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
February 2006
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
1. Final Results dated 21 February 2006
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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: February 21, 2006 By: /s/ Patrick Gonsalves
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Patrick Gonsalves
Deputy Secretary
BARCLAYS BANK PLC
(Registrant)
Date: February 21, 2006 By: /s/ Patrick Gonsalves
----------------------
Patrick Gonsalves
Joint Secretary
Exhibit No. 1
Results
Announcement
31st December
2005
BARCLAYS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR 2005
TABLE OF CONTENTS
PAGE
Summary of key information 1
Performance summary 2
Financial highlights 4
Group Chief Executive's Statement 5
Group Finance Director's Review 8
Consolidated income statement 11
Consolidated balance sheet 12
Results by business 14
Results by nature of income and expense 44
Analysis of amounts included on the balance sheet 56
Additional information 68
Notes 72
Consolidated statement of recognised income and expense 86
Summary consolidated cashflow statement 87
Other information 88
Index 90
BARCLAYS PLC, 1 CHURCHILL PLACE, LONDON, E14 5HP, ENGLAND, UNITED KINGDOM.
TELEPHONE: +44 (0) 20 7116 1000. COMPANY NO. 48839
BARCLAYS PLC
The information in this announcement, which was approved by the Board of
Directors on 20th February 2006, does not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985 (the 'Act'). Statutory
accounts, 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), will be delivered to the Registrar of Companies
in accordance with Section 242 of the Act. The 2005 Annual Review and Summary
Financial Statement will be posted to shareholders together with the Group's
full Annual Report for those shareholders who request it.
International Financial Reporting Standards
The Group has applied International Financial Reporting Standards (IFRS) from
1st January 2004, with the exception of the standards relating to financial
instruments and insurance contracts which are applied only with effect from 1st
January 2005. Therefore the impacts of adopting IAS 32, IAS 39 and IFRS 4 are
not included in the 2004 comparatives in accordance with IFRS 1 and financial
instruments and insurance contracts are accounted for under UK GAAP in 2004.
The results for 2005 are therefore not entirely comparable to those for 2004 in
affected areas. For a fuller discussion of the transitional impacts of IFRS,
please refer to the IFRS Transition Report 2004/2005, released 11th May 2005.
The IFRS Transition Report provided the reconciliations required by IFRS and the
provisional accounting policies expected to be applied in the preparation of the
2005 financial statements. The Interim Results Announcement on 5th August 2005
amended the reconciliations and the provisional accounting policies for the use
of the fair value option. The financial information in this announcement has
been prepared in accordance with these amended accounting policies. A summary of
the Group's significant accounting policies will be included in the 2005 Annual
Report. Dashes have been used to indicate where changes in policy cause an item
to be not applicable and where there is no amount to report.
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 the
Group's plans and its current goals and expectations relating to its future
financial condition and performance. These forward-looking statements can be
identified by the fact that they do not relate only to historical or current
facts. 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 the Group's future
financial position, income growth, impairment charges, business strategy,
projected levels of growth in the banking and financial markets, projected
costs, estimates of capital expenditures, and plans and objectives for future
operations.
By their nature, forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances, including, but not limited to,
the further development of standards and interpretations under IFRS applicable
to past, current and future periods, evolving practices with regard to the
interpretation and application of standards under IFRS, as well as UK 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, 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. 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 Barclays 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 it has filed or may
file with the SEC.
21st February 2006
"Barclays delivered strong and broadly based profit growth in 2005. Forty
percent of our profits came from outside the UK as our wholesale and
international businesses performed particularly well and as we started to
benefit from the Absa acquisition. We made good progress in the UK, and are well
positioned across the group for further growth in 2006."
John Varley, Group Chief Executive
SUMMARY OF KEY INFORMATION(1)
-----------------------------
---------------------------------------------- --------- ------- ---------
Group Results 2005 2004 % Change
GBPm GBPm
Total income net of insurance claims 17,333 14,108 23
Impairment charge and other credit provisions (1,571) (1,093) 44
Operating expenses (10,527) (8,536) 23
Profit before tax 5,280 4,580 15
Profit attributable to minority interests (394) (47) 738
Profit attributable to equity holders of the 3,447 3,254 6
parent
Economic profit 1,752 1,568 12
Earnings per share 54.4p 51.0p 7
Proposed full year dividend per share 26.6p 24.0p 11
Post-tax return on average shareholders' equity 21.1% 21.7%
GBPm GBPm % Change
Summary of divisional profit before tax(2)
UK Banking 2,455 2,265 8
-------- --------
UK Retail Banking 1,027 963 7
UK Business Banking 1,428 1,302 10
-------- --------
Barclays Capital 1,272 1,020 25
Barclays Global Investors 542 336 61
Wealth Management 172 110 56
Barclaycard 687 843 (19)
International Retail and Commercial Banking (IRCB) 690 293 135
-------- --------
IRCB - ex Absa 355 293 21
IRCB - Absa 335 - -
-------- --------
---------------------------------------------- --------- ------- ---------
(1) In this document the income statement analysis compares, unless stated
otherwise, the year ended 31st December 2005 to the corresponding period of
2004. Balance sheet comparisons, unless stated otherwise, relate to the
corresponding position at 31st December 2004. 2004 comparatives do not
include additional impacts arising from the first time application of IAS 32
(Financial instruments: Disclosure and Presentation), IAS 39 (Financial
instruments: Recognition and Measurement) and IFRS 4 (Insurance Contracts),
which were applied from 1st January 2005.
(2) Summary excludes Wealth Management-closed life assurance activities and Head
office functions and other operations. Full analysis of business profit
before tax is on page 18.
PERFORMANCE SUMMARY
- The financial results reflect progress in implementing our strategy:
- Total income(1) up 23% to GBP17,333m
- Profit before tax up 15% to GBP5,280m
- Earnings per share up 7% to 54.4p
- Dividend per share up 11% to 26.6p
- Economic profit up 12% to GBP1,752m
- Return on average shareholders' equity of 21%.
- UK Banking produced good profit(2) growth, up 8% to GBP2,455m, and
outperformed its productivity target for 2005 with the cost:income(1) ratio
improving by three percentage points versus the target of two percentage
points. UK Retail Banking delivered an improvement in profits driven by
higher income and lower costs and UK Business Banking maintained strong
growth.
- Barclays Capital maintained its excellent performance, with profit(2)
rising 25% to GBP1,272m. Profit growth reflected the success of past
investments and higher customer driven revenues across a broad range of
asset classes. The rate of profit growth exceeded the rate of growth in
capital consumption.
- Barclays Global Investors achieved outstanding results, with profit(2) up
61% to GBP542m, and delivered a strong investment performance. Net new
assets under management were US$88bn.
- Wealth Management profit(2) grew significantly, up 56% to GBP172m. This
reflected balance sheet growth across the business, higher assets under
management and client activity, and disciplined cost control.
- Barclaycard profit(2) fell 19% to GBP687m. Strong income(1) growth was
offset by a significant rise in impairment charges, principally in the UK
card portfolios. Barclaycard profits were also adversely impacted by higher
costs, mainly as a result of investment in Barclaycard US (previously
Juniper), which is performing on plan.
- International Retail and Commercial Banking excluding Absa achieved very
strong growth with profit(2) up 21% to GBP355m. There were particularly good
performances in European mortgages, African corporate lending and in the
Spanish business.
- Absa's performance was excellent, reflecting good balance sheet growth,
strong levels of customer activity and a benign credit environment. Absa's
contribution to profit(2) was GBP335m reflecting five months of ownership
and the annualised return on investment before hedging and funding costs in
this period was 13%.
- The Group's results also reflect the benefits realised from other recent
acquisitions, including Banco Zaragozano in Spain, Gerrard in the UK,
Barclaycard US and the Iveco Finance business.
- Group income growth(1) excluding Absa, of 16%, was very strong and well
diversified by business, income type and geography. Non-interest income(1)
excluding Absa rose 20% and represented over half of total income(1).
- The increase in operating expenses excluding Absa was in line with
comparable income(1) growth. The increase was driven by significant
investment directed to the global product businesses, higher performance
related expenses, the expansion of International Retail and Commercial
Banking and head office relocation costs. This was partly offset by a strong
focus on cost control and by good progress on UK Banking productivity goals.
(1) Total income net of insurance claims.
(2) Profit before tax.
PERFORMANCE SUMMARY
- Impairment charges and other credit provisions rose 44%. This reflected
some large one-off releases and recoveries in 2004, the impact of
acquisitions in 2005 and changes in methodology. Excluding these factors,
the underlying rate of growth in impairment charges was 24%. Stable credit
conditions in the wholesale and corporate businesses were more than offset
by a deterioration in the retail businesses. This was driven principally by
a continued steady increase in arrears balances and lower rates of recovery
from customers in UK credit cards. Impairment charges rose at a slower rate
in unsecured loans and were minimal in UK mortgages.
- Barclays primary performance goal is to achieve top quartile total
shareholder return. In the first two years of the 2004-2007 goal period
Barclays was positioned 5th within its peer group(1), which is second
quartile. Compound annual growth in economic profit of 18% over the first
two years of the goal period is ahead of the target range (10%-13%).
(1) Peer group for 2005 remained unchanged from 2004: ABN Amro, BBVA, BNP
Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan, Lloyds TSB, Royal
Bank of Scotland and UBS. The peer group is unchanged for 2006.
FINANCIAL HIGHLIGHTS
2005 2004
RESULTS GBPm GBPm
---------
Net interest income 8,075 6,833
Net fee and commission income 5,705 4,847
Principal transactions(1) 3,179 2,514
Net premiums from insurance contracts 872 1,042
Other income 147 131
Total income 17,978 15,367
Net claims and benefits paid on insurance
contracts (645) (1,259)
Total income net of insurance claims 17,333 14,108
Impairment charge and other credit provisions (1,571) (1,093)
Net income 15,762 13,015
Operating expenses (including amortisation (10,527) (8,536)
of intangible assets)
Share of post-tax results of associates and
joint ventures 45 56
Profit on disposal of associates and joint
ventures - 45
Profit before tax 5,280 4,580
Profit attributable to equity holders of the
parent 3,447 3,254
Economic profit 1,752 1,568
PER ORDINARY SHARE p p
--------------------
Earnings 54.4 51.0
Diluted earnings 52.6 49.8
Proposed full year dividend 26.6 24.0
Net asset value 269 246
PERFORMANCE RATIOS % %
--------------------
Post-tax return on average shareholders' equity 21.1 21.7
Cost:income ratio(2) 61 61
Cost:net income ratio(3) 67 66
As at
2005 01.01.05 2004
BALANCE SHEET GBPm GBPm GBPm
Shareholders' equity excluding minority
interests 17,426 15,287 15,870
Minority interests 7,004 3,330 894
Total shareholders' equity 24,430 18,617 16,764
Loan capital 12,463 10,606 12,277
Total capital resources 36,893 29,223 29,041
Total assets 924,357 715,600 538,181
Weighted risk assets 269,148 219,758 218,601
CAPITAL RATIOS % % %
Tier 1 ratio 7.0 7.1 7.6
Risk asset ratio 11.3 11.8 11.5
(1) Principal transactions comprise net trading income and net investment
income.
(2) The cost:income ratio is defined as operating expenses compared to total
income net of insurance claims.
(3) The cost:net income ratio is defined as operating expenses compared to total
income net of insurance claims, less impairment charges.
