Commercial
Banking-Absa liabilities(1) 2.94 2.41 2.23
Barclays Wealth assets 1.12 1.08 1.07
Barclays Wealth liabilities 1.08 1.12 1.08
Average balances
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
UK Retail Banking assets 76,747 74,057 73,128
UK Retail Banking liabilities 80,213 78,120 74,876
UK Business Banking assets 52,327 52,933 51,103
UK Business Banking liabilities 46,492 46,007 43,671
Barclaycard assets 18,761 18,427 17,408
International Retail and Commercial
Banking-ex Absa assets 30,903 28,341 26,046
International Retail and Commercial
Banking-ex Absa liabilities 11,673 11,044 9,862
International Retail and Commercial
Banking-Absa assets(1) 24,832 23,414 24,228
International Retail and Commercial
Banking-Absa liabilities(1) 11,229 11,973 13,454
Barclays Wealth assets 6,458 5,816 5,270
Barclays Wealth liabilities 29,140 27,964 27,523
(1) International Retail and Commercial Banking - Absa assets and liabilities
business margins, average balances and business net interest income for the half
year ended 30th June 2006 and the half year ended 31st December 2006 have been
restated on a consistent basis to reflect changes in methodology
Business net interest income
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
UK Retail Banking assets 456 479 491
UK Retail Banking liabilities 854 819 747
UK Business Banking assets 480 527 471
UK Business Banking liabilities 345 343 312
Barclaycard assets 640 646 632
International Retail and Commercial Banking
- ex Absa assets 192 190 160
International Retail and Commercial Banking
- ex Absa liabilities 105 110 106
International Retail and Commercial
Banking-Absa assets(1) 351 347 373
International Retail and Commercial
Banking-Absa liabilities(1) 164 145 149
Barclays Wealth assets 36 32 28
Barclays Wealth liabilities 156 158 148
-------- -------- --------
Business net interest income 3,779 3,796 3,617
-------- -------- --------
Reconciliation of business interest income to Group net interest income
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Business net interest income 3,779 3,796 3,617
Other:
- Barclays Capital 567 663 495
- Barclays Global Investors (2) 3 7
- Other 245 277 285
-------- -------- --------
Group net interest income 4,589 4,739 4,404
-------- -------- --------
Business net interest income is derived from the interest rate earned on average
assets or paid on average liabilities relative to the average Bank of England
base rate, local equivalents for international businesses or the rate managed by
the bank using derivatives. The margin is expressed as annualised business
interest income over the relevant average balance. Asset and liability margins
cannot be added together as they are relative to the average Bank of England
base rate, local equivalent for international businesses or the rate managed by
the bank using derivatives. The benefit of capital attributed to these
businesses is excluded from the calculation of business margins and business net
interest income.
Average balances are calculated on daily averages for most UK banking operations
and monthly averages elsewhere.
Within the reconciliation of Group net interest income, there is an amount
captured as Other. This relates to the benefit of capital excluded from the
business margin calculation, Head office functions and other operations and net
funding on non-customer assets and liabilities.
(1) International Retail and Commercial Banking - Absa assets and liabilities
business margins, average balances and business net interest income for the half
year ended 30th June 2006 and the half year ended 31st December 2006 have been
restated on a consistent basis to reflect changes in methodology
UK Retail Banking assets margin decreased 15 basis points to 1.20% (2006: 1.35%)
principally due to the increased flow of new mortgages at prevailing market
rates. UK Retail Banking liabilities margin increased 14 basis points to 2.15%
(2006: 2.01%) due to pricing initiatives.
UK Business Banking assets margin remained broadly stable at 1.85% (2006:1.86%).
UK Business Banking liabilities margin increased 6 basis points to 1.50% (2006:
1.44%).
Barclaycard assets margin decreased 45 basis points to 6.87% (2006: 7.32%) due
to a change in the product mix with a higher proportion of secured lending.
International Retail and Commercial Banking - excluding Absa assets margin of
1.25% (2006: 1.24%) was broadly stable. International Retail and Commercial
Banking - excluding Absa liabilities margin decreased 30 basis points to 1.82%
(2006: 2.12%) primarily driven by margin compression in Emerging Markets.
International Retail and Commercial Banking - Absa assets margin decreased 25
basis points to 2.85% (2006: 3.10%) due to increased competition, increases in
interest rates and changes in the product mix. The liabilities margin increased
71 basis points to 2.94% (2006: 2.23%) driven by a re-pricing of customer
deposits.
Barclays Wealth assets margin increased 5 basis points to 1.12% (2006: 1.07%)
reflecting a slight strengthening of margins across the portfolio. The
liabilities margin was stable at 1.08%.
Net fee and commission income
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Fee and commission income 4,292 3,928 4,077
Fee and commission expense (480) (403) (425)
--------- --------- ---------
Net fee and commission income 3,812 3,525 3,652
--------- --------- ---------
Net fee and commission income increased 4% (GBP160m) to GBP3,812m (2006:
GBP3,652m) with the increase spread across a number of businesses including UK
Retail Banking, UK Business Banking, Barclays Capital and Barclays Global
Investors.
Fee and commission income rose 5% (GBP215m) to GBP4,292m (2006: GBP4,077m)
reflecting good growth in current account income in UK Retail Banking and strong
growth in lending fees, syndication fees and transaction related income in UK
Business Banking. Fee income in Barclays Capital increased due to higher volumes
and continued market share gains in a number of key markets whilst Barclays
Global Investors fee income grew as a result of increased management fees
particularly in iShares and active businesses.
Fee and commission expense increased 13% (GBP55m) to GBP480m (2006: GBP425m)
largely reflecting increases in Barclays Capital arising from higher volumes.
Total foreign exchange income was GBP477m (2006: GBP457m) and consisted of
revenues earned from both retail and wholesale activities. Foreign exchange
income earned on customer transactions by individual businesses is reported in
those respective business units within fee and commission income. The foreign
exchange income earned in Barclays Capital and in Treasury is reported within
principal transactions.
Principal transactions
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Rates related business 2,002 1,212 1,636
Credit related business 809 201 565
-------- -------- --------
Net trading income 2,811 1,413 2,201
-------- -------- --------
Cumulative gain from disposal of available
for sale assets 159 187 120
Dividend income 18 (3) 18
Net income from financial instruments 102 361 86
designated at fair value
Other investment income 117 43 150
-------- -------- --------
Net investment income 396 588 374
-------- -------- --------
Principal transactions 3,207 2,001 2,575
-------- -------- --------
The majority of the Group's trading income is generated in Barclays Capital.
Net trading income increased 28% (GBP610m) to GBP2,811m (2006: GBP2,201m) due to
excellent performances in Barclays Capital Rates and Credit businesses
particularly fixed income, commodities, equity derivatives, structured credit
and credit derivatives. There was very strong growth in primary bonds, emerging
markets, mortgage backed securities and credit trading.
Net investment income increased 6% (GBP22m) to GBP396m (2006: GBP374m).
The cumulative gain from disposal of available for sale assets increased 33%
(GBP39m) to GBP159m (2006: GBP120m) reflecting profits realised on the sale of
investments partially offset by lower equity realisations primarily in private
equity and structured capital markets.
Fair value movements on certain assets and liabilities have been reported within
net trading income or within net investment income depending on the nature of
the transaction. Fair value movements on insurance assets included within net
investment income contributed GBP83m (2006: GBP46m).
Net premiums from insurance contracts
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Gross premiums from insurance contracts 465 572 536
Premiums ceded to reinsurers (23) (22) (26)
-------- -------- --------
Net premiums from insurance contracts 442 550 510
-------- -------- --------
Net premiums from insurance contracts decreased 13% (GBP68m) to GBP442m (2006:
GBP510m), primarily due to lower customer take up of loan protection insurance.
Other income
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Increase/(decrease) in fair value of
assets held in respect of linked
liabilities to customers under
investment contracts 2,810 10,377 (2,960)
(Increase)/decrease in liabilities to
customers under investment contracts (2,810) (10,377) 2,960
Property rentals 27 27 28
Loss on part disposal of Monument credit
card portfolio (27) - -
Other 100 126 33
-------- -------- --------
Other income 100 153 61
-------- -------- --------
Certain asset management products offered to institutional clients by Barclays
Global Investors are recognised as investment contracts. Accordingly the
invested assets and the related liabilities to investors are held at fair value
and changes in those fair values are reported within Other income.
Net claims and benefits paid on insurance contracts
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Gross claims and benefits incurred on
insurance contracts 254 353 235
Reinsurers' share of claims incurred (6) (11) (2)
-------- -------- --------
Net claims and benefits incurred on
insurance contracts 248 342 233
-------- -------- --------
Impairment charges
Half Year ended
30.06.07 31.12.06 30.06.06
Impairment charges on loans and advances GBPm GBPm GBPm
- New and increased impairment allowances 1,223 1,465 1,257
- Releases (136) (238) (151)
- Recoveries (124) (134) (125)
--------- --------- ---------
Impairment charges on loans and advances
(see note 5) 963 1,093 981
Other credit provisions
(Credits)/charges for the year in respect of
provision for undrawn contractually committed
facilities and guarantees provided (4) 1 (7)
--------- --------- ---------
Impairment charges on loans and advances and
other credit provisions 959 1,094 974
Impairment charges on available for sale
assets - 3 83
--------- --------- ---------
Total impairment charges 959 1,097 1,057
--------- --------- ---------
Total impairment charges decreased 9% (GBP98m) to GBP959m (2006: GBP1,057m).
Impairment charges on loans and advances and other credit provisions
Impairment charges on loans and advances and other credit provisions decreased
2% (GBP15m) to GBP959m (2006: GBP974m). In retail sectors this reflected a
decrease in flows into delinquency and arrears balances across UK cards and
unsecured loans; and some increase in impairment following book growth in
international portfolios. UK mortgage impairment remained negligible. In
addition, the wholesale credit environment remained stable with continued low
levels of default.
Impairment charges on loans and advances and other credit provisions as a
percentage of total loans and advances fell to 0.52% (2006: 0.61%) as total
loans and advances grew by 14% to GBP367,711m (2006: GBP320,831m).
Retail impairment charges on loans and advances and other credit provisions fell
5% (GBP39m) to GBP800m (2006: GBP839m). As a result, retail impairment charges
as a percentage of period end total loans and advances of GBP147,730m (2006:
GBP134,534m) improved to 1.08% (2006: 1.25%). We made changes to our
methodologies as part of efforts to standardise our impairment approach in
anticipation of Basel II.
In the UK retail businesses, high debt levels and changing social attitudes to
bankruptcy have, until recently, led to sustained growth in personal insolvency.
This growth has now slowed but rising interest rates meant that household
cashflows remained under pressure. In UK cards and unsecured loans, improvements
in new customer quality and earlier customer intervention helped cut flows into
delinquency while arrears balances trended downwards since the third quarter of
last year. In UK cards, these trends continued to drive down charge-offs. UK
unsecured loans showed positive delinquency flow trends, although charge-offs
have not yet fallen from last year's levels.
In UK Home Finance, mortgage delinquencies as a percentage of outstandings
remained stable and amounts charged off were low, with the result that there was
a small release to impairment. The impairment charge in Barclaycard UK secured
lending increased sharply in the second half of 2006 reflecting very strong book
growth and stricter criteria for management of early cycle delinquency. The
impairment charge in the first half of 2007 was consistent with the second half
of 2006 and Risk Tendency was broadly stable.
The impairment charge in the international card portfolios increased, from a low
base, as the balance sheet grew strongly in 2006 and the first half of 2007.