GROUP CHIEF EXECUTIVE'S STATEMENT
I am pleased to report that 2005 was another record year for Barclays. Profit
before tax grew 15% to GBP5.3bn. We increased our dividend 11%. This performance
is the consequence of having a well-grounded and robust strategy, and
implementing it well.
Our ambition is to position Barclays as one of the handful of universal banks
leading the global industry. Our portfolio helps us to achieve this, through
diversity in both business and geography.
We have a simply stated business purpose: to help our customers and clients
achieve their goals. Our strategic priorities are derived from that business
purpose. They are: building the best bank in the UK; accelerating the growth of
our global product businesses; developing retail and commercial banking
activities in selected countries outside the UK; and enhancing operational
excellence.
In executing our strategy, we are clear about what we are seeking to achieve on
behalf of our owners: higher earnings growth. This is what drives our investment
priorities, and what has guided us towards further international expansion. The
acquisition of a controlling stake in the South African bank, Absa Group
Limited, which we completed in 2005; the development of our other International
Retail and Commercial Banking businesses; and the continued rapid growth of
Barclays Capital, Barclays Global Investors and Barclaycard International - all
of these are designed to enable us to grow faster by ensuring that we have a
good spread of activities both by business and by geography.
We have a clear view about sources of growth in the financial services industry
over the coming years. We see significant growth opportunities in the UK but we
see at least as many internationally. Our selective diversification by
geography, by product, and by customer segment helps us improve financial
performance, reduce risk, and create opportunities for synergies in product and
capital.
Our performance in 2005 has been underpinned by three strong pillars: our
portfolio of businesses; our geographical presence; and the talent and skills of
our people.
Our portfolio
UK Banking is a bellwether business for us. If Barclays is to achieve its
ambitions, then UK Banking must perform well. We made good progress in UK
Banking during 2005, and both of its components - UK Business Banking and UK
Retail Banking - achieved encouraging profit growth. We have made a public
commitment to improve the productivity of this business by two percentage points
in each of 2005, 2006 and 2007, and we out-performed that goal in 2005.
We know that UK Retail Banking presents us with a significant growth
opportunity. Our recruitment of customers was good in 2005 - 400,000 new current
account holders, 250,000 new savings customers, and over 500,000 new registrants
for online banking. The business is not yet performing as strongly as we intend,
but we have identified opportunities for improvement and have enhanced the
resource and skill that we are directing towards these.
UK Business Banking had a good year. Its business model - based on relationship
management and industry sector specialisation - positions it well to capture
business, and 2005 was busy and successful.
Barclays Capital had another record year. Barclays Capital is a client focused
business. Its performance is not particularly sensitive to the direction or
absolute level of interest rates but rather to levels of client activity. We
have taken the simple formula of offering financing and risk management services
to clients, and applied it with discipline to a steadily expanding array of
activities. The business base has expanded quickly through the investment of the
last two years. As a result of growth in Asia, in continental Europe, and in
North America, over 70% of Barclays Capital income comes from outside the UK. We
have expanded the business in a way that demands both short term performance and
medium term returns. Profits have grown very strongly. Meanwhile, we have
increased the range of our investment banking activities through the development
of significant income streams in the areas of mortgage backed securities, equity
products, commodities, and derivative products across all asset classes.
Barclays Global Investors achieved outstanding results. Assets under management
now exceed US$1.5 trillion. As in the case of Barclays Capital, we are
unconstrained by market share and, in particular, we are seeing brisk growth in
the areas of fixed income, cash management and exchange traded funds. 2005 was a
year of strong headcount growth in Barclays Global Investors (BGI), which
reflects our confidence in the position which BGI has in the industry. This
position is underpinned by BGI's investment performance track record - which is
outstanding - and by demographics and the fiscal pressure on governments to
provide retirement solutions for their citizens.
Our goal is to position our Wealth Management business as a leading European
wealth manager. This is a business undergoing rapid transformation. The pick-up
in profits in the last two years has been striking, but the most important
feature of our progress is good growth in the client base, in assets under
management and lending balances.
In Barclaycard, the challenging consumer environment and consequent rising
impairment in the UK contrasted with stable credit conditions and very good
growth in other markets. Our strategy has been to diversify our cards and
consumer lending business, adding a partnerships business in the UK in recent
years (providing Sky TV customers with a credit card offering would be a good
example of this in 2005) and rapidly expanding Barclaycard International. We now
have nearly 4.5 million cards in issue in the International business. Growth
prospects here are underpinned by the rapid development of Barclaycard US
(previously Juniper) which we acquired at the end of 2004, by our joint venture
in Scandinavia with Swedbank launched in 2005, and by the Zaragozano and Absa
acquisitions.
The customer base of International Retail and Commercial Banking grew
significantly during 2005 as a result of the acquisition of Absa, which added
over 7 million new customers to the Group. This transaction was the largest
investment we have ever made outside the UK. Absa is a very good bank, and it is
performing strongly. The expected synergies with our pre-existing South African
activities, and the introduction into Absa of specialist skills in the areas of
investment banking, small and mid-corporate banking and credit cards, make us
confident that Absa represents a significant source of earnings growth for our
shareholders in the future.
Outside Absa, the rest of the International Retail and Commercial Banking
portfolio performed strongly. In particular, we continue to make rapid progress
in our Spanish business, where the integration of Banco Zaragozano, acquired in
2003, is proceeding well. Spain represents another good example of where we can
take a strong retail and commercial banking platform, develop it by acquisition,
and use it to introduce additional service offerings to our customers through
collaboration with Barclays Capital, Barclays Global Investors and Barclaycard.
Our presence
The second pillar of our activities is the business spread and geographical
presence that we continue to build. We have two principal sources of earnings
diversification: the first is in core banking activities outside the United
Kingdom, of which Africa and Spain would be the best examples. The second is
through the development of our global product businesses; investment banking,
asset management, wealth management and credit cards.
In 2005, about 40% of our profits came from outside the United Kingdom. Over
time we would like to see this percentage increase. We expect the plans we have
for our existing portfolio of businesses to enable us to achieve an
approximately even balance between UK and international profits over the next
three years.
We believe that we should ensure that our shareholders, through investing in
Barclays, have appropriate exposure to the fastest growing economies in the
world. By consequence, we continue to invest in Asia through Barclays Capital
and Barclays Global Investors, which represent our principal sources of activity
in that part of the world. During 2005, we opened a branch in Shanghai, adding
to our representative office in Beijing; and our Indian business grew quickly,
in particular in the area of debt issuance on behalf of Indian companies.
We are - and will continue to be - selective about where we do business. The
standard we set ourselves is that where we choose to operate, we are in a
position to compete with the best in the world.
Our people
The third pillar of our business - our people - is fundamental to what we do.
Barclays has been in business for over 300 years. The common thread running
through its long history is that of relationships, and strong business
relationships depend on talented people. Recruiting, developing and retaining
the best people is a strategic imperative for us, and we direct a lot of time
and effort at nurturing what we call 'franchise health': in other words, the
standing of Barclays in the minds of our people, our customers and the
communities in which we live and work. We measure our people's level of
engagement regularly through our employee opinion surveys. The results of the
2005 survey continued the positive trend of recent years, with good progress in
employee engagement and pride in Barclays.
Our investment in people reflects a broader cultural change in our business. As
we grow and as we diversify, it is important that the people of Barclays reflect
the customers, clients and societies which we serve. Central to the service
ethic are two things: first that we must lift our performance, month by month
and year by year. This is an intensively competitive industry, and our customers
and clients have the right to expect us to be good at what we do. Second, we
take pride in being successful, because if we are successful as an organisation,
then we contribute significantly to the societies in which we work. It is
important for all our stakeholders - be they pensioners, employees, customers or
governments - that Barclays does well.
Long term success, as well as good short term performance, depends on having the
right strategy and executing it effectively. Our performance in 2005 shows that
we are doing what we said we would. We have accelerated the pace at which we
execute our strategy because the strategy is a good one, and it is serving our
shareholders and customers well.
It is good to be able to report record profits in 2005. However, it is more
important still to be able to say that a portfolio of good businesses, along
with a growing geographical presence and the talent of great people, position us
well for the future.
John Varley
Group Chief Executive
GROUP FINANCE DIRECTOR'S REVIEW
Group performance
Barclays delivered strong financial results in 2005. Profit before tax was
GBP5,280m, an increase of 15% from 2004. Earnings per share rose 7%, and
economic profit(1) was up 12%. Return on average shareholders' funds was 21% and
we have increased the total dividend payout 11%.
Income(2) rose 23%, an increase which was broadly spread across the Group with
most businesses reporting double digit income growth and UK Retail Banking
returning to modest top line growth.
Operating expenses grew in line with income, reflecting significant investment
directed to the global product businesses, higher performance-related expenses,
the expansion of International Retail and Commercial Banking and head office
relocation. Excluding the first time contribution of Absa, income and operating
expenses increased 16%.
Impairment charges increased 44% to GBP1,571m (2004: GBP1,093m). This reflected
some large one-off releases and recoveries in 2004, the impact of acquisitions
in 2005 and changes in methodology. Excluding these factors, the underlying rate
of growth in impairment charges was 24%, driven by a continued increase in
arrears balances and lower rates of recovery from customers in UK credit cards.
Impairment charges rose at a slower rate in unsecured loans and were minimal in
UK mortgages. Wholesale and corporate credit conditions were stable.
Business performance
UK Banking produced good profit growth(3), up 8%, to GBP2,455m (2004: GBP2,265m)
and outperformed its productivity target for 2005 with the cost:income(2) ratio
improving by three percentage points.
UK Retail Banking achieved solid income(2) growth of 4% in 2005, with a marked
pick-up in the second half of the year which we believe establishes good
momentum for 2006. Operating expenses decreased 3% through strong cost control
whilst continuing targeted reinvestment to improve customer service and the
branch network. Profit before tax grew 7% to GBP1,027m (2004: GBP963m).
Excluding the gain on the sale of our stake in Edotech in 2004, underlying
profit before tax increased 12%.
UK Business Banking profit before tax increased 10% to GBP1,428m (2004:
GBP1,302m), driven by strong income and balance sheet growth. Operating expenses
grew slower than income leading to an improved cost:income(2) ratio of 35%.
Barclays Capital continued its very strong growth of recent years, with profit
before tax in 2005 rising 25% to GBP1,272m (2004: GBP1,020m). Income(2) growth
of 27% was broadly based across products and geographies. The year also saw
continued investment in building Barclays Capital's scale and diversity in terms
of geography, products and people. As a result of investment and the profit
performance, operating expenses grew 28%. Market risk was well-controlled with
DVaR falling 6% to GBP32m as a result of increased diversification. The rate of
growth of earnings once again exceeded the rate of growth of capital
consumption.
Barclays Global Investors achieved outstanding results, with profit before tax
rising 61% to GBP542m (2004: GBP336m), reflecting strong growth in net new
assets, very good investment performance and a continuing improvement in
operating margins. Income(2) growth of 48% was driven by significant increases
in management fees, incentive fees, and securities lending revenues. Operating
expenses rose 40%, reflecting higher performance based compensation and
significant investment in the platform and in innovative new products.
(1) Economic profit is defined on page 64.
(2) Total income net of insurance claims.
(3) Profit before tax.
Wealth Management profit before tax rose 56% to GBP172m (2004: GBP110m) - a very
strong performance driven by broad based income(1) growth of 11% and improved
cost efficiency. Operating expenses grew only 3% as efficiency savings funded
significant cost restructuring and investment programmes.