Arrears in some of Absa's key retail portfolios deteriorated in 2007, driven by
interest rate increases in 2006 and 2007 and pressure on collections. Action has
been taken to reduce some of the higher risk customer balances.
In the wholesale and corporate businesses, impairment charges on loans and
advances and other credit provisions increased 12% (GBP17m) to GBP159m (2006:
GBP142m). Wholesale and corporate impairment charges as a percentage of period
end total loans and advances of GBP219,981m (2006: GBP186,297m) was broadly
stable at 0.14% (2006: 0.15%).
Impairment on available for sale assets
In 2006, there was an impairment charge related to losses on assets in the
available for sale portfolio. There has been no corresponding charge in the
first half of 2007.
Operating expenses
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Staff costs (refer to page 52) 4,581 4,022 4,147
Administrative expenses 1,893 2,064 1,916
Depreciation 227 248 207
Impairment loss - property and equipment - 8 6
- intangible assets 2 7 -
Operating lease rentals 204 177 168
Gain on property disposals (147) (194) (238)
Amortisation of intangible assets 87 73 63
-------- -------- --------
Operating expenses 6,847 6,405 6,269
-------- -------- --------
Operating expenses grew 9% (GBP578m) to GBP6,847m (2006: GBP6,269m). The
increase was driven by growth of 10% (GBP434m) in staff costs to GBP4,581m
(2006: GBP4,147m).
Administrative expenses fell 1% (GBP23m) to GBP1,893m (2006: GBP1,916m)
reflecting tight cost control across all businesses.
Operating lease rentals increased 21% (GBP36m) to GBP204m (2006: GBP168m),
primarily due to increased levels of property held under operating leases.
Operating expenses were reduced by gains from the sale of property of GBP147m
(2006: GBP238m) as the Group continued the sale and leaseback of its freehold
portfolio which was substantially reinvested in the business.
Amortisation of intangible assets increased 38% (GBP24m) to GBP87m (2006:
GBP63m) primarily reflecting the amortisation of mortgage servicing rights
relating to the acquisition of HomEq in November 2006.
The Group cost:income ratio increased one percentage point to 58% (2006: 57%).
The Group cost:net income ratio was 63% (2006: 63%).
Staff costs
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Salaries and accrued incentive payments 3,856 3,271 3,364
Social security costs 301 210 292
Pension costs
- defined contribution plans 71 73 55
- defined benefit plans 77 140 142
Other post retirement benefits 12 15 15
Other 264 313 279
-------- -------- --------
Staff costs 4,581 4,022 4,147
-------- -------- --------
Staff costs increased 10% (GBP434m) to GBP4,581m (2006: GBP4,147m).
Salaries and accrued incentive payments rose 15% (GBP492m) to GBP3,856m (2006:
GBP3,364m), largely reflecting incremental performance related costs in Barclays
Capital associated with strong results.
Defined benefit plans pension costs have decreased 46% (GBP65m) to GBP77m (2006:
GBP142m). This has been caused by changed assumptions leading to falling service
costs and an increase in the expected return on scheme assets.
Staff numbers
As at
30.06.07 31.12.06 30.06.06
UK Banking 41,700 42,600 42,900
--------- -------- --------
UK Retail Banking 33,900 34,500 35,000
UK Business Banking 7,800 8,100 7,900
--------- -------- --------
Barclaycard 8,300 8,500 8,300
International Retail and Commercial
Banking 50,800 47,800 46,800
--------- -------- --------
International Retail and Commercial
Banking-ex Absa 16,800 13,900 13,100
International Retail and Commercial
Banking-Absa 34,000 33,900 33,700
--------- -------- --------
Barclays Capital 15,700 13,200 10,500
Barclays Global Investors 3,100 2,700 2,400
Barclays Wealth 6,900 6,600 6,400
Head office functions and other operations 1,200 1,200 1,000
--------- -------- --------
Total Group permanent and fixed term
contract staff worldwide 127,700 122,600 118,300
Agency staff worldwide 15,000 9,100 8,700
--------- -------- --------
Total including agency staff 142,700 131,700 127,000
--------- -------- --------
Staff numbers are shown on a full-time equivalent basis. Total Group permanent
and contract staff comprised 61,700 (31st December 2006: 62,400) in the UK and
66,000 (31st December 2006: 60,200) internationally.
UK Banking staff numbers decreased 900 to 41,700 (31st December 2006: 42,600),
primarily due to reductions in back office operations.
Barclaycard staff numbers decreased 200 to 8,300 (31st December 2006: 8,500),
due to the sale of part of the Monument card portfolio, partially offset by an
increase in the International cards businesses.
International Retail and Commercial Banking staff numbers increased 3,000 to
50,800 (31st December 2006: 47,800). International Retail and Commercial Banking
- excluding Absa staff numbers increased 2,900 to 16,800 (31st December 2006:
13,900) due to growth in the distribution network in Emerging Markets and
Western Europe. International Retail and Commercial Banking - Absa staff numbers
increased 100 to 34,000 (31st December 2006: 33,900), reflecting continued
growth in the business.
Barclays Capital staff numbers increased 2,500 during 2007 to 15,700 (31st
December 2006:13,200) including 1,400 from the acquisition of EquiFirst. 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.
Barclays Global Investors staff numbers increased 400 to 3,100 (31st December
2006: 2,700) spread across regions, product groups and support functions,
reflecting continued investment to support strategic initiatives.
Barclays Wealth staff numbers increased 300 to 6,900 (31st December 2006: 6,600)
principally due to the acquisition of Walbrook.
Head office functions and other operations staff numbers remained stable at
1,200.
Agency staff numbers rose 5,900 to 15,000 (31st December 2006: 9,100) due to the
additional sales agents engaged in retail banking activities across Emerging
Markets, particularly in India, to support the continued growth of international
business.
Share of post-tax results of associates and joint ventures
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Profit from associates 3 24 29
(Loss)/profit from joint ventures (3) (8) 1
-------- -------- --------
Share of post-tax results of associates
and joint ventures - 16 30
-------- -------- --------
The share of post-tax results of associates and joint ventures decreased GBP30m
to GBPnil (2006: GBP30m), principally due to the sale of the Group's interest in
FirstCaribbean International Bank, which completed on 22nd December 2006.
Profit on disposal of subsidiaries, associates and joint ventures
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Profit on disposal of subsidiaries,
associates and joint ventures 5 323 -
-------- -------- --------
The profit on disposal in the first half of 2007 relates mainly to the partial
disposal of the Group's shareholding in Gabetti Property Solutions.
Tax
The tax charge for the period is based upon a UK corporation tax rate of 30% for
the calendar year 2007 (2006: 30%). The effective rate of tax for the first half
of 2007, based on profit before tax, was 28.2% (2006: 29.2%). The effective tax
rate differs from 30% as it takes account of the different tax rates which are
applied to the profits earned outside the UK, disallowable expenditure,
non-taxable gains and income and adjustments to prior year tax provisions. The
forthcoming change in the UK mainstream rate of corporation tax from 30% to 28%
on 1st April 2008 has led to an additional tax charge in 2007 as a result of its
effect on the Group's net deferred tax asset. The effective tax rate for this
interim period is marginally higher than the 2006 full year rate, principally
because there was, in 2006, a higher level of profit on disposals of
subsidiaries, associates and joint ventures offset by losses or exemptions. The
tax charge for the first half of the year includes GBP706m (2006: GBP640m)
arising in the UK and GBP452m (2006: GBP432m) arising overseas.
Profit attributable to minority interests
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Absa Group Limited 129 140 122
Preference shares 90 90 85
Reserve capital instruments 44 45 47
Upper tier 2 instruments 8 8 7
Barclays Global Investors minority 22 21 26
interests
Other minority interests 16 26 7
-------- -------- --------
Profit attributable to minority
interests 309 330 294
-------- -------- --------
Earnings per share
Half Year ended
30.06.07 31.12.06 30.06.06
Profit attributable to equity holders of
the parent GBP2,634m GBP2,264m GBP2,307m
Dilutive impact of convertible options (GBP13m) (GBP17m) (GBP17m)
-------- -------- --------
Profit attributable to equity holders of
the parent including dilutive impact of
convertible options GBP2,621m GBP2,247m GBP2,290m
Basic weighted average number of shares
in issue 6,356m 6,360m 6,353m
Number of potential ordinary shares(1) 178m 152m 177m
-------- -------- --------
Diluted weighted average number of
shares 6,534m 6,512m 6,530m
-------- -------- --------
p p p
Basic earnings per ordinary share 41.4 35.6 36.3
Diluted earnings per ordinary share 40.1 34.5 35.1
The calculation of basic earnings per share is based on the profit attributable
to equity holders of the parent and the weighted average number of shares
excluding own shares held in employee benefit trusts, currently not vested and
shares held for trading.
When calculating the diluted earnings per share, the profit attributable to
equity holders of the parent is adjusted for the conversion of outstanding
options into shares within Absa Group Limited and Barclays Global Investors UK
Holdings Limited. The weighted average number of ordinary shares excluding own
shares held in employee benefit trusts currently not vested and shares held for
trading, is adjusted for the effects of all dilutive potential ordinary shares,
totalling 178 million (2006: 177 million).
(1) Potential ordinary shares reflect the dilutive impact of share options
outstanding.
Dividends on ordinary shares
The Board has decided to pay, on 1st October 2007, an interim dividend for the
year ended 31st December 2007 of 11.5p per ordinary share for shares registered
in the books of the Company at the close of business on 17th August 2007.
Shareholders who have their dividends paid direct to their bank or building
society account will receive a consolidated tax voucher detailing the dividends
paid in the 2007-2008 UK tax year in mid-October 2007.
The amount payable for the 2007 interim dividend based on the number of shares
outstanding at 30th June 2007 would be GBP731m (half-year ended 31st December
2006: GBP1,311m; half-year ended 30th June 2006: GBP666m). This amount does not
include the effects of the share subscriptions and share buy back programme
described in the Recent developments section on page 74. This amount also
excludes GBP22m payable on own shares held by employee benefit trusts (half-year
ended 31st December 2006: GBP30m; half-year ended 30th June 2006: GBP18m).
For qualifying US and Canadian resident ADR holders, the interim dividend of
11.5p per ordinary share becomes 46p per ADS (representing four shares). The ADR
depositary will mail the dividend on 1st October 2007 to ADR holders on the
record on 17th August 2007.
For qualifying Japanese shareholders, the final dividend of 11.5p per ordinary
share will be distributed in mid-October to shareholders on the record on 17th
August 2007.
Shareholders may have their dividends reinvested in Barclays PLC shares by
participating in the Barclays Dividend Reinvestment Plan. The plan is available
to all shareholders, including members of Barclays Sharestore, provided that
they neither live in nor are subject to the jurisdiction of any country where
their participation in the plan would require Barclays or The Plan Administrator
to take action to comply with local government or regulatory procedures or any
similar formalities. Any shareholder wishing to obtain details and a form to
join the plan should contact The Plan Administrator by writing to: The Plan
Administrator to Barclays, Share Dividend Team, The Causeway, Worthing, West
Sussex, BN99 6DA; or, by telephoning 0870 609 4535. The completed form should be
returned to The Plan Administrator on or before 7th September 2007 for it to be
effective in time for the payment of the interim dividend on 1st October 2007.
Shareholders who are already in the plan need take no action unless they wish to
change their instructions in which case they should write to The Plan
Administrator.