Barclaycard profit before tax fell 19% to GBP687m (2004: GBP843m) driven by
higher levels of impairment in the UK and continued investment in the
International business. Income(1) growth of 15% reflected good performances by
the UK cards and loans businesses and very strong international growth.
Operating expenses rose 21%, reflecting continued heavy investment in the
business, particularly internationally. The Barclaycard US business, previously
Juniper, grew strongly in line with plans, and cards in Spain and Germany
performed strongly.
International Retail and Commercial Banking was transformed by the acquisition
of Absa. International Retail and Commercial Banking excluding Absa increased
profit before tax 21% to GBP355m (2004: GBP293m). Income(1) growth of 20%
reflected strong balance sheet growth in Europe and Africa. Operating expenses
grew in line with income(1) as we accelerated the integration of Banco
Zaragozano. Excluding integration costs, Barclays Spain increased profit before
tax 25% to GBP156m (2004: GBP125m).
We completed the acquisition of a majority stake in Absa Group Limited in July
2005. Absa Group Limited reported 28% growth in profit before tax to R7,031m for
the 9 month period to 31st December 2005(2). For the 5 month period of Barclays
ownership, Absa contributed GBP335m to profit before tax and the performance of
Absa is well ahead of the business plan that underpinned the acquisition.
Head office functions and other operations loss before tax increased to GBP532m
(2004: GBP235m). This was driven by accounting adjustments to eliminate
inter-segment transactions of GBP204m (2004: GBP69m) and non-recurring costs of
GBP165m (2004: GBP32m) including the costs of head office relocation and
write-off of capitalised IT related assets.
International Financial Reporting Standards
Barclays applied International Financial Reporting Standards (IFRS) with effect
from 1st January 2004, with the exception of IAS 32, IAS 39 and IFRS 4, which
were applied from 1st January 2005. The effect of these changes is pervasive
throughout these results. Where possible, and where the difference causes a
significant issue with interpretation, we have sought to identify the
discontinuities caused by different standards being applied from 1st January
2005 and have reported balance sheet data for both 31st December 2004 as well as
1st January 2005 in order to enable appropriate comparisons to be made. At Group
level, we believe the application of IAS 32, IAS 39 and IFRS 4 has not had a
material impact on attributable profits or earnings per share but have
significantly increased balance sheet footings. We have previously reported in
detail on the line items which would be affected by IFRS and the outcomes have
been consistent with our earlier expectations.
(1) Total income net of insurance claims.
(2) Absa has changed its financial year-end to 31st December to conform with
Barclays. The comparable period comprises unaudited results for the nine
months ended 31st December 2004.
Capital strength
Our strong credit rating and disciplined approach to capital management remain
sources of competitive advantage. Our capital management policies are designed
to optimise the returns to shareholders whilst maintaining our rating.
At the end of 2005, our tier 1 capital ratio was 7.0% and our risk asset ratio
was 11.3%. Over the past two years we have consciously sought to address the
extent to which we are carrying surplus capital and to use our resources more
intensively. In 2004, we bought back approximately GBP700m in shares and we have
changed the mix of our core capital in both 2004 and 2005 by introducing
preference shares into the capital base. In 2005, we acquired Absa Group Limited
without issuing ordinary equity, made a number of other smaller acquisitions,
increased weighted risk assets 10% excluding Absa and paid dividends of
GBP1.6bn. Despite this we ended the year with a tier 1 ratio only marginally
changed from the level post the impact of IFRS at the beginning of the year.
This resulted from the strong cash flow generation of our business portfolio and
the efficient management of the balance sheet through the use of the capital
markets.
During 2006 we expect continued strong growth in capital investment in our
businesses to support organic growth and for our tier 1 capital ratio to move
towards our target of 7.25% through the combination of the impact of retained
earnings and continued efficient use of the debt capital markets.
Outlook
We expect the UK economy to show reasonable growth in 2006, but the credit
environment in the consumer sector is likely to remain challenging. Impairment
charges in the UK small and medium business sector have been exceptionally low
in the recent past and may trend towards more normal levels in 2006. The healthy
global economy should provide a positive backdrop for all our businesses this
year. We start 2006 with strong income momentum throughout Barclays and this
positions us well for another year of good earnings growth.
Naguib Kheraj
Group Finance Director
CONSOLIDATED INCOME STATEMENT
2005 2004
Continuing operations GBPm GBPm
-------- --------
Interest income 17,232 13,880
Interest expense (9,157) (7,047)
-------- --------
Net interest income 8,075 6,833
-------- --------
Fee and commission income 6,430 5,509
Fee and commission expense (725) (662)
-------- --------
Net fee and commission income 5,705 4,847
-------- --------
Net trading income 2,321 1,487
Net investment income 858 1,027
-------- --------
Principal transactions 3,179 2,514
Net premiums from insurance contracts 872 1,042
Other income 147 131
-------- --------
Total income 17,978 15,367
Net claims and benefits paid on insurance contracts (645) (1,259)
-------- --------
Total income net of insurance claims 17,333 14,108
Impairment charge and other credit provisions (1,571) (1,093)
-------- --------
Net income 15,762 13,015
-------- --------
Operating expenses excluding amortisation of intangible
assets (10,448) (8,514)
Amortisation of intangible assets (79) (22)
-------- --------
Operating expenses (10,527) (8,536)
Share of post-tax results of associates and joint ventures 45 56
Profit on disposal of associates and joint ventures - 45
-------- --------
Profit before tax 5,280 4,580
Tax (1,439) (1,279)
-------- --------
Profit for the year 3,841 3,301
-------- --------
Profit attributable to minority interests 394 47
Profit attributable to equity holders of the parent 3,447 3,254
-------- --------
3,841 3,301
-------- --------
p p
Basic earnings per ordinary share 54.4 51.0
Diluted earnings per share 52.6 49.8
Paid and proposed dividends per ordinary share:
Interim paid 9.20 8.25
Final proposed 17.40 15.75
Interim dividend GBP582m GBP528m
Proposed final dividend GBP1,105m GBP1,001m
CONSOLIDATED BALANCE SHEET
As at
2005 01.01.05 2004
Assets GBPm GBPm GBPm
Cash and balances at central banks 3,906 3,238 1,753
Items in the course of collection from other
banks 1,901 1,772 1,772
Treasury bills and other eligible bills - - 6,658
Trading portfolio assets 155,723 110,033 -
Financial assets designated at fair value: -
- held on own account 12,904 9,799 -
- held in respect of linked liabilities to
customers
under investment contracts 83,193 63,124 -
Derivative financial instruments 136,823 94,211 -
Loans and advances to banks 31,105 25,728 80,632
Loans and advances to customers 268,896 207,259 262,409
Debt securities - - 130,311
Equity shares - - 11,399
Available for sale financial investments 53,497 48,097 -
Reverse repurchase agreements and cash
collateral on securities borrowed 160,398 139,574 -
Other assets 4,620 3,647 25,915
Insurance assets including unit-linked assets 114 109 8,576
Investments in associates and joint ventures 546 429 429
Goodwill 6,022 4,518 4,518
Intangible assets 1,269 139 139
Property plant and equipment 2,754 2,282 2,282
Deferred tax assets 686 1,641 1,388
-------- -------- --------
Total assets 924,357 715,600 538,181
-------- -------- --------
CONSOLIDATED BALANCE SHEET
As at
2005 01.01.05 2004
Liabilities GBPm GBPm GBPm
Deposits from banks 75,127 74,735 111,024
Items in the course of collection due to other
banks 2,341 1,205 1,205
Customer accounts 238,684 194,478 217,492
Trading portfolio liabilities 71,564 59,114 -
Financial liabilities designated at fair value:
- held on own account 33,385 5,320 -
Liabilities to customers under investment
contracts 85,201 64,609 -
Derivative financial instruments 137,971 94,429 -
Debt securities in issue 103,328 76,154 83,842
Repurchase agreements and cash collateral on
securities lent 121,178 98,582 -
Other liabilities 11,131 9,869 82,936
Current tax liabilities 747 621 621
Insurance contract liabilities including
unit-linked liabilities 3,767 3,596 8,377
Subordinated liabilities:
- Undated loan capital-non convertible 4,397 4,208 6,149
- Dated loan capital-convertible 38 15 15
- Dated loan capital-non convertible 8,028 6,383 6,113
Deferred tax liabilities 700 1,397 1,362
Other provisions for liabilities 517 403 416
Retirement benefit liabilities 1,823 1,865 1,865
-------- -------- --------
Total liabilities 899,927 696,983 521,417
-------- -------- --------
Shareholders' equity
Called up share capital 1,623 1,614 1,614
Share premium account 5,650 5,524 5,524
Available for sale reserve 225 314 -
Cash flow hedging reserve 70 302 -
Capital redemption reserve 309 309 309
Other capital reserve 617 617 617
Translation reserve 156 (58) (58)
Retained earnings 8,957 6,784 7,983
Less: treasury shares (181) (119) (119)
-------- -------- --------
Shareholders' equity excluding minority
interests 17,426 15,287 15,870
Minority interests 7,004 3,330 894
-------- -------- --------
Total shareholders' equity 24,430 18,617 16,764
-------- -------- --------
-------- -------- --------
Total liabilities and shareholders' equity 924,357 715,600 538,181
-------- -------- --------
FINANCIAL REVIEW
Results by business
The following section analyses the Group's performance by business. For
management and reporting purposes, Barclays is organised into the following
business groupings:
- UK Banking, comprising
- UK Retail Banking
- UK Business Banking
- Barclays Capital
- Barclays Global Investors
- Wealth Management
- Wealth Management - closed life assurance activities
- Barclaycard
- International Retail and Commercial Banking, comprising
- International Retail and Commercial Banking - excluding Absa
- International Retail and Commercial Banking - Absa, included with effect
from 27th July 2005
- 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, Mortgages, Small Business and UK
Premier. This cluster of businesses aims to build broader and deeper
relationships with both existing and new customers. Personal Customers and
Mortgages provide a wide range of products and services to retail customers,
including current accounts, savings, mortgages, and general insurance. Small
Business provides banking services to small businesses. UK Premier provides
banking, investment products and advice to affluent customers.
UK Business Banking
UK Business Banking provides relationship banking to Barclays larger and medium
business customers in the United Kingdom. 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. UK
Business Banking provides asset financing and leasing solutions through a
specialist business.
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 sales, trading and
research, prime services and equity products; Credit, which includes primary and
secondary activities for loans and bonds for investment grade, high yield and
emerging market credits, as well as hybrid capital products, asset based
finance, commercial mortgage backed securities, credit derivatives, structured
capital markets and large asset leasing; and Private Equity.
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. BGI also
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 140 funds
for institutions and individuals trading in eleven markets globally. BGI's
investment philosophy is founded on managing all dimensions of performance: a
consistent focus on controlling risk, return and cost.
Wealth Management
Wealth Management serves affluent, high net worth and corporate clients,
providing private banking, offshore banking, stockbroking, asset management and
financial planning services.
Wealth Management - closed life assurance activities
Wealth Management - closed life assurance activities comprise the closed life
assurance businesses of Barclays and Woolwich in the UK.
Barclaycard
Barclaycard is a multi-brand international credit card and consumer lending
business; it is one of the leading credit card businesses in Europe.
In the UK, Barclaycard manages the Barclaycard branded credit cards and other
non-Barclaycard branded card portfolios including Monument, SkyCard and Solution
Personal Finance. In consumer lending, Barclaycard manages both secured and
unsecured loan portfolios, through Barclays branded loans, being mostly
Barclayloan, and also through the FirstPlus and Clydesdale Financial Services
businesses.
Outside the UK, Barclaycard provides credit cards in the United States through
Barclaycard US (previously Juniper), Germany, Spain, Greece, Italy, Portugal and
a number of other countries. In the Nordic region, Barclaycard operates through
Entercard, a joint venture with ForeningsSparbanken (Swedbank).
Barclaycard Business processes card payments for retailers and issues purchasing
and credit cards to business customers and to the UK Government.
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 Barclays international
personal and corporate customers with banking services. The products and
services offered to customers are tailored to meet the regulatory and commercial
environments within each country. For reporting purposes in 2005, the operations
have been grouped into two components: International Retail and Commercial
Banking excluding Absa encompasses Barclays operations in continental Europe,
Africa and the Middle East and the Caribbean joint venture; and International
Retail and Commercial Banking - Absa represents the total business of Absa Group
Limited in which Barclays acquired a majority stake on 27th July 2005.
International Retail and Commercial Banking - excluding Absa
International Retail and Commercial Banking excluding Absa provides a range of
banking services, including current accounts, savings, investments, mortgages
and loans to personal and corporate customers across Spain, Portugal, France,
Italy, the Caribbean, Africa and the Middle East.
International Retail and Commercial Banking excluding Absa works closely with
other parts of the Group, including Barclaycard, UK Banking, Barclays Capital
and Barclays Global Investors, to leverage synergies from product and service
propositions.
International Retail and Commercial Banking - Absa
Absa Group Limited is one of South Africa's largest financial services
organisations serving personal, commercial and corporate customers predominantly
in South Africa. Absa serves retail customers through a variety of distribution
channels and offers a full range of banking services, including basic bank
accounts, mortgages, instalment finance, credit cards, bancassurance products
and wealth management services; for commercial and large corporate customers
Absa offers customised business solutions. As at 31st December 2005, Barclays
owned 56.6% of Absa Group Limited's ordinary shares and has voting control.
Head office functions and other operations
Head office functions and other operations comprise:
- Head office and central support functions
- discontinued businesses in transition
- consolidation adjustments
Head office and central support functions comprise 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.
Discontinued businesses in transition principally relate to Middle Eastern
corporate banking businesses and airline leasing activities. These businesses
are centrally managed with the objective of maximising recovery from the assets.
Consolidation adjustments largely reflect the elimination of inter segment
transactions.
SUMMARY OF RESULTS
Analysis of profit attributable to equity holders of the parent
2005 2004
GBPm GBPm
UK Banking 2,455 2,265
-------- --------
UK Retail Banking 1,027 963
UK Business Banking 1,428 1,302
-------- --------
Barclays Capital 1,272 1,020
Barclays Global Investors 542 336
Wealth Management 172 110
Wealth Management - closed life assurance activities (6) (52)
Barclaycard 687 843
International Retail and Commercial Banking 690 293
-------- --------
International Retail and Commercial Banking - ex Absa 355 293
International Retail and Commercial Banking - Absa 335 -
-------- --------
Head office functions and other operations (532) (235)
-------- --------
Profit before tax 5,280 4,580
Tax (1,439) (1,279)
-------- --------
Profit for the year 3,841 3,301
Profit attributable to minority interests (394) (47)
-------- --------
Profit attributable to equity holders of the parent 3,447 3,254
-------- --------
TOTAL ASSETS AND WEIGHTED RISK ASSETS
Total assets
As at
2005 01.01.05 2004
GBPm GBPm GBPm
UK Banking 141,190 131,392 122,380
-------- -------- --------
UK Retail Banking 69,193 71,850 71,647
UK Business Banking 71,997 59,542 50,733
-------- -------- --------
Barclays Capital 581,865 454,437 346,901
Barclays Global Investors 80,900 61,371 968
Wealth Management 6,094 5,659 5,616
Wealth Management - closed life assurance
activities 7,276 6,551 6,425
Barclaycard 25,771 23,186 23,367
International Retail and Commercial
Banking 73,589 28,780 28,505
-------- -------- --------
International Retail and Commercial
Banking - ex Absa 34,195 28,780 28,505
International Retail and Commercial
Banking - Absa 39,394 - -
-------- -------- --------
Head office functions and other operations 7,672 4,224 4,019
-------- -------- --------
Total assets 924,357 715,600 538,181
-------- -------- --------
Weighted risk assets
As at
2005 01.01.05 2004
GBPm GBPm GBPm
UK Banking 94,195 92,590 91,913
-------- -------- --------
UK Retail Banking 32,298 37,835 37,111
UK Business Banking 61,897 54,755 54,802
-------- -------- --------
Barclays Capital 96,095 79,511 79,949
Barclays Global Investors 1,659 1,233 1,230
Wealth Management 4,467 4,187 4,018
Wealth Management - closed life assurance - - -
activities
Barclaycard 20,438 21,595 20,188
International Retail and Commercial
Banking 50,071 18,701 19,319
-------- -------- --------
International Retail and Commercial
Banking - ex Absa 21,637 18,701 19,319
International Retail and Commercial
Banking - Absa 28,434 - -
-------- -------- --------
Head office functions and other operations 2,223 1,941 1,984
-------- -------- --------
Weighted risk assets 269,148 219,758 218,601
-------- -------- --------
Further analysis of total assets and weighted risk assets, including the impact
of securitisations, can be found on page 59.
UK Banking
2005 2004
GBPm GBPm
Net interest income 3,990 3,477
Net fee and commission income 1,776 1,936
-------- --------
Net trading income - -
Net investment income 31 5
-------- --------
Principal transactions 31 5
Net premiums from insurance contracts 280 249
Other income 26 37
-------- --------
Total income 6,103 5,704
Net claims and benefits on insurance
contracts (58) (46)
-------- --------
Total income net of insurance claims 6,045 5,658
Impairment charge and other credit provisions (344) (199)
-------- --------
Net income 5,701 5,459
-------- --------
Operating expenses excluding amortisation of
intangible assets (3,240) (3,239)
Amortisation of intangible assets (3) (2)
-------- --------
Operating expenses (3,243) (3,241)
Share of post-tax results of associates and
joint ventures (3) 5
Profit on disposal of associates and joint
ventures - 42
-------- --------
Profit before tax 2,455 2,265
-------- --------
Cost:income ratio 54% 57%
Cost:net income ratio 57% 59%
Risk Tendency GBP450m GBP375m
Return on average economic capital 33% 35%
Economic profit GBP1,219m GBP1,158m
As at
2005 01.01.05 2004
Loans and advances to customers GBP129.1bn GBP119.6bn GBP114.1bn
Customer accounts GBP133.6bn GBP124.6bn GBP114.8bn
Total assets GBP141.2bn GBP131.4bn GBP122.4bn
Weighted risk assets GBP94.2bn GBP92.6bn GBP91.9bn
Key Facts 2005 2004
Number of UK branches 2,029 2,061
UK Banking profit before tax increased 8% (GBP190m) to GBP2,455m (2004:
GBP2,265m) driven by good income growth and strong cost management.
UK Banking has targeted a cost:income ratio reduction of two percentage points
per annum in 2005, 2006 and 2007. This has been exceeded in 2005 as the cost:
income ratio improved by three percentage points to 54% (2004: 57%). UK Banking
has continued to make good progress towards achieving its strategic aims of
delivering integrated banking solutions to customers, enhancing the customer
service experience, capturing revenue growth opportunities and improving
productivity.
UK Retail Banking
2005 2004
GBPm GBPm
Net interest income 2,174 2,059
Net fee and commission income 1,112 1,123
-------- --------
Net trading income - -
Net investment income 9 1
-------- --------
Principal transactions 9 1
Net premiums from insurance contracts 280 249
Other income 17 26
-------- --------
Total income 3,592 3,458
Net claims and benefits on insurance contracts (58) (46)
-------- --------
Total income net of insurance claims 3,534 3,412
Impairment charge and other credit provisions (142) (60)
-------- --------
Net income 3,392 3,352
Operating expenses (2,359) (2,433)
Share of post-tax results of associates and
joint ventures (6) 2
Profit on disposal of associates and joint
ventures - 42
-------- --------
Profit before tax 1,027 963
-------- --------
Cost:income ratio 67% 71%
Cost:net income ratio 70% 73%
Risk Tendency GBP170m GBP150m
Return on average economic capital 34% 32%
Economic profit GBP557m GBP473m
As at
2005 01.01.05 2004
Loans and advances to customers GBP63.6bn GBP66.0bn GBP65.6bn
Customer accounts GBP77.6bn GBP73.1bn GBP72.4bn
Total assets GBP69.2bn GBP71.9bn GBP71.7bn
Weighted risk assets GBP32.3bn GBP37.8bn GBP37.1bn
Key Facts 2005 2004
Personal Customers
--------------------
Number of UK current accounts 11.1m 10.7m
Number of UK savings accounts 10.8m 10.6m
Total UK mortgage balances (residential) GBP59.6bn GBP61.7bn
Small Business and UK Premier
-------------------------------
Number of Small Business customers 592,000 566,000
Number of UK Premier customers 286,000 273,000
UK Retail Banking profit before tax increased 7% (GBP64m) to GBP1,027m (2004:
GBP963m). Profit before tax increased 12% excluding the impact of a GBP42m
profit on disposal of a stake in Edotech in 2004.
Total income net of insurance claims increased 4% (GBP122m) to GBP3,534m (2004:
GBP3,412m). The full-year growth compares favourably with 1% growth reported for
the first half of 2005. There was good growth in current accounts, Small
Business and UK Premier, whilst income from retail savings was weaker. The
application of IAS 32 and IAS 39 from 1st January 2005, in particular Effective
Interest Rate requirements, resulted in the reclassification of certain lending
related fees from net fee and commission income to net interest income.
Net interest income increased 6% (GBP115m) to GBP2,174m (2004: GBP2,059m).
Growth was driven by higher contributions from Mortgages and Small Business,
partly offset by some margin pressure on savings and deposits. Excluding the
impact of the application of IAS 32 and IAS 39 from 1st January 2005, net
interest income increased 3%.
UK residential mortgage balances ended the period at GBP59.6bn (2004:
GBP61.7bn). The mortgage business continued to focus on higher margin new
business which resulted in an improved new business spread. Gross advances were
GBP11.5bn which represented a market share of 4%. The loan to value ratio within
the mortgage book on a current valuation basis averaged 35% (2004: 35%). There
was strong balance growth in non-mortgage loans, as Small Business average loan
balances increased 14% and within Personal Customers, average overdraft balances
increased 8%.
Total average customer deposit balances increased 6% to GBP72.4bn (2004:
GBP68.5bn). There was strong growth in UK Premier average balances of 11%, and
good growth in Small Business average deposits of 5%. Within Personal Customers,
retail savings average balances increased 5% and current account average
balances increased 3%.
Net fee and commission income decreased 1% (GBP11m) to GBP1,112m (2004:
GBP1,123m) with lending related fees impacted by the application of IAS 32 and
IAS 39 from 1st January 2005. Excluding this impact, net fee and commission
income growth was 5%. There was strong growth in current account fees, including
a higher contribution from value-added Additions accounts. UK Premier delivered
strong growth reflecting higher income from investment advice. There was also
good growth from Small Business, including higher income from money
transmission.
Income from principal transactions was GBP9m (2004: GBP1m) representing the gain
on the sale of the investment in Gresham, an insurance underwriting business,
ahead of the launch in 2005 of the new general insurance offering.