BARCLAYS PLC
ANALYSIS OF AMOUNTS INCLUDED IN THE BALANCE SHEET
Capital resources
As at
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Shareholders' equity excluding
minority interests 20,973 19,799 17,988
-------- -------- --------
Preference shares 3,431 3,414 3,435
Reserve capital instruments 1,921 1,906 1,922
Upper tier 2 instruments 586 586 586
Absa minority interests 1,541 1,451 1,397
Other minority interests 269 234 211
-------- -------- --------
Minority interests 7,748 7,591 7,551
-------- -------- --------
Total shareholders' equity 28,721 27,390 25,539
Subordinated liabilities 15,067 13,786 13,629
-------- -------- --------
Total capital resources 43,788 41,176 39,168
-------- -------- --------
The authorised share capital of Barclays PLC was GBP2,500m (31st December 2006:
GBP2,500m) comprising 9,996 million (31st December 2006: 9,996 million) ordinary
shares of 25p each and 1 million (31st December 2006: 1 million) staff shares of
GBP1 each. Called up share capital comprises 6,545 million (31st December 2006:
6,535 million) ordinary shares of 25p each and 1 million (31st December 2006: 1
million) staff shares of GBP1 each.
Total capital resources increased GBP2,612m to GBP43,788m (31st December 2006:
GBP41,176m).
Shareholders' equity excluding minority interests increased GBP1,174m since 31st
December 2006. The increase reflected profits attributable to equity holders of
the parent of GBP2,634m, increases in share capital and share premium of GBP44m
and increases in available for sale reserves of GBP106m. Offsetting these
movements were dividends paid of GBP1,311m, decreases in the cash flow hedging
reserves of GBP177m, a GBP43m decrease due to changes in treasury and Employee
Share Ownership Plan shares, a GBP48m decrease in the currency translation
reserve and other decreases in retained reserves of GBP31m.
Subordinated liabilities have increased GBP1,281m to GBP15,067m (31st December
2006: GBP13,786m). This increase is driven by capital issuances of GBP2,400m,
partially offset by redemptions of GBP670m, a decrease to the adjustment
associated with fair value hedge arrangements of GBP344m, a decrease of GBP124m
relating to movements in exchange rates.
Minority interests increased GBP157m to GBP7,748m (31st December 2006:
GBP7,591m).
Capital ratios
Risk weighted assets and capital resources, as defined for regulatory purposes
by the FSA, comprised:
As at
Risk weighted assets: 30.06.07 31.12.06 30.06.06
Banking book GBPm GBPm GBPm
On-balance sheet 202,835 197,979 190,979
Off-balance sheet 33,748 33,821 33,010
Associated undertakings and joint
ventures(1) 1,075 2,072 6,351
-------- -------- --------
Total banking book 237,658 233,872 230,340
-------- -------- --------
Trading book
Market risks 33,811 30,291 27,477
Counterparty and settlement risks 46,574 33,670 33,107
-------- -------- --------
Total trading book 80,385 63,961 60,584
-------- -------- --------
Total risk weighted assets 318,043 297,833 290,924
-------- -------- --------
Capital resources:
Tier 1
Called up share capital 1,637 1,634 1,628
Eligible reserves 21,323 19,608 18,061
Minority interests(2) 8,405 7,899 7,629
Tier 1 notes(3) 887 909 941
Less: intangible assets (7,757) (7,045) (7,242)
Less: deductions from Tier 1 capital(4) (26) - -
-------- -------- --------
Total qualifying Tier 1 capital 24,469 23,005 21,017
-------- -------- --------
Tier 2
Revaluation reserves 24 25 25
Available for sale-equity gains 440 221 188
Collectively assessed impairment 2,527 2,556 2,593
allowances
Minority Interests 441 451 479
Qualifying subordinated liabilities(5)
Undated loan capital 3,174 3,180 3,200
Dated loan capital 8,626 7,603 8,157
Less: deductions from Tier 2 capital(4) (26) - -
-------- -------- --------
Total qualifying Tier 2 capital 15,206 14,036 14,642
-------- -------- --------
Less: Regulatory deductions:
Investments not consolidated for
regulatory purposes (947) (982) (946)
Other deductions (1,276) (1,348) (998)
-------- -------- --------
(2,223) (2,330) (1,944)
-------- -------- --------
Total net capital resources 37,452 34,711 33,715
-------- -------- --------
Equity Tier 1 ratio 5.3% 5.3% 4.9%
Tier 1 ratio 7.7% 7.7% 7.2%
Risk asset ratio 11.8% 11.7% 11.6%
(1) From 1st January 2007, under the FSA's Prudential Sourcebook for
Banks, Building Societies and Investment Firms, eligible
associates are proportionally, rather than fully, consolidated
for regulatory purposes.
(2) Includes reserve capital instruments of GBP3,222m (31st December
2006: GBP2,765m; 30th June 2006: GBP2,158m). Of this amount, an issue of
GBP500m was made during 2007. This issue is classified within subordinated
liabilities on the consolidated balance sheet.
(3) Tier 1 notes are included in subordinated liabilities in the
consolidated balance sheet.
(4) From 1st January 2007, under the FSA's General Prudential
Sourcebook, certain deductions are made directly from Tiers 1 and 2 rather
than being included in regulatory deductions.
(5) Subordinated liabilities included in Tier 2 Capital are subject to
limits laid down in the regulatory requirements.
At 30th June 2007, the Tier 1 Capital ratio was 7.7% and the risk asset ratio
was 11.8%. From 31st December 2006, total net capital resources rose GBP2.7bn
and risk weighted assets increased GBP20.2bn.
Tier 1 capital rose GBP1.5bn, including GBP1.3bn arising from profits
attributable to equity holders net of dividends paid. Minority interests within
Tier 1 capital increased GBP0.5bn primarily due to the issuance of reserve
capital instruments. The deduction for goodwill and intangible assets increased
by GBP0.7bn. Tier 2 capital increased GBP1.2bn mainly as a result of net
issuance of GBP1.2bn of dated loan capital.
Reconciliation of regulatory capital
Capital is defined differently for accounting and regulatory purposes. A
reconciliation of shareholders' equity for accounting purposes to called up
share capital and eligible reserves for regulatory purposes, is set out below:
As at
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Shareholders' equity excluding minority
interests 20,973 19,799 17,988
Available for sale reserve (238) (132) (9)
Cash flow hedging reserve 407 230 172
Adjustments to retained earnings
Defined benefit pension scheme 1,261 1,165 1,302
Additional companies in regulatory
consolidation and non-consolidated
companies (230) (498) (101)
Foreign exchange on RCIs and upper Tier
2 loan stock 533 504 398
Other adjustments 254 174 (61)
--------- --------- ---------
Called up share capital and eligible
reserves for regulatory purposes 22,960 21,242 19,689
--------- --------- ---------
Total assets and risk weighted assets
Total assets increased 16% to GBP1,158.3bn (2006: GBP996.8bn). Risk weighted
assets increased 7% to GBP318.0bn (31st December 2006: GBP297.8bn). Loans and
advances to customers that have been securitised increased GBP6.5bn to GBP30.9bn
(31st December 2006: GBP24.4bn). The increase in risk weighted assets since 2006
reflected a rise of GBP3.8bn in the banking book and a rise of GBP16.4bn in the
trading book.
UK Retail Banking total assets increased 3% to GBP84.3bn (31st December 2006:
GBP81.7bn). This was mainly attributable to growth in mortgage balances. Risk
weighted assets fell 1% to GBP42.5bn (31st December 2006: GBP43.0bn) with growth
in mortgages offset by an increase in securitised balances.
UK Business Banking total assets grew 5% to GBP69.5bn (31st December 2006:
GBP65.9bn) driven by good growth across lending products. Risk weighted assets
increased 2% to GBP50.8bn (31st December 2006: GBP50.0bn), reflecting asset
growth partially offset by increased regulatory netting and an increase in
securitised balances.
Barclaycard total assets increased 1% to GBP20.4bn (31st December 2006:
GBP20.1bn). Risk weighted assets increased 1% to GBP17.1bn (31st December 2006:
GBP17.0bn), primarily reflecting underlying net business growth, broadly offset
by the redemption of a securitisation transaction, changes to the regulatory
treatment of associates and the sale of part of the Monument portfolio.
International Retail and Commercial Banking - excluding Absa total assets grew
11% to GBP42.4bn (31st December 2006: GBP38.2bn) driven by increases in
mortgages and unsecured lending in the retail sectors in Western Europe. Risk
weighted assets increased 17% to GBP23.5bn (31st December 2006: GBP20.1bn),
reflecting the balance sheet growth.
International Retail and Commercial Banking - Absa total assets increased 8% to
GBP32.8bn (31st December 2006: GBP30.4bn), primarily driven by increases in
mortgages and commercial lending. Risk weighted assets increased 5% to GBP21.8bn
(31st December 2006: GBP20.7bn), reflecting the balance sheet growth.
Barclays Capital total assets rose 21% to GBP796.4bn (31st December 2006:
GBP657.9bn). This reflected the continued expansion of the business, with growth
mainly attributable to increases in traded debt and equity securities and
grossed-up derivative positions. Risk weighted assets increased 11% to
GBP152.5bn (31st December 2006: GBP137.6bn) in line with risk, driven by the
growth in trading portfolios and derivatives.
Barclays Global Investors total assets increased 12% to GBP90.4bn (31st December
2006: GBP80.5bn), mainly attributable to growth in insurance products. The
majority of total assets relates to asset management products with equal and
offsetting balances reflected within liabilities to customers. Risk weighted
assets increased 14% to GBP1.6bn (31st December 2006: GBP1.4bn).
Barclays Wealth total assets increased 11% to GBP16.7bn (December 2006:
GBP15.0bn) reflecting strong growth in lending to high net worth, affluent and
intermediary clients. Risk weighted assets increased 13% to GBP6.9bn (31st
December 2006: GBP6.1bn) reflecting the increase in lending.
Head office functions and other operations total assets decreased 24% to
GBP5.4bn (31st December 2006: GBP7.1bn). Risk weighted assets decreased 21% to
GBP1.5bn (31st December 2006: GBP1.9bn).
PERFORMANCE MANAGEMENT
Economic capital
Barclays assesses capital requirements by measuring the Group risk profile using
both internally and externally developed models. The Group assigns economic
capital primarily within seven risk categories: Credit Risk, Market Risk,
Business Risk, Operational Risk, Insurance Risk, Fixed Assets and Private
Equity.
The Group regularly enhances its economic capital methodology and benchmarks
outputs to external reference points. The framework uses default probabilities
during average credit conditions, rather than those prevailing at the balance
sheet date, thus seeking to remove cyclicality from the economic capital
calculation. The framework also adjusts economic capital to reflect time
horizon, correlation of risks and risk concentrations.
Economic capital is allocated on a consistent basis across all of Barclays
businesses and risk activities with allocations reflecting varying levels of
risk. A single cost of equity is applied to calculate the cost of risk.
The total average economic capital required by the Group, as determined by risk
assessment models and after considering the Group's estimated portfolio effects,
is compared with the supply of economic capital to evaluate economic capital
utilisation. Supply of economic capital is calculated as the average available
shareholders' equity after adjustment and including preference shares.
The economic capital methodology formed the basis of the Group's submission for
the Basel II Internal Capital Adequacy Assessment Process (ICAAP).