Net premiums from insurance underwriting activities increased 12% (GBP31m) to
GBP280m (2004: GBP249m). In 2004 there was a provision relating to the early
termination of contracts. Adjusting for this, income was slightly lower as a
result of reduced insurance take-up on consumer loans.
Impairment charges increased 137% (GBP82m) to GBP142m (2004: GBP60m). Excluding
UK mortgage releases (GBP40m in 2004 and GBP10m in 2005) impairment charges
increased 52% (GBP52m) to GBP152m (2004: GBP100m). The increase principally
reflected some deterioration in the delinquency experience and balance growth in
overdrafts and small business lending. Losses from the mortgage portfolio
remained negligible, with arrears increasing slightly over the year but
remaining at low levels. Operating expenses decreased 3% (GBP74m) to GBP2,359m
(2004: GBP2,433m). The successful execution of initiatives focused on reducing
back and middle office expenditure continued. Regulatory costs reduced in 2005.
Despite continued investment in the business, the cost:income ratio improved
four percentage points to 67% (2004: 71%).
UK Business Banking
2005 2004
GBPm GBPm
Net interest income 1,816 1,418
Net fee and commission income 664 813
-------- --------
Net trading income - -
Net investment income 22 4
-------- --------
Principal transactions 22 4
Other income 9 11
-------- --------
Total income 2,511 2,246
Impairment charge and other credit provisions (202) (139)
-------- --------
Net income 2,309 2,107
-------- --------
Operating expenses excluding amortisation of
intangible assets (881) (806)
Amortisation of intangible assets (3) (2)
-------- --------
Operating expenses (884) (808)
Share of post-tax results of associates and
joint ventures 3 3
-------- --------
Profit before tax 1,428 1,302
-------- --------
Cost:income ratio 35% 36%
Cost:net income ratio 38% 38%
Risk Tendency GBP280m GBP225m
Return on average economic capital 32% 38%
Economic profit GBP662m GBP685m
As at
2005 01.01.05 2004
Loans and advances to customers GBP65.5bn GBP53.6bn GBP48.5bn
Customer accounts GBP56.0bn GBP51.5bn GBP42.4bn
Total assets GBP72.0bn GBP59.5bn GBP50.7bn
Weighted risk assets GBP61.9bn GBP54.8bn GBP54.8bn
Key Facts 2005 2004
Total number of Business Banking customers 183,000 179,000
Customers registered for online banking/Business
Master 70,100 66,900
UK Business Banking profit before tax increased 10% (GBP126m) to GBP1,428m
(2004: GBP1,302m), driven by strong income growth. Both Larger Business and
Medium Business performed well in highly competitive markets and maintained
their respective shares of primary banking relationships. In June 2005, UK
Business Banking completed the acquisition of a 51% stake in Iveco Finance.
Total income increased 12% (GBP265m) to GBP2,511m (2004: GBP2,246m), driven by
strong balance sheet growth. The application of IAS 32 and IAS 39 from 1st
January 2005, in particular Effective Interest Rate requirements, resulted in
the reclassification of certain lending related fees from net fee and commission
income to net interest income.
Net interest income increased 28% (GBP398m) to GBP1,816m (2004: GBP1,418m).
Excluding the impact of the application of IAS 32 and IAS 39 from 1st January
2005, net interest income increased by 13%.
Balance sheet growth was very strong. The application of IAS 32 and IAS 39 from
1st January 2005 has resulted in the grossing up of previously netted positions
(assets and liabilities subject to master netting agreements). As at 31st
December 2005 these balances were GBP8.9bn. Average lending balances (excluding
previously netted balances) increased 23% to GBP54.9bn (2004: GBP44.6bn), with
good contributions from all business areas and in particular large corporates.
Iveco Finance contributed GBP1.1bn of average lending balances. Average deposit
balances (excluding previously netted balances) increased 11% to GBP46.1bn
(2004: GBP41.5bn) with strong growth from large corporate deposits. The
underlying lending margin (adjusting for the income reclassification) was
broadly stable. Excluding the impact of the structural hedge the liabilities
margin declined modestly.
Net fee and commission income decreased 18% (GBP149m) to GBP664m (2004:
GBP813m). Excluding the impact of IAS 32 and IAS 39, net fee and commission
income increased 8%, as a result of higher lending and transaction fees.
Income from principal transactions was GBP22m (2004: GBP4m). The majority of the
increase represented gains on equity investments.
Impairment charges increased GBP63m to GBP202m (2004: GBP139m). Excluding the
impact of a GBP57m recovery in the second half of 2004, the impairment charge
was broadly stable. Corporate credit conditions remained steady during 2005 with
potential credit risk loans unchanged, despite very strong loan growth.
Operating expenses increased 9% (GBP76m) to GBP884m (2004: GBP808m), reflecting
volume growth, increased expenditure on front line staff and the costs of Iveco
Finance since acquisition. The cost:income ratio improved one percentage point
to 35% (2004: 36%).
Barclays Capital
2005 2004
GBPm GBPm
Net interest income 926 991
Net fee and commission income 724 603
-------- --------
Net trading income 2,194 1,463
Net investment income 401 297
-------- --------
Principal transactions 2,595 1,760
Other income 25 21
-------- --------
Total income 4,270 3,375
Impairment charge and other credit provisions (103) (102)
-------- --------
Net income 4,167 3,273
-------- --------
Operating expenses excluding amortisation of
intangible assets (2,894) (2,253)
Amortisation of intangible assets (1) -
-------- --------
Operating expenses (2,895) (2,253)
-------- --------
Profit before tax 1,272 1,020
-------- --------
Cost:income ratio 68% 67%
Cost:net income ratio 69% 69%
Risk Tendency GBP85m GBP70m
Return on average economic capital 34% 35%
Average net income per member of staff ('000) GBP496 GBP481
Economic profit GBP619m GBP521m
As at
2005 01.01.05 2004
Total assets GBP581.9bn GBP454.4bn GBP346.9bn
Weighted risk assets GBP96.1bn GBP79.5bn GBP79.9bn
Key Facts(1) 2005 2004
League League
table Issuance table Issuance
position value position value
Global all debt 4th $329.2bn 4th $284.0bn
European all debt 2nd $221.6bn 1st $174.2bn
All international bonds (all
currencies) 2nd $183.6bn 3rd $148.7bn
All international bonds
(Euros) 4th EUR70.1bn 6th EUR59.0bn
Sterling bonds 1st GBP23.0bn 1st GBP18.5bn
US investment grade bonds 5th $9.9bn 10th $4.8bn
(1) League tables compiled by Barclays Capital from external sources including
Dealogic and Thomson Financial.
Barclays Capital delivered record profit before tax and net income. Profit
before tax increased 25% (GBP252m) to GBP1,272m (2004: GBP1,020m) as a result of
the very strong income performance driven by higher business volumes and client
activity levels. Net income increased 27% (GBP894m) to GBP4,167m (2004:
GBP3,273m).
Total income increased 27% (GBP895m) to GBP4,270m (2004: GBP3,375m) as a result
of strong growth across Rates and Credit Businesses. Income by asset category
was broadly based with particularly strong growth delivered by credit products,
commodities, currency products and equity products. Income by geography was well
spread with significant growth in the US. Areas of investment in 2004, such as
commodities, commercial mortgage backed securities and equity derivatives,
performed well, delivering significant income growth. Market risk was well
controlled with average DVaR falling 6% to GBP32m (2004: GBP34m) as a result of
increased diversification across asset classes.
Secondary income, comprising principal transactions (net trading income and net
investment income) and net interest income, is mainly generated from providing
financing and client risk management solutions. This increased 28% (GBP770m) to
GBP3,521m (2004: GBP2,751m).
Net trading income increased 50% (GBP731m) to GBP2,194m (2004: GBP1,463m) with
very strong contributions across the Rates and Credit Businesses; commodities,
foreign exchange, fixed income and credit derivatives performed particularly
well. These results were driven by the continued return on prior year
investments and higher volumes of client led activity across a broad range of
products and geographical regions. Net investment income increased 35% (GBP104m)
to GBP401m (2004: GBP297m) driven by realisations from credit products. Net
interest income decreased 7% (GBP65m) to GBP926m (2004: GBP991m) reflecting
flattening yield curves and the impact of IAS 32 and IAS 39.
Primary income, comprising net fee and commission income from advisory and
origination activities, grew 20% (GBP121m) to GBP724m (2004: GBP603m). This
reflected higher volumes and continued market share gains in a number of key
markets, with strong performances from both bonds and loans.
Other income of GBP25m (2004: GBP21m) primarily reflected income from operating
leases.
Impairment charges of GBP103m (2004: GBP102m) were in line with the prior year
reflecting the stable wholesale credit environment.
Operating expenses increased 28% (GBP642m) to GBP2,895m (2004: GBP2,253m),
reflecting higher business volumes and the ongoing costs associated with staff
hired during 2004 and 2005 as part of the business expansion plan. Performance
related costs increased due to the strong profit performance. Investment
expenditure, primarily in the front office, continued to be significant although
less than 2004 as headcount growth slowed. The cost:net income ratio remained
stable at 69% (2004: 69%). Total staff costs to net income of 56% was in line
with 2004 levels. Approximately half of operating expenses comprised performance
related pay, discretionary investment spend and short-term contractor resource,
consistent with 2004.
Total headcount increased by 1,200 during 2005 to 9,000 (2004: 7,800). Growth
occurred across all regions with over half of the increase in the front office,
spread across product, client coverage and distribution.
Barclays Global Investors
2005 2004
GBPm GBPm
Net interest income 17 5
Net fee and commission income 1,297 882
-------- --------
Net trading income 2 3
Net investment income 4 3
-------- --------
Principal transactions 6 6
Other income - -
-------- --------
Total income 1,320 893
-------- --------
Operating expenses excluding amortisation of
intangible assets (775) (555)
Amortisation of intangible assets (4) (1)
-------- --------
Operating expenses (779) (556)
Share of post-tax results of associates and
joint ventures 1 (2)
Profit on disposal of associates and joint
ventures - 1
-------- --------
Profit before tax 542 336
-------- --------
Cost:income ratio 59% 62%
Average income per member of staff ('000) GBP629 GBP464
Return on average economic capital 248% 166%
Economic profit GBP299m GBP195m
As at
2005 01.01.05 2004
Total assets GBP80.9bn GBP61.4bn GBP1.0bn
Weighted risk assets GBP1.7bn GBP1.2bn GBP1.2bn
Key Facts 2005 2004
Number of institutional clients 2,800 2,600
Assets under management:
-indexed GBP586bn GBP478bn
-active GBP198bn GBP147bn
-managed cash and other GBP97bn GBP84bn
Total assets under management GBP881bn GBP709bn
Total assets under management (US$) $1,513bn $1,362bn
Net new assets in period GBP48bn GBP58bn
Number of iShares products 149 132
Total iShares assets under management(1) GBP113bn GBP68bn
(1) Included in indexed assets
Barclays Global Investors (BGI) delivered another year of outstanding financial
results, achieving record revenues and profit before tax. The performance was
spread across a diverse range of products, distribution channels and
geographies. Profit before tax increased 61% (GBP206m) to GBP542m (2004:
GBP336m) reflecting substantial income growth and focused investment spend.
Net fee and commission income increased 47% (GBP415m) to GBP1,297m (2004:
GBP882m), driven by significant increases in management, incentive and
securities lending revenues. Higher margin assets under management, strong
investment performance and higher market levels contributed to the significant
income growth, which was strong across all areas, particularly in the active and
iShares businesses.
Investment performance remained very good for the majority of active funds as
they outperformed their respective benchmarks. The growth in global iShares
continued at pace, with related assets under management up 66% (GBP45bn) to
GBP113bn (2004: GBP68bn).
Operating expenses increased 40% (GBP223m) to GBP779m (2004: GBP556m) as a
result of higher performance based expenses, significant investment in key
growth initiatives and ongoing investment in infrastructure required to support
business growth. The cost:income ratio improved to 59% (2004: 62%).
Total headcount rose by 400 to 2,300 (2004: 1,900). Headcount increased in all
regions, across product groups and the support functions, reflecting the
investments made to support strategic initiatives.
Total assets under management increased 24% (GBP172bn) to GBP881bn (2004:
GBP709bn). The growth included GBP48bn of net new assets, GBP53bn attributable
to favourable exchange rate movements and GBP71bn as a result of market
movements. In US$ terms, the increase in assets under management to US$1,513bn
from US$1,362bn (2004) included US$88bn of net new assets and US$121bn of market
movements, partially offset by adverse exchange rate movements of US$58bn. BGI
manages assets denominated in numerous currencies although the majority are held
in US dollars.
Wealth Management
2005 2004
GBPm GBPm
Net interest income 335 303
Net fee and commission income 589 529
-------- --------
Net trading income - -
Net investment income 5 -
-------- --------
Principal transactions 5 -
Other income (1) 7
-------- --------
Total income 928 839
Impairment charge and other credit provisions (2) 1
-------- --------
Net income 926 840
-------- --------
Operating expenses excluding amortisation of
intangible assets (752) (729)
Amortisation of intangible assets (2) (1)
-------- --------
Operating expenses (754) (730)
-------- --------
Profit before tax 172 110
-------- --------
Cost:income ratio 81% 87%
Cost:net income ratio 81% 87%
Risk Tendency GBP5m GBP5m
Return on average economic capital 38% 32%
Average net income per member of staff ('000) GBP129 GBP119
Economic profit GBP109m GBP70m
As at
2005 01.01.05 2004
Loans and advances to customers GBP4.7bn GBP4.2bn GBP4.1bn
Customer accounts GBP23.1bn GBP21.4bn GBP21.3bn
Total assets GBP6.1bn GBP5.7bn GBP5.6bn
Weighted risk assets GBP4.5bn GBP4.2bn GBP4.0bn
Key Facts 2005 2004
Total customer funds GBP78.3bn GBP70.8bn
Multi-Manager assets (included above) GBP6.0bn GBP1.6bn
Wealth Management profit before tax increased 56% (GBP62m) to GBP172m (2004:
GBP110m), driven by broad based income growth and improved cost efficiency.
Total income increased 11% (GBP89m) to GBP928m (2004: GBP839m).
Net interest income increased 11% (GBP32m) to GBP335m (2004: GBP303m) reflecting
strong growth in loans and deposits. Total average customer deposits increased
12% to GBP23.0bn (2004: GBP20.6bn) driven by strong growth from offshore and
private banking clients. Total average loans increased 22% to GBP4.4bn (2004:
GBP3.6bn), reflecting growth from corporate clients in the offshore business.
Net fee and commission income increased 11% (GBP60m) to GBP589m (2004: GBP529m).
The increase was driven principally by sales of investment products to private
banking and financial planning clients, stronger equity markets and higher
client transaction volumes.
Operating expenses increased 3% (GBP24m) to GBP754m (2004: GBP730m). The
business is being re-organised to establish an integrated global operating model
and efficiency savings have enabled the funding of significant restructuring
expenditure and the initiation of major investment programmes in people and
infrastructure. The cost:income ratio improved six percentage points to 81%
(2004: 87%).
The integration of the Gerrard business continued to make good progress with
profits well ahead of 2004.
Total customer funds, comprising customer deposits and assets under management,
increased to GBP78.3bn (31st December 2004: GBP70.8bn). Multi-Manager assets
increased to GBP6.0bn (31st December 2004: GBP1.6bn); this growth included
existing customer assets.
Wealth Management - closed life assurance activities
2005 2004
GBPm GBPm
Net interest income (13) (53)
Net fee and commission income 44 -
-------- --------
Net trading income - -
Net investment income 259 596
-------- --------
Principal transactions 259 596
Net premiums from insurance contracts 195 362
Other income 11 4
-------- --------
Total income 496 909
Net claims and benefits on insurance contracts (375) (818)
-------- --------
Total income net of insurance claims 121 91
Operating expenses (127) (143)
-------- --------
Loss before tax (6) (52)
-------- --------
Cost:income ratio 105% 157%
Return on average economic capital (3)% (53)%
Economic loss GBP(7)m GBP(77)m
As at
2005 01.01.05 2004
Total assets GBP7.3bn GBP6.6bn GBP6.4bn
Wealth Management closed life assurance activities loss before tax reduced to
GBP6m (2004: loss of GBP52m) predominantly due to lower funding and redress
costs in 2005.
Profit before tax excluding customer redress costs was GBP79m (2004: GBP45m).
From 1st January 2005, following the application of IAS 39 and IFRS 4, life
assurance products are divided into investment contracts and insurance
contracts. Investment income from assets backing investment contracts, and the
corresponding movement in investment contract liabilities, has been presented on
a net basis in other income. In addition, these standards have impacted the
reporting of net claims and benefits paid.
Total income decreased to GBP496m (2004: GBP909m), largely due to the
application of IFRS. The decrease was offset by a broadly similar reduction in
net claims and benefits.
Operating expenses decreased 11% (GBP16m) to GBP127m (2004: GBP143m). Costs
relating to redress for customers decreased to GBP85m (2004: GBP97m) and other
operating expenses decreased 9% (GBP4m) to GBP42m (2004: GBP46m).
Barclaycard
2005 2004
GBPm GBPm
Net interest income 1,773 1,600
Net fee and commission income 972 790
Net premiums from insurance contracts 24 22
-------- --------
Total income 2,769 2,412
Net claims and benefits on insurance contracts (7) (5)
-------- --------
Total income net of insurance claims 2,762 2,407
Impairment charge and other credit provisions (1,098) (761)
-------- --------
Net income 1,664 1,646
-------- --------
Operating expenses excluding amortisation of
intangible assets (961) (804)
Amortisation of intangible assets (17) (3)
-------- --------
Operating expenses (978) (807)
Share of post-tax results of associates and
joint ventures 1 4
-------- --------
Profit before tax 687 843
-------- --------
Cost:income ratio 35% 34%
Cost:net income ratio 59% 49%
Risk Tendency GBP1,100m GBP860m
Return on average economic capital 16% 24%
Economic profit GBP183m GBP350m
As at
2005 01.01.05 2004
Loans and advances to customers GBP24.0bn GBP22.2bn GBP22.3bn
Total assets GBP25.8bn GBP23.2bn GBP23.4bn
Weighted risk assets GBP20.4bn GBP21.6bn GBP20.2bn
Key Facts 2005 2004
Number of Barclaycard UK customers 11.2m 11.2m
Number of retailer relationships 93,000 90,000
UK credit cards - average outstanding balances GBP10.1bn GBP9.6bn
UK credit cards - average extended credit GBP8.6bn GBP8.2bn
balances
UK loans - average consumer lending balances GBP10.3bn GBP9.4bn
International - average extended credit GBP1.8bn GBP0.9bn
balances
International - cards in issue 4.3m 2.9m
Barclaycard profit before tax decreased 19% (GBP156m) to GBP687m (2004: GBP843m)
as strong income growth was more than offset by higher impairment charges and
increased costs from the continued development of the International business.
Excluding Barclaycard US (previously Juniper), which was acquired in December
2004, profit before tax fell 12% (GBP102m) to GBP743m.
Total income, net of insurance claims, increased 15% (GBP355m) to GBP2,762m
(2004: GBP2,407m) driven by good performances across the diversified UK cards
and loans businesses and Barclaycard Business, and by very strong momentum in
international cards. Excluding Barclaycard US, income increased 10%. The
application of IAS 32 and IAS 39 from 1st January 2005, in particular the
Effective Interest Rate requirements, resulted in the reclassification of fee
and commission expenses to net interest income.
Net interest income increased 11% (GBP173m) to GBP1,773m (2004: GBP1,600m) as a
result of growth in average balances, although the rate of growth in the UK
slowed during 2005. UK average extended credit balances rose 5% to GBP8.6bn
(2004: GBP8.2bn) and international average extended credit balances doubled to
GBP1.8bn (2004: GBP0.9bn). Excluding Barclaycard US, international average
extended credit balances increased 26%. UK average consumer lending balances
increased 10% to GBP10.3bn (2004: GBP9.4bn). Margins in the cards business
improved during 2005 to 7.96% (2004: 7.34%) due to the impact of increased card
rates and a reduced proportion of total balances on promotional offers. Margins
in consumer lending fell to 4.96% (2004: 6.27%), due to the impact of IAS 32 and
IAS 39, competitive pressure and a change in the product mix. Excluding the
impact of the application of IAS 32 and IAS 39, net interest income increased
14%.
Net fee and commission income increased 23% (GBP182m) to GBP972m (2004: GBP790m)
as a result of the inclusion of Barclaycard US and increased contributions from
Barclaycard Business and FirstPlus. Excluding the impact of IAS 32 and IAS 39,
net fee and commission income increased 16%.
Impairment charges increased 44% (GBP337m) to GBP1,098m (2004: GBP761m). The
increase was driven by a rise in delinquent balances, lower rates of recovery
from customers, the inclusion of Barclaycard US, and an increase in the size of
the average loan book. Excluding Barclaycard US, impairment charges increased
38%. The increases arose in the UK businesses as a result of the industry wide
credit experience during 2005. Within the portfolio, the greater increase arose
in the UK cards business; impairment charges in the consumer lending business
increased at a lower rate. Non-performing loans increased significantly, driven
by the growth in delinquent balances.
Operating expenses rose 21% (GBP171m) to GBP978m (2004: GBP807m) mostly as a
result of the inclusion of Barclaycard US. Excluding Barclaycard US, operating
expenses rose 7% reflecting continued investment in the UK and continental
European card businesses and the development of the UK Partnerships business.
Barclaycard International performed strongly, with Germany and Spain delivering
excellent results. In June Barclaycard formed a new joint venture with Swedbank
to develop a card business in the Nordic region; the business is performing in
line with expectations. Excluding Barclaycard US, Barclaycard International
profit before tax was GBP26m (2004: GBP8m), with income ahead 22%. Barclaycard
US performance and integration proceeded in line with expectations, with strong
growth in balances and customers and the establishment of a number of new
partnerships. The loss before tax for Barclaycard US was GBP56m (2004: loss of
GBP2m).
International Retail and Commercial Banking
2005 2004
GBPm GBPm
Net interest income 1,096 534
Net fee and commission income 711 288
-------- --------
Net trading income 40 -
Net investment income 150 135
-------- --------
Principal transactions 190 135
Net premiums from insurance contracts 227 300
Other income 62 25
-------- --------
Total income 2,286 1,282
Net claims and benefits on insurance contracts (205) (390)
-------- --------
Total income net of insurance claims 2,081 892
Impairment charge and other credit provisions (33) (31)
-------- --------
Net income 2,048 861
-------- --------
Operating expenses excluding amortisation of
intangible assets (1,356) (616)
Amortisation of intangible assets (48) (1)
-------- --------
Operating expenses (1,404) (617)
Share of post-tax results of associates and
joint ventures 46 49
-------- --------
Profit before tax 690 293
-------- --------
Cost:income ratio 67% 69%
Cost:net income ratio 69% 72%
Risk Tendency GBP195m GBP65m
Return on average economic capital 23% 21%
Economic profit GBP238m GBP111m
As at
2005 01.01.05 2004
Loans and advances to customers GBP54.3bn GBP20.8bn GBP20.7bn
Customer accounts GBP33.4bn GBP9.5bn GBP10.1bn
Total assets GBP73.6bn GBP28.8bn GBP28.5bn
Weighted risk assets GBP50.1bn GBP18.7bn GBP19.3bn
International Retail and Commercial Banking profit before tax increased GBP397m
to GBP690m (2004: GBP293m). The increase reflected the inclusion of Absa profit
before tax of GBP335m for the period from 27th July 2005 and strong organic
growth in Africa and Europe.