Economic capital demand(1)
As at
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
UK Banking 6,550 6,050 5,850
-------- -------- --------
UK Retail Banking 3,400 3,250 3,250
UK Business Banking 3,150 2,800 2,600
-------- -------- --------
Barclaycard 2,050 1,850 2,150
International Retail and Commercial
Banking 2,250 2,000 1,850
-------- -------- --------
International Retail and Commercial
Banking-ex Absa 1,300 1,200 1,150
International Retail and Commercial
Banking-Absa 950 800 700
-------- -------- --------
Barclays Capital 4,400 3,950 3,600
Barclays Global Investors 200 200 150
Barclays Wealth 500 450 400
Head office functions and other
operations(2) 250 250 250
-------- -------- --------
Economic Capital requirement (excluding
goodwill) 16,200 14,750 14,250
Average historic goodwill and intangible
assets(3) 8,100 7,700 7,900
-------- -------- --------
Total economic capital requirement(4) 24,300 22,450 22,150
-------- -------- --------
(1) Calculated using a five point average over the year and rounded to
the nearest GBP50m for presentation purposes.
(2) Includes Transition Businesses and capital for central functional risks.
(3) Average goodwill relates to purchased goodwill and intangible
assets from business acquisitions.
(4) Total period end economic capital requirement (including core
available funds) as at 30th June 2007 stood at GBP26,800m (31st December
2006: GBP25,150m; 30th June 2006: GBP24,100m).
UK Retail Banking economic capital allocation increased GBP150m to GBP3,400m
(31st December 2006: GBP3,250m), reflecting exposure growth in the portfolio and
implementation of the updated Operational Risk Model. UK Business Banking
economic capital allocation increased GBP350m to GBP3,150m (31st December 2006:
GBP2,800m) as a consequence of asset growth and implementation of updated Credit
and Operational Risk Models.
Barclaycard economic capital allocation increased GBP200m to GBP2,050m (31st
December 2006: GBP1,850m), as a consequence of exposure growth, primarily in the
international cards and secured loans portfolio, partially offset by risk
transfer activity.
International Retail and Commercial Banking - excluding Absa economic capital
allocation increased GBP100m to GBP1,300m (31st December 2006: GBP1,200m). This
was due to lending growth primarily in Spain. International Retail and
Commercial Banking - Absa economic capital allocation (excluding the risk borne
by the minority interest) increased GBP150m to GBP950m (31st December 2006:
GBP800m), reflecting exposure growth in the portfolio.
Barclays Capital economic capital increased GBP450m to GBP4,400m (31st December
2006: GBP3,950m) due to growth in equity investments, operational and market
risk.
Barclays Wealth economic capital allocation increased GBP50m to GBP500m (31st
December 2006: GBP450m) reflecting exposure growth in the portfolio.
The Group's practice is to maintain an appropriate level of excess capital,
which is not allocated to the business units. This excess arises as a result of
capital management timing and includes capital held to cover pension
contribution risk. Available funds for economic capital exceeds demand by
GBP1,900m (31st December 2006: GBP2,050m).
Economic capital supply
The capital resources to support economic capital comprise adjusted
shareholders' equity including preference shares but excluding other minority
interests. Preference shares have been issued to optimise the long-term capital
base of the Group.
The capital resources to support economic capital are impacted by a number of
factors arising from the application of IFRS and are modified in calculating
available funds for economic capital. This applies specifically to:
- Cash flow hedging reserve - to the extent that the Group
undertakes the hedging of future cash flows, shareholders' equity
will include gains and losses which will be offset against the
gain or loss on the hedged item when it is recognised in the
income statement at the conclusion of the future hedged
transaction. Given the future offset of such gains and losses,
they are excluded from shareholders' equity when calculating
economic capital.
- Available for sale reserve - unrealised gains and losses on such
securities are included in shareholders' equity until disposal or
impairment. Such gains and losses are excluded from shareholders'
equity for the purposes of calculating economic capital. Realised
gains and losses, foreign exchange translation differences and
any impairment charges recorded in the income statement will
impact economic profit.
- Retirement benefits liability - the Group has recorded a deficit
with a consequent reduction in shareholders' equity. This
represents a non-cash reduction in shareholders' equity. For the
purposes of calculating economic capital, the Group does not
deduct the pension deficit from shareholders' equity.
The average supply of capital to support the economic capital framework is set
out below(1):
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Shareholders' equity excluding minority 13,250 12,100 10,750
interests less goodwill(2)
Retirement benefits liability 1,250 1,300 1,300
Cashflow hedging reserve 350 150 50
Available for sale reserve (150) (100) (50)
Preference shares 3,400 3,350 3,100
--------- --------- --------
Available funds for economic capital
excluding goodwill 18,100 16,800 15,150
Average historic goodwill and intangible
assets(2) 8,100 7,700 7,900
--------- --------- --------
Available funds for economic capital
including goodwill(3) 26,200 24,500 23,050
--------- --------- --------
(1) Averages for the period will not correspond to period-end balances
disclosed in the balance sheet. Numbers are rounded to the nearest GBP50m
for presentational purposes only.
(2) Average goodwill relates to purchased goodwill and intangible
assets from business acquisitions.
(3) Available funds for economic capital (including other Tier 1
instruments) as at 30th June 2007 stood at GBP30,950m (31st December 2006:
GBP28,800m; 30th June 2006: GBP27,200m).
In addition, the Group holds other Tier 1 Instruments of GBP4,109m as at 30th
June 2007 (31st December 2006: GBP3,674m; 30th June 2006: GBP3,099m) consisting
of Tier 1 notes of GBP887m and reserve capital instruments of GBP3,222m.
Economic profit
Economic profit comprises:
- Profit after tax and minority interests; less
- Capital charge (average shareholders' equity excluding minority
interests multiplied by the Group cost of capital).
The Group cost of capital has been applied at a uniform rate of 9.5%(1). The
costs of servicing preference shares are included in minority interests, and so
preference shares are excluded from average shareholders' equity for economic
profit purposes.
The economic profit performance in 2007 and 2006 is shown below:
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Profit after tax and minority interests 2,634 2,264 2,307
Addback of amortisation charged on
acquired intangible assets(2) 59 60 23
-------- -------- --------
Profit for economic profit purposes 2,693 2,324 2,330
-------- -------- --------
Average shareholders' equity excluding
minority interests (3),(4) 13,250 12,100 10,750
Adjust for unrealised loss/(gains) on
cashflow hedge reserve(4) 350 150 50
Adjust for unrealised gains on available
for sale financial instruments (4) (150) (100) (50)
Add: retirements benefits liability 1,250 1,300 1,300
Goodwill and intangible assets arising on
acquisitions (4) 8,100 7,700 7,900
-------- -------- --------
Average shareholders' equity
for economic profit purposes (3),(4) 22,800 21,150 19,950
-------- -------- --------
Capital charge at 9.5% (1,084) (1,005) (945)
-------- -------- --------
Economic profit 1,609 1,319 1,385
-------- -------- --------
(1) The Board determined the Group's cost of capital is to be
unchanged for 2007 at 9.5%.
(2) Amortisation charged for purchased intangibles, adjusted for tax
and minority interests.
(3) Average ordinary shareholders' equity for Group economic profit
calculation is the sum of adjusted equity and reserves plus goodwill and
intangible assets arising on acquisition, but excludes preference shares.
(4) Averages for the period will not correspond exactly to period end
balances disclosed in the balance sheet. Numbers are rounded to the nearest
GBP50m for presentation purposes only.
Economic profit generated by business
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
UK Banking 654 734 593
--------- -------- --------
UK Retail Banking 315 323 266
UK Business Banking 339 411 327
--------- --------- ---------
Barclaycard 101 22 115
International Retail and Commercial
Banking 85 324 169
--------- --------- ---------
International Retail and Commercial
Banking-ex Absa 31 233 76
International Retail and Commercial
Banking-Absa 54 91 93
--------- --------- ---------
Barclays Capital 969 510 671
Barclays Global Investors 210 181 195
Barclays Wealth 114 43 87
Head office functions and other
operations (185) (172) (143)
--------- --------- ---------
1,948 1,642 1,687
Historic goodwill and intangibles
arising on acquisition (387) (363) (376)
Variance to average shareholders' funds
(excluding minority interest) 48 40 74
--------- --------- ---------
Economic profit 1,609 1,319 1,385
--------- --------- ---------
Economic profit for the Group increased 16% (GBP224m) to GBP1,609m (2006:
GBP1,385m). The rise in economic profit was greater than the increase in both
profit before tax and earnings per share. This was due to the more efficient use
of capital across the Group partially offset by the increased share of minority
interests.
UK Retail Banking economic profit increased 18% (GBP49m) to GBP315m (2006:
GBP266m) due to a 9% increase in profit before tax and a 5% increase in the
economic capital charge reflecting exposure growth in the portfolio and
implementation of the updated Operational Risk Model. UK Business Banking
economic profit increased 4% (GBP12m) to GBP339m (2006: GBP327m) due to a 9%
increase in profit before tax partially offset by a 22% increase in the economic
capital charge arising from the impact of asset growth and implementation of the
updated Credit and Operational Risk Models.
Barclaycard economic profit decreased 12% (GBP14m) to GBP101m (2006: GBP115m),
primarily due to the 17% decrease in profit before tax and a 5% decrease in the
economic capital charge arising from the decline in UK card balances and
improvement in default probability methodology.
International Retail and Commercial Banking - excluding Absa economic profit
decreased 59% (GBP45m) to GBP31m (2006: GBP76m), due to a 27% decrease in profit
before tax, and an increase in the economic capital charge of 14%. The increase
in economic capital charge reflects the impact of lending growth in Spain and a
revised methodology.
International Retail and Commercial Banking - Absa economic profit decreased 42%
(GBP39m) reflecting a higher economic capital charge due to exposure growth in
the portfolio.
Barclays Capital economic profit increased 44% (GBP298m) to GBP969m (2006:
GBP671m), due to a 33% increase in profit before tax and a 22% increase in the
economic capital charge. The increased economic capital charge is due to growth
in equity investments and operational and market risk.
Barclays Wealth economic profit increased 31% (GBP27m) to GBP114m (2006:
GBP87m), due to a 34% increase in profit before tax and an increase in the
economic capital charge of 18%, reflecting exposure growth in the Wealth lending
portfolio.
Performance relative to the 2004 to 2007 goal period
Barclays will continue to use goals to drive performance. At the end of 2003,
Barclays established a set of four year performance goals for the period 2004 to
2007 inclusive. The primary goal is to achieve top quartile total shareholder
return (TSR) relative to a peer group(1) of financial services companies. TSR is
defined as the value created for shareholders through share price appreciation,
plus reinvested dividend payments. The peer group is regularly reviewed to
ensure that it remains aligned to our business mix and the direction and scale
of our ambition.
In terms of progress towards the Group's goal, Barclays delivered Total
Shareholder Return (TSR) of 63% and was positioned 6th within its peer group
(second quartile) for the goal period commencing 1st January 2004.
At the time of setting the TSR goal, we estimated that achieving top quartile
TSR would require the achievement of compound annual growth in economic
profit(2) in the range of 10% to 13% per annum (GBP6.5bn to GBP7.0bn of
cumulative economic profit) (3) over the 2004 to 2007 goal period.
Economic profit for the first half of 2007 was GBP1.6bn, which, added to the
GBP6.0bn generated in 2004, 2005 and 2006, delivered a cumulative total of
GBP7.6bn for the goal period to date. Therefore Barclays has delivered 117% of
the minimum range and 109% of the upper range of the cumulative economic profit
goal after expiry of only 88% of the goal period.
(1) Peer group for 2007 remained unchanged from 2006: ABN Amro, BBVA,
BNP Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan Chase, Lloyds
TSB, Royal Bank of Scotland and UBS.
(2) Economic profit is defined on page 64.
(3) Restated for the implementation of IFRS in 2005.
Risk Tendency
As part of its credit risk management system, the Group uses a model-based
methodology to assess the point-in-time expected loss of credit portfolios
across different customer categories. The approach is termed Risk Tendency and
applies to credit exposures in both wholesale and retail sectors. Risk Tendency
models provide statistical estimates of loss levels within a rolling 12 month
period based on averages in the ranges of possible losses expected from each of
the current portfolios. This contrasts with impairment allowances required under
accounting standards, which are based on objective evidence of actual impairment
as at the balance sheet date.
Since Risk Tendency and impairment allowances are calculated for different
purposes and on different bases, Risk Tendency does not predict loan impairment.
Risk Tendency is provided to present a view of the evolution of the quality and
scale of the credit portfolios.
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
UK Banking 870 790 705
--------- -------- --------
UK Retail Banking 580 500 430
UK Business Banking 290 290 275
--------- -------- --------
Barclaycard 1,000 1,135 1,105
International Retail and Commercial
Banking 315 220 195
--------- -------- --------
International Retail and Commercial
Banking-ex Absa 105 75 70
International Retail and Commercial
Banking-Absa 210 145 125
--------- -------- --------
Barclays Capital 110 95 125
Barclays Wealth 10 10 10
Transition Businesses(1) 5 10 25
--------- -------- --------
2,310 2,260 2,165
--------- -------- --------
(1) Included within Head office functions and other operations.
Risk Tendency increased GBP50m (2%) to GBP2,310m (31st December 2006: GBP2,260m)
reflecting the broadly stable risk profile of the loan book. Factors influencing
Risk Tendency included the very strong growth (16%) of the Group loans and
advances balances, particularly in Barclays Capital where the Risk Tendency
component is very low, methodology enhancements in UK Retail Banking, and the
maturation in the credit risk profile in the international card portfolios.
These were partially offset by a portfolio sale, methodology refinements in
Barclaycard and improvements in the credit risk profile in the wholesale and
corporate portfolios.
UK Retail Banking Risk Tendency increased GBP80m to GBP580m (31st December 2006:
GBP500m). This reflects GBP120m methodology enhancements in unsecured loans to
bring them more in line with UK cards. Excluding these enhancements Risk
Tendency decreased by GBP40m reflecting an improvement in the credit risk
profile in the UK unsecured personal loan portfolios offset by some growth in
loan balances.
Barclaycard Risk Tendency decreased GBP135m to GBP1,000m (31st December 2006:
GBP1,135m) reflecting the sale of part of the Monument portfolio and a
methodology enhancement in the UK cards portfolio. Excluding these factors, Risk
Tendency increased by GBP20m reflecting balance sheet growth in the
international portfolios offset by some improvement in the credit risk profile
of UK cards.
Risk Tendency at International Retail and Commercial Banking - excluding Absa
increased GBP30m to GBP105m (31st December 2006: GBP75m) reflecting a change to
the risk profile in Emerging Markets and balance sheet growth in Emerging
Markets and Western Europe.
International Retail and Commercial Banking - Absa Risk Tendency increased
GBP65m to GBP210m (31st December 2006: GBP145m) caused by a weakening of retail
credit conditions in South Africa after a series of interest rate rises in 2006
and 2007 and balance sheet growth.
ADDITIONAL INFORMATION
Group reporting changes in 2007
Barclays announced on19th June 2007 the impact of certain changes in Group
Structure and reporting on the 2006 results. There was no impact on the Group
income statement or balance sheet.
UK Retail Banking. The unsecured lending business, previously managed and
reported within Barclaycard and the Barclays Financial Planning business,
previously managed and reported within Barclays Wealth are now managed and
reported within UK Retail Banking. The changes combine these products with
related products already offered by UK Retail Banking. In the UK certain UK
Premier customers are now managed and reported within Barclays Wealth.
Barclaycard. The unsecured lending portfolio, previously managed and reported
within Barclaycard, has been transferred and is now managed and reported within
UK Retail Banking.
International Retail and Commercial Banking - excluding Absa. A number of high
net worth customers are now managed and reported within Barclays Wealth in order
to better match client profiles to wealth services.
Barclays Wealth. In the UK and Western Europe certain Premier and high net worth
customers are now managed and reported within Barclays Wealth having been
previously reported within UK Retail Banking and International Retail and
Commercial Banking - excluding Absa.
The Barclays Financial Planning business previously managed and reported within
Barclays Wealth, has become a fully integrated part of and is managed and
reported within UK Retail Banking. Finally with effect from 1st January 2007
Barclays Wealth - closed life assurance activities continues to be managed
within Barclays Wealth and for reporting purposes has been combined rather than
being reported separately.
The structure and reporting remains unchanged for UK Business Banking,
International Retail and Commercial Banking- Absa, Barclays Capital, Barclays
Global Investors and Head Office Functions and Other Operations.
Basis of Preparation
There have been no significant changes to the accounting policies described in
the 2006 Annual report. Therefore the information in this announcement has been
prepared using the accounting policies and presentation applied in 2006.
Changes to the UK Financial Services Authority Listing, Prospectus, Disclosure
and Transparency Rules to implement the European Union Transparency Directive,
including the requirement for the half-yearly report to be prepared in
accordance with IAS 34 'Interim Financial Reporting,' first apply to financial
years beginning on or after 20th January 2007. Therefore the revised Listing,
Prospectus and Disclosure Rules will first be applied to the June 2008 Interim
Results Announcement.
Future accounting developments
IFRS 7 ('Financial Instruments Disclosures') and an amendment to IAS 1
('Presentation of Financial Statements') on capital disclosures were issued by
the IASB in August 2005 for application in accounting periods beginning on or
after 1st January 2007 and have been adopted by the European Commission. The new
or revised disclosures will be included in the financial statements for the year
ended 31st December 2007.
Consideration will be given during the second half of 2007 to the implications,
if any, of the following IFRIC interpretations issued during 2006 and 2007 which
would first apply to the Group accounting period beginning on 1st January 2008:
- IFRIC 11 IFRS 2 - Group and Treasury Share Transactions
- IFRIC 12 Service Concession Arrangements
- IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
IFRS 8 ('Operating Segments') was issued in November 2006 and would first be
required to be applied to the Group accounting period beginning on 1st January
2009. The standard replaces IAS 14 Segmental Reporting and would align operating
segmental reporting with segments reported to senior management as well as
requiring amendments and additions to the existing segmental reporting
disclosures. The standard has not been endorsed for use in the European Union.
Once it has been endorsed, the Group will consider the enhancements that
permitted early adoption in 2008 may make to the transparency of the segmental
disclosures.
IFRIC 13 Customer Loyalty Programs was issued in June 2007 and would first apply
to the Group accounting period beginning on 1st January 2009. The Interpretation
addresses accounting by entities that grant loyalty award credits (such as
'points' or travel miles) to customers who buy other goods or services. It
requires entities to allocate some of the proceeds of the initial sale to the
award credits and recognise these proceeds as revenue only when they have
fulfilled their obligations. The implications of this IFRIC interpretation are
being considered and any resulting change in accounting policy would be
accounted for in accordance with IAS 8 in 2009.
Share capital
The Group manages its debt and equity capital actively. The Group's authority to
buy back ordinary shares (up to 980.8 million ordinary shares) was renewed at
the 2007 Annual General Meeting.
As per the announcement made on 23rd July 2007, Barclays intends to minimise the
dilutive effect on its existing shareholders of the issuance of Barclays shares
to Temasek and China Development Bank by commencing a share buyback programme
for up to EUR3.6 billion (GBP2.4 billion). The earliest date the buyback would
start is shortly after the publication of these interim results and the latest
is after conclusion of its offer for ABN AMRO.
Group share schemes
The independent trustees of the Group's share schemes may make purchases of
Barclays PLC ordinary shares in the market at any time or times following this
announcement of the Group's results for the purposes of those schemes' current
and future requirements. The total number of ordinary shares purchased would not
be material in relation to the issued share capital of Barclays PLC.
Filings with the SEC
The results will be furnished as a Form 6-K to the US Securities and Exchange
Commission as soon as practicable following the publication of these results.
Competition and regulatory matters
The scale of regulatory change remains challenging, arising in part from the
implementation of some key European Union (EU) directives. Many changes to
financial services legislation and regulation have come into force in recent
years and further changes will take place in the near future. Concurrently,
there is continuing political and regulatory scrutiny of the operation of the
retail banking and consumer credit industries in the UK and elsewhere. The
nature and impact of future changes in policies and regulatory action are not
predictable and are beyond the Group's control but could have an impact on the
Group's businesses and earnings.
In the EU as a whole, these regulatory actions included an enquiry into retail
banking in all of the then 25 member states by the European Commission's
Directorate General for Competition. The enquiry looked at retail banking in
Europe generally and Barclays has fully co-operated with the enquiry. On 31st
January 2007 the European Commission announced that the enquiry had identified
barriers to competition in certain areas of retail banking, payment cards and
payment systems in the EU. The Commission indicated it will use its powers to
address these barriers, and will encourage national competition authorities to
enforce European and national competition laws where appropriate. Any action
taken by the Commission and national competition authorities could have an
impact on the payment cards and payment systems businesses of Barclays and on
its retail banking activities in the EU countries in which it operates.
In September 2005 the UK Office of Fair Trading (OFT) received a super-complaint
from the Citizens Advice Bureau relating to payment protection insurance (PPI).
As a result, the OFT commenced a market study on PPI in April 2006. In October
2006, the OFT announced the outcome of the market study and, following a period
of consultation, the OFT referred the PPI market to the UK Competition
Commission for an in-depth enquiry in February 2007. This enquiry could last for
up to two years. Also in October 2006, the UK Financial Services Authority (FSA)
published the outcome of its broad industry thematic review of PPI sales
practices in which it concluded that some firms fail to treat customers fairly.
Barclays has cooperated fully with these investigations and will continue to do
so.
In April 2006, the OFT commenced a review of the undertakings given following
the conclusion of the Competition Commission Enquiry in 2002 into the supply of
banking services to small and medium enterprises. Barclays is cooperating fully
with that review.
The OFT has carried out investigations into Visa and MasterCard credit card
interchange rates. The decision by the OFT in the MasterCard interchange case
was set aside by the Competition Appeals Tribunal in June 2006. The OFT's
investigation in the Visa interchange case and a second MasterCard interchange
case are ongoing. The outcome is not known but these investigations may have an
impact on the consumer credit industry in general and therefore on Barclays
business in this sector. In February 2007 the OFT announced that it was
expanding its investigation into interchange rates to include debit cards.
On 1st April 2007, the UK consumer interest association known as Which?
submitted a super-complaint to the OFT pursuant to the Enterprise Act 2002. The
super-complaint criticises the various ways in which credit card companies
calculate interest charges on credit card accounts. On 26th June 2007, the OFT
announced a new programme of work with the credit card industry and consumer
bodies in order to make the costs of credit cards easier for consumers to
understand. This OFT decision follows the receipt by the OFT of the
super-complaint from Which?. This new work will explore the issues surrounding
the costs of credit for credit cards including purchases, cash advances,
introductory offers and payment allocation. The OFT's programme of work is
expected to take six months.
The OFT announced the findings of its investigation into the level of late and
over-limit fees on credit cards in April 2006, requiring a response from credit
card companies by 31st May 2006. Barclaycard responded by confirming that it
would reduce its late and over-limit fees on credit cards from 1st August 2006.