From 1st January 2005, following the application of IAS 39 and IFRS 4, life
assurance products are divided into investment contracts and insurance
contracts. Investment income from assets backing insurance contracts, and the
corresponding movement in investment contract liabilities, has been presented on
a net basis in other income. In addition, these standards have impacted the
reporting of net claims and benefits paid. Also the application of IAS 32 and
IAS 39 from 1st January 2005, in particular the Effective Interest Rate
requirements, resulted in the reclassification of certain lending related fees
from net fee and commission income to net interest income.
International Retail and Commercial Banking - excluding Absa
2005 2004
GBPm GBPm
Net interest income 582 534
Net fee and commission income 377 288
-------- --------
Net trading income 31 -
Net investment income 88 135
-------- --------
Principal transactions 119 135
Net premiums from insurance contracts 129 300
Other income 23 25
-------- --------
Total income 1,230 1,282
Net claims and benefits on insurance contracts (161) (390)
-------- --------
Total income net of insurance claims 1,069 892
Impairment charge and other credit provisions (13) (31)
-------- --------
Net income 1,056 861
-------- --------
Operating expenses excluding amortisation of
intangible assets (734) (616)
Amortisation of intangible assets (6) (1)
-------- --------
Operating expenses (740) (617)
Share of post-tax results of associates and
joint ventures 39 49
-------- --------
Profit before tax 355 293
-------- --------
Cost:income ratio 69% 69%
Cost:net income ratio 70% 72%
Risk Tendency GBP75m GBP65m
Return on average economic capital 20% 21%
Economic profit GBP115m GBP111m
As at
2005 01.01.05 2004
Loans and advances to customers GBP25.4bn GBP20.8bn GBP20.7bn
Customer accounts GBP10.4bn GBP9.5bn GBP10.1bn
Total assets GBP34.2bn GBP28.8bn GBP28.5bn
Weighted risk assets GBP21.6bn GBP18.7bn GBP19.3bn
Key Facts 2005 2004
Number of international branches 798 830
Number of Barclays Africa and the Middle East
customer accounts 1.3m 1.4m
Number of Barclays Europe customers 0.8m 0.7m
Number of European mortgage customers 229,000 153,000
European mortgages - average balances (Euros) EUR21.2bn EUR16.9bn
European assets under management (Euros) EUR22.6bn EUR17.1bn
International Retail and Commercial Banking excluding Absa performed strongly,
with profit before tax increasing 21% (GBP62m) to GBP355m (2004: GBP293m). The
performance was broad based, featuring stronger profits in all geographies.
Total income net of insurance claims increased 20% (GBP177m) to GBP1,069m (2004:
GBP892m).
Net interest income increased 9% (GBP48m) to GBP582m (2004: GBP534m), reflecting
strong balance sheet growth in Europe, Africa and the Middle East, and the
development of the corporate businesses in Spain.
Total average customer loans increased 28% to GBP22.8bn (2004: GBP17.8bn).
Mortgage balance growth in continental Europe was particularly strong with
average Euro balances up 25%. Average lending balances in Africa and the Middle
East increased 34%. Changes in the overall product mix, as a result of growth in
European mortgages and competitive pressures in key European markets contributed
to lower lending margins. Average customer deposits increased 7% to GBP9.5bn
(2004: GBP8.9bn), with deposit margins rising modestly.
Net fee and commission income increased 31% (GBP89m) to GBP377m (2004: GBP288m).
This reflected a strong performance from the Spanish funds business, where
assets under management increased 15%, together with good growth in France,
including the contribution of the ING Ferri business which was acquired on 1st
July 2005. Fee income also showed solid growth in Italy, Africa and the Middle
East. Excluding the impact of IAS 32 and IAS 39, net fee and commission income
increased 25%.
Principal transactions reduced to GBP119m (2004: GBP135m), reflecting the change
in accounting for insurance business, partly offset by investment realisations
during 2005 including a gain of GBP23m from the redemption of preference shares
in FirstCaribbean.
Impairment charges decreased 58% (GBP18m) to GBP13m (2004: GBP31m), mainly as a
result of releases and recoveries in Africa and the Middle East. In Europe,
charges remained broadly stable.
Operating expenses increased 20% (GBP123m) to GBP740m (2004: GBP617m). The
increase was in line with the growth in income, and was due to higher
integration costs in Spain, the continued expansion of the business in Africa
and the Middle East, investments in the European distribution network,
particularly in Portugal and Italy, and the acquisition of the ING Ferri
business in France. The cost:income ratio remained stable at 69% (2004: 69%).
Barclays Spain continued to perform very strongly with profit before tax, pre
integration costs, up 25% to GBP156m (2004: GBP125m). This was driven by the
continued realisation of benefits from the accelerated integration of Banco
Zaragozano, together with good growth in mortgages and assets under management.
The integration of Banco Zaragozano continued to be well ahead of plan;
integration costs were GBP57m (2004: GBP42m). Profit before tax also increased
strongly in Italy and Portugal reflecting strong customer acquisition and
increased business volumes. France performed well as a result of good organic
growth and the acquisition of ING Ferri.
Africa and the Middle East profit before tax increased 14% to GBP142m (2004:
GBP125m) reflecting continued investment and balance sheet growth across the
businesses, particularly in Egypt, United Arab Emirates and South Africa and
lower impairment charges.
The post-tax profit from associates decreased GBP10m to GBP39m (2004: GBP49m)
due to a lower contribution from FirstCaribbean. The underlying performance in
2005 was stronger; Barclays results in 2004 included GBP28m relating to the gain
made by FirstCaribbean on the sale of shares in Republic Bank Limited.
International Retail and Commercial Banking - Absa
Period from
27th July until
31st December
2005
GBPm
Net interest income 514
Net fee and commission income 334
--------
Net trading income 9
Net investment income 62
--------
Principal transactions 71
Net premiums from insurance contracts 98
Other income 39
--------
Total income 1,056
Net claims and benefits on insurance contracts (44)
--------
Total income net of insurance claims 1,012
Impairment charge and other credit provisions (20)
--------
Net income 992
--------
Operating expenses excluding amortisation of intangible assets (622)
Amortisation of intangible assets (42)
--------
Operating expenses (664)
Share of post-tax results of associates and joint ventures 7
--------
Profit before tax 335
--------
Cost:income ratio 66%
Cost:net income ratio 67%
Risk Tendency GBP120m
Return on average economic capital 33%
Economic profit GBP123m
Loans and advances to customers GBP28.9bn
Customer accounts GBP23.0bn
Total assets GBP39.4bn
Weighted risk assets GBP28.4bn
Key Facts 2005
Number of branches 718
Number of ATMs 5,835
Number of retail customers 7.6m
Number of corporate customers 82,000
Absa's profit before tax for the period from 27th July 2005 was GBP335m. On
consolidation into Barclays results, a charge of GBP42m has been taken for the
amortisation of intangible assets and is included within operating expenses. The
consolidated results for Absa represent 100% of earnings, 43.4% of which is
attributable to minority interests. This is deducted from Barclays results as
profit attributable to minority interests.
Absa Group Limited continued to perform strongly and today reported profit
before tax for the nine months to 31st December 2005 of R7,031m. This was an
increase of 28% over the comparable(1) period of 2004 and reflected excellent
performances across all business lines. The performance was driven by lending
growth of 27% on an annualised basis and the recruitment of 800,000 new retail
customers over the period. The results also benefited from a favourable economic
and equity market environment, the low levels of impairment charges and included
equity investment gains of R270m.
Absa Group Limited experienced good net interest income growth in the period
since acquisition from the personal, commercial and wholesale businesses. The
areas of strongest balance sheet growth were mortgages, credit cards and
instalment finance as the retail credit environment remained strong.
The performance in net fees and commission income was driven by good retail
customer transaction volume growth and a strong performance from insurance
related activities. This growth was partly offset by income reclassification due
to the implementation of IFRS.
Principal transactions growth was predominantly driven by higher treasury
trading income.
Impairment charges for the period were low reflecting the benign credit
environment, a reduction in non-performing loans and a higher level of releases
and recoveries.
Operating expenses grew as Absa Group Limited invested in the expansion and
improvement of the branch and ATM network and in customer service initiatives,
including increased staff numbers. Expense growth also reflected higher volumes
and regulatory programme expenditure.
The integration of Absa Group Limited progressed well. Included in Absa Group
Limited's results for 2005 are R211m (GBP18m)(2) of integration costs,
R67m (GBP6m)(2) of sustainable pre-tax synergy benefits and R30m (GBP3m)(2) of
one-off benefits. Total revenue and cost synergies identified to date are
expected to improve Absa Group Limited's pre-tax profits by approximately
R1.4 billion per annum four years after the completion of the transaction.
Implementation costs totalling R1.8 billion are expected to be incurred over the
first three years.
(1) Absa has changed its financial year-end to 31st December to conform with
Barclays. The comparable period comprises unaudited results for the nine
months ended 31st December 2004.
(2) Calculated using an average exchange rate of R/GBP of 11.47, since the date
of acquisition.
Head office functions and other operations
2005 2004
GBPm GBPm
Net interest expense (49) (24)
Net fee and commission expense (408) (181)
-------- --------
Net trading income 85 21
Net investment income 8 (9)
-------- --------
Principal transactions 93 12
Net premiums from insurance contracts 146 109
Other income 24 37
-------- --------
Total income (194) (47)
Impairment release/(charge) and other credit
provisions 9 (1)
-------- --------
Net loss (185) (48)
-------- --------
Operating expenses excluding amortisation of
intangible assets (343) (175)
Amortisation of intangible assets (4) (14)
-------- --------
Operating expenses (347) (189)
Share of post-tax results of associates and joint
ventures - 2
-------- --------
Loss before tax (532) (235)
-------- --------
Risk Tendency GBP10m GBP20m
As at
2005 01.01.05 2004
Total assets GBP7.7bn GBP4.2bn GBP4.0bn
Weighted risk assets GBP2.2bn GBP1.9bn GBP2.0bn
Head office functions and other operations loss before tax increased GBP297m to
GBP532m (2004: loss GBP235m), reflecting the elimination of inter-segment
transactions and increased operating expenses.
Group segmental reporting is prepared in accordance with Group accounting
policies. This means that inter-segment transactions are recorded in each
segment as if undertaken on an arms length basis. Consolidation adjustments
necessary to eliminate the inter-segment transactions, including adjustments to
eliminate the timing differences on the recognition of inter-segment income and
expenses, are included in Head office functions and other operations.
The increase in asymmetric consolidation adjustments of GBP135m to GBP204m
(2004: GBP69m) mainly arises from the timing of the recognition of insurance
premiums included in Barclaycard and UK Banking amounting to GBP113m (2004:
GBPnil).