In September 2006, the OFT announced that it had decided to undertake a fact
find on the application of its statement on credit card fees to current account
unauthorised overdraft fees. The fact find was completed in March 2007. On 29th
March 2007, the OFT announced its decision to conduct a formal investigation
into the fairness of bank current account charges. The OFT announced a market
study into personal current accounts (PCAs) in the UK on 26th April 2007. The
market study will look at: (i) whether the provision of ''free if in credit''
PCAs delivers sufficiently high levels of transparency and value for customers;
(ii) the implications for competition and consumers if there were to be a shift
away from ''free if in credit'' PCAs; (iii) the fairness and impact on consumers
generally of the incidence, level and consequences of account charges; and (iv)
what steps could be taken to improve customers' ability to secure better value
for money, in particular to help customers make more informed current account
choices and drive competition. The study will focus on PCAs but will include an
examination of other retail banking products, in particular savings accounts,
credit cards, personal loans and mortgages in order to take into account the
competitive dynamics of UK retail banking.
On 27th July 2007, the OFT commenced High Court proceedings by agreement with
Barclays and seven other banks and building societies in which both the OFT and
the banks and building societies seek declarations on legal issues arising from
the banks' terms and conditions relating to overdraft charges. Specifically,
those declarations will address key aspects of the applicability of the Unfair
Terms in Consumer Contracts Regulations to those terms and conditions and the
question of whether such terms are capable of amounting to unlawful penalty
charges.
The proceedings will run in parallel with the ongoing OFT dual inquiry into
unauthorised overdraft charges and PCAs. As the purpose of the proceedings is to
seek to clarify the legitimacy of the banks' overdraft charging provisions, the
banks are seeking a stay of all pending county court litigation in relation to
such matters. The Financial Ombudsman Service has agreed to suspend reviews of
such cases and the FSA has granted complaints handling waivers in respect of all
complaints on the same issues pending conclusion of the test case.
In January 2007, the FSA issued a Statement of Good Practice relating to
Mortgage Exit Administration fees. Barclays will charge the fee applicable at
the time the customer took out the mortgage, which is one of the options
recommended by the FSA.
Acquisitions
On 8th February 2007 Barclays completed the acquisition of Indexchange
Investment AG. Indexchange is based in Munich offering exchange traded fund
products.
On 28th February 2007 Barclays completed the acquisition Nile Bank Limited. Nile
Bank is based in Uganda with 18 branches and 228 employees.
On 30th March 2007 Barclays completed the acquisition of EquiFirst. EquiFirst is
a non-prime wholesale mortgage originator in the United States.
On 18th May 2007 Barclays completed the acquisition of Walbrook Group Limited.
Walbrook is based in Jersey, Guernsey, Isle of Man and Hong Kong where it serves
high net worth private clients and corporate customers.
Disposals
On 4th April 2007 Barclays completed the sale of part of Monument, a credit card
portfolio.
Recent developments
On 16th April 2007 Barclays announced the sale of Barclays Global Investors
Japan Trust & Banking Co., Ltd, a Japanese trust administration and custody
operation.
On 18th June 2007 Barclays announced it had entered into an agreement to sell a
50% shareholding in Intelenet Global Services Pvt Ltd. Completion is subject to
the receipt of applicable regulatory approval and is expected in the second half
of 2007.
On 23rd April 2007, the supervisory and management boards of ABN AMRO Holding
N.V. (ABN AMRO) and the board of Barclays jointly announced that agreement had
been reached on the terms of a merger of ABN AMRO and Barclays. Revised terms of
the offer being made by Barclays for ABN AMRO were announced by Barclays on 23rd
July 2007.
On 23rd July 2007, Barclays also announced an unconditional subscription of
GBP2.4 billion of Barclays shares by China Development Bank and Temasek
Holdings, as well as a conditional subscription by them of GBP6.6 billion of
Barclays shares which was subject to a partial clawback in favour of certain
Barclays shareholders. The proceeds of this conditional investment will be used
to fund part of the cash consideration to be payable to ABN AMRO shareholders
under the revised offer. Barclays also announced that it intends to minimise the
dilutive effect of the unconditional subscription on existing shareholders by
commencing a share buyback programme for up to GBP2.4 billion. Barclays will
make a separate announcement describing the timing and terms on which such
buybacks will be made.
The merger is subject to, among other things, the satisfaction or waiver of
certain conditions, including approval by Barclays shareholders. It is currently
anticipated that the merger will be completed in the fourth quarter of 2007.
NOTES
-----
1. Assets held in respect of linked liabilities to customers under
investment contracts/liabilities to customers under investment
contracts
As at
30.06.07 31.12.06 30.06.06
Non-trading financial instruments fair GBPm GBPm GBPm
valued
through profit and loss held in respect
of linked liabilities 92,194 82,798 79,334
Cash and bank balances within the funds 1,541 1,839 2,046
--------- --------- ---------
Assets held in respect of linked
liabilities to customers under
investment contracts 93,735 84,637 81,380
--------- --------- ---------
Liabilities arising from investment
contracts (93,735) (84,637) (81,380)
--------- --------- ---------
2. Derivative financial instruments
The tables set out below analyse the contract or underlying principal and the
fair value of derivative financial instruments held for trading purposes and for
the purposes of managing the Group's structural exposures. Derivatives are
measured at fair value and the resultant profits and losses from derivatives
held for trading purposes are included in net trading income. Where derivatives
are held for risk management purposes and when transactions meet the criteria
specified in IAS 39, the Group applies hedge accounting as appropriate to the
risks being hedged.
Contract 30.06.07
notional Fair value
amount Assets Liabilities
Derivatives designated as held for GBPm GBPm GBPm
trading
Foreign exchange derivatives 2,113,080 23,852 (22,325)
Interest rate derivatives 21,671,954 102,959 (103,722)
Credit derivatives 1,755,840 13,430 (12,916)
Equity and stock index and commodity
derivatives 620,500 32,254 (37,814)
---------- -------- ---------
Total derivative assets/(liabilities)
held for trading 26,161,374 172,495 (176,777)
---------- -------- ---------
Derivatives designated in hedge
accounting relationships
Derivatives designated as cash flow
hedges 42,193 162 (433)
Derivatives designated as fair value
hedges 22,246 324 (483)
Derivatives designated as hedges of 16,094 1,244 (81)
net investments
---------- -------- ---------
Total derivative assets/(liabilities)
designated in hedge accounting
relationships 80,533 1,730 (997)
---------- -------- ---------
Total recognised derivative assets/
(liabilities) 26,241,907 174,225 (177,774)
---------- -------- ---------
Contract 31.12.06
notional Fair value
amount Assets Liabilities
Derivatives designated as held fo GBPm GBPm GBPm
trading
Foreign exchange derivatives 1,500,774 22,026 (21,745)
Interest rate derivatives 17,666,353 76,010 (75,854)
Credit derivatives 1,224,548 9,275 (8,894)
Equity and stock index and commodity
derivatives 495,080 29,962 (33,253)
---------- -------- --------
Total derivative assets/(liabilities)
held for trading 20,886,755 137,273 (139,746)
---------- -------- --------
Derivatives designated in hedge
accounting relationships
Derivatives designated as cash flow
hedges 63,895 132 (401)
Derivatives designated as fair value
hedges 19,489 298 (441)
Derivatives designated as hedges of
net investments 12,050 650 (109)
---------- -------- --------
Total derivative assets/(liabilities)
designated in hedge accounting
relationships 95,434 1,080 (951)
---------- -------- --------
Total recognised derivative assets/
(liabilities) 20,982,189 138,353 (140,697)
---------- -------- --------
Contract 30.06.06
notional Fair value
amount Assets Liabilities
Derivatives designated as held for GBPm GBPm GBPm
trading
Foreign exchange derivatives 1,407,480 20,865 (20,885)
Interest rate derivatives 17,863,507 80,471 (80,625)
Credit derivatives 897,769 5,473 (5,075)
Equity and stock index and commodity
derivatives 587,142 29,099 (31,721)
----------- --------- ---------
Total derivative assets/(liabilities)
held for trading 20,755,898 135,908 (138,306)
----------- --------- ---------
Derivatives designated in hedge
accounting relationships
Derivatives designated as cash flow 31,724 135 (351)
hedges
Derivatives designated as fair value
hedges 15,982 267 (313)
Derivatives designated as hedges of
net investments 12,292 591 (12)
----------- --------- ---------
Total derivative assets/(liabilities)
designated in hedge accounting
relationships 59,998 993 (676)
----------- --------- ---------
Total recognised derivative assets/
(liabilities) 20,815,896 136,901 (138,982)
----------- --------- ---------
Total derivative notionals have grown over the period primarily due to increases
in the volume of fixed income derivatives, reflecting the continued growth in
client based activity and increased use of electronic trading platforms in
Europe and the US. Internet rate and credit derivative values have also
increased significantly, largely due to growth in the market for these products.
3. Loans and advances to banks
As at
30.06.07 31.12.06 30.06.06
By geographical area GBPm GBPm GBPm
United Kingdom 8,933 6,229 7,848
Other European Union 13,538 8,513 10,209
United States 12,351 9,056 10,888
Africa 2,252 2,219 1,375
Rest of the World 6,120 4,913 5,014
-------- -------- --------
43,194 30,930 35,334
Less: Allowance for impairment (3) (4) (4)
-------- -------- --------
Total loans and advances to banks 43,191 30,926 35,330
-------- -------- --------
4. Loans and advances to customers
As at
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Retail business 147,730 139,350 134,534
Wholesale and corporate business 176,787 146,281 150,963
--------- -------- --------
324,517 285,631 285,497
Less: Allowances for impairment (3,274) (3,331) (3,400)
--------- -------- --------
Total loans and advances to customers 321,243 282,300 282,097
--------- -------- --------
By geographical area
United Kingdom 183,756 170,518 164,417
Other European Union 52,178 43,430 43,528
United States 33,767 25,677 26,523
Africa 34,175 31,691 29,694
Rest of the World 20,641 14,315 21,335
--------- -------- --------
324,517 285,631 285,497
Less: Allowance for impairment (3,274) (3,331) (3,400)
--------- -------- --------
Total loans and advances to customers 321,243 282,300 282,097
--------- -------- --------
By industry
Financial institutions 67,125 45,954 56,616
Agriculture, forestry and fishing 3,144 3,997 3,449
Manufacturing 14,086 15,451 13,951
Construction 4,764 4,056 4,430
Property 17,489 16,528 16,929
Energy and water 8,000 6,810 5,527
Wholesale and retail distribution and
leisure 17,209 15,490 16,902
Transport 6,012 5,586 5,252
Postal and communication 3,793 2,180 1,394
Business and other services 36,533 29,425 29,453
Home loans(1) 104,319 98,172 89,001
Other personal 31,713 31,840 31,865
Finance lease receivables 10,330 10,142 10,728
--------- -------- --------
324,517 285,631 285,497
Less: Allowance for impairment (3,274) (3,331) (3,400)
--------- -------- --------
Total loans and advances to customers 321,243 282,300 282,097
--------- -------- --------
(1) Excludes commercial property mortgages.
The industry classifications have been prepared at the level of the borrowing
entity. This means that a loan to the subsidiary of a major corporation is
classified by the industry in which that subsidiary operates even though the
parent's predominant business may be a different industry.
5. Allowance for impairment on loans and advances
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
At beginning of period 3,335 3,404 3,450
Acquisitions and disposals (75) (20) (3)
Exchange and other adjustments (6) (48) (105)
Unwind of discount (53) (50) (48)
Amounts written off (see below) (1,011) (1,178) (996)
Recoveries (see below) 124 134 125
Amounts charged against profit (see
below) 963 1,093 981
--------- -------- --------
At end of period 3,277 3,335 3,404
--------- -------- --------
Amounts written off
United Kingdom (820) (995) (751)
Other European Union (46) (20) (54)
United States (87) (28) (18)
Africa (58) (97) (167)
Rest of the World - (38) (6)
--------- -------- --------
(1,011) (1,178) (996)
--------- -------- --------
Recoveries
United Kingdom 93 98 80
Other European Union 7 8 10
United States 8 9 13
Africa 15 16 17
Rest of the World 1 3 5
--------- -------- --------
124 134 125
--------- -------- --------
Impairment charged against profit:
New and increased impairment allowances
United Kingdom 941 1,211 1,042
Other European Union 85 126 56
United States 82 16 44
Africa 111 107 102
Rest of the World 4 5 13
--------- -------- --------
1,223 1,465 1,257
--------- -------- --------
Less: Releases of impairment allowance
United Kingdom (82) (111) (84)
Other European Union (11) (47) (25)
United States (21) (10) (16)
Africa (9) (18) (15)
Rest of the World (13) (52) (11)
--------- -------- --------
(136) (238) (151)
--------- -------- --------
Recoveries (124) (134) (125)
--------- -------- --------
Total impairment charges on loans and
advances(1) 963 1,093 981
--------- -------- --------
(1) This excludes other credit provisions and impairment on available
for sale assets detailed on page 50.
Allowance GBPm GBPm GBPm
United Kingdom 2,396 2,477 2,428
Other European Union 334 311 259
United States 72 100 128
Africa 452 417 474
Rest of the World 23 30 115
-------- -------- --------
Total allowance for impairment 3,277 3,335 3,404
-------- -------- --------
6. Potential credit risk loans
The following tables present an analysis of potential credit risk loans
(non-performing and potential problem loans).
As at
30.06.07 31.12.06 30.06.06
Potential credit risk loans GBPm GBPm GBPm
Summary
Impaired loans(1) 4,693 4,444 4,630
Accruing loans which are contractually
overdue 90 days or more as to principal
or interest 598 598 618
--------- -------- --------
5,291 5,042 5,248
Restructured loans 61 46 46
--------- -------- --------
Total non-performing loans 5,352 5,088 5,294
Potential problem loans 735 761 935
--------- -------- --------
Total potential credit risk loans 6,087 5,849 6,229
--------- -------- --------
Geographical split
Impaired loans(1):
United Kingdom 3,548 3,340 3,164
Other European Union 456 410 461
United States 76 129 172
Africa 589 535 657
Rest of the World 24 30 176
--------- -------- --------
Total 4,693 4,444 4,630
--------- -------- --------
Accruing loans which are contractually
overdue 90 days or more as to principal
or interest
United Kingdom 508 516 528
Other European Union 61 58 67
United States 4 3 2
Africa 25 21 21
Rest of the World - - -
--------- -------- --------
Total 598 598 618
--------- -------- --------
(1) Impaired loans are non-performing loans where, in general, an
impairment allowance has been raised. This classification may also include
non-performing loans which are fully collateralised or where the
indebtedness has already been written down to the expected realisable
value.
As at
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Restructured loans
United Kingdom 3 - 2
Other European Union 12 10 10
United States 28 22 17
Africa 18 14 17
Rest of the World - - -
-------- -------- --------
Total 61 46 46
-------- -------- --------
Total non-performing loans
United Kingdom 4,059 3,856 3,694
Other European Union 529 478 538
United States 108 154 191
Africa 632 570 695
Rest of the World 24 30 176
-------- -------- --------
Total 5,352 5,088 5,294
-------- -------- --------
Potential problem loans
United Kingdom 409 465 599
Other European Union 23 32 51
United States 9 21 35
Africa 271 240 248
Rest of the World 23 3 2
-------- -------- --------
Total 735 761 935
-------- -------- --------
Total potential credit risk loans
United Kingdom 4,468 4,321 4,293
Other European Union 552 510 589
United States 117 175 226
Africa 903 810 943
Rest of the World 47 33 178
-------- -------- --------
Total 6,087 5,849 6,229
-------- -------- --------
Allowance coverage of non-performing % % %
loans
United Kingdom 59.0 64.2 65.7
Other European Union 63.1 65.1 48.1
United States 66.7 64.9 67.0
Africa 71.5 73.2 68.2
Rest of the World 95.8 100.0 65.3
-------- -------- --------
Total 61.2 65.6 64.3
-------- -------- --------
Allowance coverage of total potential % % %
credit risk loans
United Kingdom 53.6 57.3 56.6
Other European Union 60.5 61.0 44.0
United States 61.5 57.1 56.6
Africa 50.0 51.5 50.3
Rest of the World 48.9 91.0 64.6
-------- -------- --------
Total 53.8 57.0 54.6
-------- -------- --------
As at
30.06.07 31.12.06 30.06.06
Allowance coverage of non-performing % % %
loans:
Retail 61.4 65.6 63.2
Wholesale and corporate 60.9 65.5 66.8
--------- -------- --------
Total 61.2 65.6 64.3
--------- -------- --------
Allowance coverage of total potential
credit risk loans:
Retail 55.6 59.8 56.9
Wholesale and corporate 49.7 50.6 50.4
--------- -------- --------
Total 53.8 57.0 54.6
--------- -------- --------
Allowance coverage of non-performance loans decreased to 61.2% from 65.6% at
31st December 2006 principally owing to a number of larger names where the
recovery outlook is relatively high.
7. Available for sale financial investments
As at
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Debt securities 42,727 47,910 49,908
Equity securities 1,652 1,379 1,400
Treasury bills and other eligible bills 3,387 2,420 2,498
--------- -------- ---------
47,766 51,709 53,806
Less: Allowance for impairment (2) (6) (90)
--------- -------- ---------
Available for sale financial
investments 47,764 51,703 53,716
--------- -------- ---------
8. Other assets
As at
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Sundry debtors 4,401 4,298 3,980
Prepayments 583 658 962
Accrued income 1,159 722 834
Insurance assets, including unit
linked assets 146 172 90
-------- -------- --------
Other assets 6,289 5,850 5,866
-------- -------- --------
9. Other liabilities
As at
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Obligations under finance leases
payable 86 92 102
Sundry creditors 5,075 4,118 5,772
Accruals and deferred income 5,747 6,127 4,893
-------- -------- --------
Other liabilities 10,908 10,337 10,767
-------- -------- --------
10. Provisions
30.06.07 31.12.06 30.06.06
Redundancy and restructuring 104 102 90
Undrawn contractually committed
facilities and guarantees 38 46 50
Onerous contracts 68 71 44
Sundry provisions 317 243 290
-------- -------- --------
Provisions 527 462 474
-------- -------- --------
11. Other reserves
As at
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Available for sale reserve 238 132 9
Cash flow hedging reserve (407) (230) (172)
Capital redemption reserve 309 309 309
Other capital reserve 617 617 617
Currency translation reserve (486) (438) (176)
-------- -------- --------
Other reserves 271 390 587
-------- -------- --------
Movements in other reserves reflect the relevant amounts recorded in the
consolidated statement of recognised income and expense on page 90.
12. Retirement benefit liabilities
The Group's IAS 19 pension surplus across all schemes as at 30th June 2007 was
GBP540m (31st December 2006: deficit of GBP817m). The surplus comprised net
recognised liabilities of GBP1,804m (31st December 2006: GBP1,719m) and
unrecognised actuarial gains of GBP2,344m (31st December 2006: GBP902m). The net
recognised liabilities comprised retirement benefit liabilities of GBP1,840m
(31st December 2006: GBP1,807m) and assets of GBP36m (31st December 2006:
GBP88m).
The Group's IAS 19 pension surplus in respect of the main UK scheme as at 30th
June 2007 was GBP867m (31st December 2006: deficit of GBP475m). The primary
reason for the movement of GBP1,342m was an increase in AA long-term corporate
bond yields which resulted in a higher discount rate of 5.82% (31st December
2006: 5.12%), partially offset by an increase in the inflation assumption to
3.35% (31st December 2006: 3.08%) and lower than expected returns on the assets.
Mortality assumptions remain unchanged from those in force at 31st December
2006.
The actuarial funding position of the main UK pension scheme as at 30th June
2007, estimated based on assumptions relating to the formal triennial valuation
in 2004, was a surplus of GBP1,100m (31st December 2006: surplus of GBP1,300m),
representing a funding ratio of 107%. The Pensions Protection Fund (PPF)
solvency ratio(1) for the main UK scheme as at 30th June 2007 was estimated to
be 131% (31st December 2006: 121%). The next formal triennial valuation is due
as at 30th September 2007. Assumptions will be reviewed and updated as part of
that valuation.
(1) The PPF solvency ratio represents the funds assets as a percentage
of pension liabilities calculated using a section 179 valuation model.
13. Legal proceedings
Barclays has for some time been party to proceedings, including a class action,
in the United States against a number of defendants following the collapse of
Enron; the class action claim is commonly known as the Newby litigation. On 20th
July 2006 Barclays received an Order from the United States District Court for
the Southern District of Texas Houston Division which dismissed the claims
against Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. in the Newby
litigation. On 4th December 2006 the Court stayed Barclays dismissal from the
proceedings and allowed the plaintiffs to file a supplemental complaint. On 19th
March 2007 the United States Court of Appeals for the Fifth Circuit issued its
decision on an appeal by Barclays and two other financial institutions
contesting a ruling by the District Court allowing the Newby litigation to
proceed as a class action. The Court of Appeals held that because no proper
claim against Barclays and the other financial institutions had been alleged by
the plaintiffs, the case could not proceed against them. The plaintiffs have
applied to the United States Supreme Court for a review of this decision.
Pending the outcome of further appellate proceedings, the District Court has
stayed the Newby litigation.
Barclays considers that the Enron related claims against it are without merit
and is defending them vigorously. It is not possible to estimate Barclays
possible loss in relation to these matters, nor the effect that they might have
upon operating results in any particular financial period.
Barclays has been in negotiations with the staff of the US Securities and
Exchange Commission with respect to a settlement of the Commission's
investigations of transactions between Barclays and Enron. Barclays does not
expect that the amount of any settlement with the Commission would have a
significant adverse effect on its financial position or operating results.
Barclays is engaged in various other litigation proceedings both in the United
Kingdom and a number of overseas jurisdictions, including the United States,
involving claims by and against it which arise in the ordinary course of
business. Barclays does not expect the ultimate resolution of any of the
proceedings to which Barclays is party to have a significant adverse effect on
the financial position of the Group and Barclays has not disclosed the
contingent liabilities associated with these claims either because they cannot
reasonably be estimated or because such disclosure could be prejudicial to the
conduct of the claims.
14. Contingent liabilities and commitments
As at
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Acceptances and endorsements 295 287 248
Guarantees and assets pledged as
collateral for security 33,445 31,252 33,417
Other contingent liabilities 7,757 7,880 8,354
-------- -------- --------
Contingent liabilities 41,497 39,419 42,019
-------- -------- --------
Commitments 194,810 205,504 204,860
-------- -------- --------
15. Market risk
Market risk is the risk that Barclays earnings or capital, or its ability to
meet business objectives, will be adversely affected by changes in the level or
volatility of market rates or prices such as interest rates, credit spreads,
commodity prices, equity prices and foreign exchange rates.
Barclays Capital's market risk exposure, as measured by average total Daily
Value at Risk (DVaR), was GBP39.3m in the first half of 2007. This is 9%
(GBP3.1m) more than the corresponding period of 2006 and 3% (GBP1.3m) up on the
second half of 2006. The growth in Commodity DVaR is consistent with Barclays
Capital's business plan.
Total DVaR as at 30th June 2007 was GBP41.6m (31st December 2006: GBP41.9m).
Analysis of Barclays Capital's market risk exposures
The daily average, maximum and minimum values of DVaR were calculated as below:
DVaR
Half-year ended
30th June 2007
-------------------
Average High(1) Low(1)
GBPm GBPm GBPm
Interest rate risk 19.7 27.2 13.0
Credit spread risk 20.4 28.1 14.6
Commodity risk 19.5 27.2 14.8
Equity risk 10.1 15.3 7.3
Foreign exchange risk 4.3 6.7 2.9
Diversification effect (34.7) n/a n/a
------- -------- -------
Total DVaR 39.3 47.1 33.1
------- -------- -------
Half-year ended
31st December 2006
-------------------
Average High(1) Low(1)
GBPm GBPm GBPm
Interest rate risk 19.7 28.8 12.3
Credit spread risk 24.4 33.1 17.9
Commodity risk 14.2 21.6 9.0
Equity risk 7.9 11.6 5.8
Foreign exchange risk 3.6 6.3 1.8
Diversification effect (31.8) n/a n/a
------- -------- -------
Total DVaR 38.0 43.2 34.0
------- -------- -------
Half-year ended
30th June 2006
-------------------
Average High(1) Low(1)
GBPm GBPm GBPm
Interest rate risk 20.5 25.2 14.6
Credit spread risk 24.2 27.5 20.9
Commodity risk 8.4 13.9 5.7
Equity risk 7.7 10.0 6.0
Foreign exchange risk 4.5 7.7 2.0
Diversification effect (29.1) n/a n/a
------- -------- -------
Total DVaR 36.2 43.0 31.3
------- -------- -------
(1) The high (and low) DVaR figures reported for each category did not
necessarily occur on the same day as the high (and low) DVaR reported as a
whole. Consequently a diversification effect number for the high (and low)
DVaR figures would not be meaningful and it is therefore omitted from the
above table.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED)
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net movements in available for sale
reserve 95 173 (313)
Net movements in cash flow hedging
reserve (280) (68) (419)
Net movements in currency translation
reserve (48) (186) (595)
Tax 37 (14) 267
Other movements 23 (5) 30
-------- -------- --------
Amounts included directly in equity (173) (100) (1,030)
Profit after tax 2,943 2,594 2,601
-------- -------- --------
Total recognised income and expense 2,770 2,494 1,571
-------- -------- --------
Attributable to:
Equity holders of the parent 2,502 2,121 1,561
Minority interests 268 373 10
-------- -------- --------
2,770 2,494 1,571
-------- -------- --------
The consolidated statement of recognised income and expense reflects all items
of income and expense for the period, including items taken directly to equity.
Movements in individual reserves are shown including amounts which relate to
minority interests; the impact of such amounts is then reflected in the amount
attributable to such interests. Movements in individual reserves are also shown
on a pre-tax basis with any related tax recorded on the separate tax line.
The available for sale reserve reflects gains or losses arising from the change
in fair value of available for sale financial assets except for items recorded
in the income statement which are: impairment losses; gains or losses
transferred to the income statement due to fair value hedge accounting; and
foreign exchange gains or losses on monetary items such as debt securities. When
an available for sale asset is impaired or derecognised, the cumulative gain or
loss previously recognised in the available for sale reserve is transferred to
the income statement. The movement in the first half of 2007 primarily reflects
the recognition of net unrealised gains from changes in fair value partially
offset by the transfer of net realised gains.
Cash flow hedging aims to minimise exposure to variability in cash flows that is
attributable to a particular risk associated with a recognised asset or
liability or a highly probable forecast transaction that could affect profit or
loss. The portion of the gain or loss on the hedging instrument that is deemed
to be an effective hedge is recognised in the cash flow hedging reserve. The
gains and losses deferred in this reserve will be transferred to the income
statement in the same period or periods during which the hedged item is
recognised in the income statement. The movement in the first half of 2007
primarily reflects net unrealised losses from changes in the fair value of the
hedging instruments partially offset by the transfer of net losses to the income
statement.
Exchange differences arising on the net investments in foreign operations and
effective hedges of net investments are recognised in the currency translation
reserve and transferred to the income statement on the disposal of the net
investment. The movement in the first half of 2007 primarily reflects changes in
the value of the US Dollar on net investments and the impact of changes in the
value of the Rand on the minority interest in Absa Group Limited partially
offset by the impact of other currency movements on net investments which are
hedged on a post-tax basis. The US Dollar net investments are economically
hedged through US Dollar-denominated preference share capital, which is not
revalued for accounting purposes.
SUMMARY CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Half Year ended
30.06.07 31.12.06 30.06.06
GBPm GBPm GBPm
Net cash flow from operating activities 2,729 1,017 9,030
Net cash flow from investing activities 3,990 184 (1,338)
Net cash flow from financing activities 410 (574) 1,266
Effects of exchange rate on cash and (196) 948 (386)
cash equivalents
-------- -------- --------
Net increase in cash and cash
equivalents 6,933 1,575 8,572
Cash and cash equivalents at beginning
of period 30,952 29,377 20,805
-------- -------- --------
Cash and cash equivalents at end of
period 37,885 30,952 29,377
-------- -------- --------
In order to provide more relevance to users and to enhance the comparability of
its financial statement presentation, the Group has changed certain
classification within the cash flow statement in 2006. Certain activities which
were categorised as operating activities have been reclassified as financing
activities and investing activities.
OTHER INFORMATION
Registered office
1 Churchill Place, London, E14 5HP, England, United Kingdom.
Tel: +44 (0) 20 7116 1000.
Company number: 48839.
Website
www.barclays.com
Registrar
The Registrar to Barclays PLC, The Causeway, Worthing, West Sussex, BN99 6DA,
England, United Kingdom. Tel: 0870 609 4535 or +44 1214 157 004 from overseas.
Listing
The principal trading market for Barclays PLC ordinary shares is the London
Stock Exchange. Ordinary shares are also listed on the Tokyo Stock Exchange.
Trading on the New York Stock Exchange is in the form of ADSs under the ticker
symbol 'BCS'. Each ADS represents four ordinary shares of 25p each and is
evidenced by an ADR. The ADR depositary is The Bank of New York whose
international telephone number is +1-212-815-3700, whose domestic telephone
number is 1-888-BNY-ADRS and whose address is The Bank of New York, Investor
Relations, PO Box 11258, Church Street Station, New York, NY 10286-1258.
Filings with the SEC
Statutory accounts for the year ended 31st December 2006, which also include
certain information required for the joint Annual Report on Form 20-F of
Barclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission
(SEC), can be obtained from Corporate Communications, Barclays Bank PLC, 200
Park Avenue, New York, NY 10166, United States of America or from the Director,
Investor Relations at Barclays registered office address. Copies of the Form
20-F are available from the Barclays Investor Relations website (details below)
and from the SEC's website (www.sec.gov).
Results timetable
Ex dividend Date Wednesday, 15th August 2007
Dividend Record Date Friday, 17th August 2007
Dividend Payment Date Monday, 1st October 2007
Full Year Trading Update* Tuesday, 27th November 2007
2007 Preliminary Results Announcement* Tuesday, 19th February 2008
*Note that these announcement dates are provisional and subject to change.
Economic data
30.06.07 31.12.06 30.06.06
Period end - US$/GBP 2.01 1.96 1.85
Average - US$/GBP 1.97 1.84 1.79
Period end - EUR/GBP 1.49 1.49 1.45
Average - EUR/GBP 1.48 1.47 1.46
Period end - ZAR/GBP 14.12 13.71 13.19
Average - ZAR/GBP 14.11 12.47 11.31
For further information please contact:
Investor Relations Media Relations
-------------------- -----------------
Mark Merson/James S Johnson Alistair Smith/Robin Tozer
+44 (0) 20 7116 5752/2927 +44 (0) 20 7116 6132/6586
More information on Barclays can be found on our website at the following
address: www.investorrelations.barclays.com
APPENDIX 1
ABSA
Half Year ended
30.06.07 31.12.06 30.06.06
Rm Rm Rm
-------- -------- --------
Interest and similar income 24,185 20,269 17,331
Interest expense and similar charges (15,608) (12,263) (10,440)
-------- -------- --------
Net interest income 8,577 8,006 6,891
Impairment losses on loans and advances (985) (979) (594)
-------- -------- --------
7,592 7,027 6,297
-------- -------- --------
Fee and commission income 6,020 5,874 5,077
Fee and commission expense (394) (305) (272)
-------- -------- --------
Net fee and commission income 5,626 5,569 4,805
-------- -------- --------
Insurance premium revenue 1,795 1,720 1,549
Premiums ceded to reinsurers (142) (134) (141)
-------- -------- --------
Net insurance premium income 1,653 1,586 1,408
-------- -------- --------
Gross claims and benefits paid on
insurance contracts (836) (754) (622)
Reinsurance recoveries 58 42 15
-------- -------- --------
Net claims and benefits paid (778) (712) (607)
Changes in insurance and investment
liabilities (573) (454) (294)
Gains and losses from banking and
trading activities 930 806 610
Gains and losses from investment
activities 1,084 1,303 588
Other operating income 469 579 359
-------- -------- --------
Net operating income 16,003 15,704 13,166
Operating expenses (9,113) (8,685) (7,935)
Impairments (28) (75) -
Indirect taxation (449) (450) (421)
Share of profit of associated and joint
venture companies 16 44 69
-------- -------- --------
Operating profit before income tax 6,429 6,538 4,879
-------- -------- --------
This appendix summarises the Rand results of Absa Group Limited for the six
months to 30th June 2007 as reported to JSE Limited.
Absa Group Limited results
Absa Group Limited's operating profit before income tax increased 32% (R1,550m)
to R6,429m (2006 R4,879m) reflecting very good performances from Retail Banking,
Absa Capital, Bancassurance and Corporate and Business Banking. Absa Group
Limited delivered a return on equity of 26.8% (2006: 24.7%). Key factors
impacting the results included very strong asset and income growth, increased
transaction volumes, a strong investment performance, an increased retail credit
impairment charge, and the realisation of synergies from leveraging Barclays
expertise and economies of scale.
Net operating income has grown R2,837m to R16,003m (2006: R13,166m).
Net interest income grew 25% (R1,686m) to R8,577m (2006: R6,891m). Loans and
advances to customers increased 20% from 30th June 2006 driven by growth of 25%
in mortgages, 53% in credit cards and 32% in commercial property finance.
Deposits increased 13%.
Non-interest income increased 22% reflecting higher transaction volumes, a
strong performance in insurance related earnings and higher investment income
from bancassurance operations.
As expected the impairment charge on loans and advances increased R391m to R985m
(2006: R594m) from the cyclically low levels of recent years. Arrears in retail
portfolios increased driven by interest rate increases in 2006 and 2007 and
pressure on collections. Action has been taken to reduce some of the higher risk
customer balances.
Operating expenses increased 15% 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 resulting
from the majority ownership of Absa Group Limited by Barclays. In the first six
months of 2007, synergies of R650m were delivered relative to a full year 2007
target of R750m. On an annualised basis, synergies delivered to date are close
to delivery of the 2009 target of R1.4bn. Integration costs were in line with
the target of R300m.