In UK Banking, captive insurers pay commissions to other businesses for the
introduction of short term payment protection insurance. The recognition of
commissions payable is generally spread over the term of the insurance to match
the fact that claims arise over the term of the insurance.
In Barclaycard, introducer commissions received from UK Banking's captive
insurers are recognised as 'Net fees and commission' income at the time the
service is provided. This is on the basis that the introducer carries none of
the related policy risk and provides no on-going service to the policy holder.
In addition, the related cost of introduction is incurred at the inception of
any policy.
In 2004 and prior years, Barclaycard dealt with third party underwriters but
from the start of 2005 this activity was undertaken with the captive insurance
operation within UK Banking.
In Head office functions and other operations, consolidation adjustments are
made:
- to eliminate the differential timing of the recognition of insurance
commissions between UK Banking and Barclaycard; and
- to reclassify fees and commissions, as recorded in Barclaycard, as net
premiums from insurance contracts in Head office functions and other
operations.
In addition there were two other significant consolidation adjustments: internal
fees for structured capital markets activities arranged by Barclays Capital of
GBP67m (2004: GBP63m); and the fees paid to Barclays Capital for capital raising
and risk management advice of GBP50m (2004: GBPnil). Previously capital raising
fees were amortised over the life of the capital raising and taken as a charge
to net interest income. Under IFRS they are recognised as a cost in the year of
issue.
Net trading income of GBP85m (2004: GBP21m) primarily arose as a result of
hedging related transactions in Treasury. The hedge ineffectiveness from 1st
January 2005, together with other related Treasury adjustments, amounted to a
gain of GBP18m (2004: GBPnil) and was reported in net interest income. The cost
of hedging the foreign exchange risk on the Group's investment in Absa amounted
to GBP37m (2004: GBPnil) and was deducted from net interest income.
Other income primarily comprises property rental income.
Impairment gains reflect recoveries made on loans previously written off in the
transition businesses.
Operating expenses rose GBP158m to GBP347m (2004: GBP189m) and included
non-recurring costs relating to the head office relocation to Canary Wharf of
GBP105m (2004: GBP32m) and a charge to write down capitalised IT related assets
held centrally of GBP60m (2004: GBPnil). Underlying operating expenses rose by
GBP25m, representing an increase of 16%.
BARCLAYS PLC
FINANCIAL REVIEW
Results by nature of income and expense
Net interest income
2005 2004(1)
Interest income(2) GBPm GBPm
Cash and balances with central banks 9 4
Financial instruments 2,272 -
Debt securities - 2,597
Loans and advances to banks 690 957
Loans and advances to customers 12,944 10,312
Other 1,317 10
-------- --------
17,232 13,880
-------- --------
Interest expense(2)
Deposits from banks (2,056) (1,535)
Customer accounts (2,715) (2,053)
Debt securities in issue (3,268) (1,569)
Subordinated liabilities (605) (692)
Other (513) (1,198)
-------- --------
(9,157) (7,047)
-------- --------
Net interest income 8,075 6,833
-------- --------
Group net interest income increased 18% (GBP1,242m) to GBP8,075m (2004:
GBP6,833m). The inclusion of Absa added net interest income of GBP514m in the
second half of 2005. Group net interest income excluding Absa grew 11%
reflecting growth in average balances across all businesses. Growth in net
interest income was strongest in UK Banking, particularly reflecting the growth
in UK Business Banking average lending and deposit balances. Net interest income
also improved in Barclaycard and International Retail and Commercial Banking as
a result of strong growth in balances.
In 2005, interest income relating to reverse repurchase agreements has been
included within other interest income. In 2004, such income was classified
within the loans and advances to banks and the loans and advances to customers
categories. Expenditure relating to repurchase agreements has been treated
accordingly and is included within other interest expense. In 2004 the
expenditure was included within deposits from banks and customer accounts.
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
has decreased to GBP145m (2004: GBP304m), largely due to the impact of higher
short-term interest rates and lower medium-term rates. The reduced contribution
from the structural hedge has impacted the interest earned on shareholders'
funds and reported liability margins.
Interest income includes GBP76m accrued on impaired loans, reflecting the
application of IAS 32.
(1) Does not include IAS 32, IAS 39 or IFRS 4. Financial instruments are
measured in accordance with UK GAAP. Further explanation is provided on
page 9.
(2) Following application of IAS 32 and IAS 39 there are a number
reclassifications, which affect the year on year comparisons of interest
income and expense:
- Certain lending related fees and commissions transferred to net interest
income.
- The interest expense of certain capital instruments transferred to
minority interests.
Business margins(1)
2005 2004
% %
UK Retail Banking assets 0.87 0.73
UK Retail Banking liabilities 1.98 2.14
UK Business Banking assets 1.84 1.55
UK Business Banking liabilities 1.37 1.51
Wealth Management assets 0.99 0.97
Wealth Management liabilities 1.04 1.07
Barclaycard assets 6.59 6.84
-------- --------
Barclaycard assets - cards 7.96 7.34
Barclaycard assets - loans 4.96 6.27
-------- --------
International Retail and Commercial Banking assets - ex Absa 1.51 1.75
International Retail and Commercial Banking liabilities - ex
Absa 1.49 1.43
International Retail and Commercial Banking assets - Absa(2) 2.02 -
International Retail and Commercial Banking liabilities -
Absa(2) 1.42 -
UK Retail Banking assets margin increased 14 basis points to 0.87% (2004:
0.73%). The application of IAS 32 and IAS 39 increased the assets margin by 3
basis points. The higher assets margin reflected improved mortgage margins and
higher contributions from Personal Customer overdrafts and Small Business loans.
The UK Retail Banking liabilities margin decreased by 16 basis points to 1.98%
(2004: 2.14%), reflecting an 8 basis point impact from the reduced contribution
from the structural hedge, and competition for retail savings and deposits. The
movements in both the assets and liabilities margins partly reflect changes in
UK base rates.
UK Business Banking assets margin increased 29 basis points to 1.84% (2004:
1.55%). The application of IAS 32 and IAS 39 had a significant effect on the UK
Business Banking assets margin for 2005, increasing it by 32 basis points.
Excluding the impact of IAS 32 and IAS 39 the asset margin was broadly stable.
UK Business Banking liabilities margin decreased 14 basis points to 1.37% (2004:
1.51%), principally reflecting a 10 basis point impact from the reduced
contribution from the structural hedge.
Wealth Management assets margin increased slightly by 2 basis points to 0.99%
(2004: 0.97%). The application of IAS 32 and IAS 39 did not impact the assets
margin. Wealth Management liabilities margin decreased modestly by 3 basis
points to 1.04% (2004: 1.07%). Excluding the reduced contribution from the
structural hedge, underlying margins were firmer.
Barclaycard cards margin increased 62 basis points to 7.96% (2004: 7.34%). The
application of IAS 32 and IAS 39 increased the cards margin by 10 basis points.
Margins in the cards business improved due to the impact of increased card rates
and the roll off of promotional rate balances throughout 2005. Barclaycard loans
margin decreased 131 basis points to 4.96% (2004: 6.27%). The application of IAS
32 and IAS 39 reduced the loans margin by 60 basis points. Margins in the loans
business also reduced due to competitive pressures and a change in the product
mix with a higher weighting to secured loans.
(1) The margin is expressed as annualised divisional interest over average
balance. Asset and liability margins cannot be added together as they are
relative to the average Bank of England base rate or local equivalent for
international businesses or the rate managed by the Group using derivatives.
2005 figures are not strictly comparable to those in 2004 with the
application of IAS 32 and IAS 39 from 1st January 2005 affecting the assets
margin.
(2) Absa's margin is five months annualised.
International Retail and Commercial Banking excluding Absa assets margin
decreased 24 basis points to 1.51% (2004: 1.75%) The application of IAS 32 and
IAS 39 increased the assets margin for 2005 by 5 basis points. Excluding the
impact of IAS 32 and IAS 39, the assets margin reduction reflected the impact of
a change in mix as a result of growth in mortgage assets in Europe and
competitive pressures. International Retail and Commercial Banking excluding
Absa liabilities margin increased 6 basis points to 1.49% (2004: 1.43%).
International Retail and Commercial Banking Absa assets margin of 2.02% remained
broadly stable over the period since acquisition. The liabilities margin of
1.42% declined modestly over the period.
Net fee and commission income
2005 2004
GBPm GBPm
Fee and commission income 6,430 5,509
Fee and commission expense (725) (662)
-------- --------
Net fee and commission income 5,705 4,847
-------- --------
Net fee and commission income increased 18% (GBP858m) to GBP5,705m (2004:
GBP4,847m) reflecting good growth across all businesses. The inclusion of Absa
increased net fee and commission income by GBP334m in the second half of 2005.
Group net fee and commission income excluding Absa grew 11%. Excluding the
application of IAS 32 and IAS 39 net fee and commission income increased 20%.
Fee and commission income rose 17% (GBP921m) to GBP6,430m (2004: GBP5,509m). The
inclusion of Absa increased fee and commission income by GBP386m. Excluding
Absa, fee and commission income grew by 10%. The growth was driven by Barclays
Global Investors, reflecting strong growth in net new assets, strong investment
performance and higher market levels, and Barclays Capital as a result of
increased business volumes and higher market share. In addition, Barclaycard fee
and commission income increased as a result of higher contributions from
Barclaycard Business and FirstPlus and the inclusion of Barclaycard US for the
full year. Fee and commission expense increased 10% (GBP63m) to GBP725m (2004:
GBP662m), largely reflecting the inclusion of Absa which added GBP52m.
Total foreign exchange income was GBP648m (2004: GBP520m) and consisted of
revenues earned from both retail and wholesale activities. The foreign exchange
income earned on customer transactions by UK Retail Banking, UK Business
Banking, International Retail and Commercial Banking, Barclaycard, Barclays
Global Investors and Wealth Management, both externally and with Barclays
Capital, is reported in those respective business units, within fee and
commission income. The foreign exchange income earned in Barclays Capital is
reported within trading income.
Principal transactions
2005 2004
GBPm GBPm
Net trading income
Rates related business 1,732 1,141
Credit related business 589 346
-------- --------
2,321 1,487
-------- --------
Net investment income
Cumulative gain from disposal of available for
sale assets/investment securities 120 45
Dividend income 22 17
Net income from financial instruments designated at fair value 389 -
Income from assets backing insurance policies(1) - 717
Other investment income 327 248
-------- --------
858 1,027
-------- --------
Principal transactions 3,179 2,514
-------- --------
Most of the Group's trading income is generated in Barclays Capital.
Net trading income increased 56% (GBP834m) to GBP2,321m (2004: GBP1,487m) due to
strong performances across Barclays Capital Rates and Credit businesses, in
particular from commodities, foreign exchange, fixed income and credit
derivatives. This was driven by the continued return on prior year investments
and higher volumes of client led activity across a broad range of products and
geographical regions. Group net trading income excluding Absa grew 55%.
Net investment income decreased 16% (GBP169m) to GBP858m (2004: GBP1,027m). The
inclusion of Absa increased net investment income by GBP62m in the second half
of 2005. Group net investment income excluding Absa decreased 22%.
Following the application of IAS 39 at 1st January 2005, certain assets and
liabilities have been designated at fair value. Fair value movements on these
items 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 GBP317m.
(1) From 1st January 2005, investment and insurance contracts are separately
accounted for in accordance with IAS 39 and IFRS 4. This has resulted in
investment income and the corresponding movement in investment contract
liabilities being presented on a net basis within other income. In 2004, all
contracts were accounted for as insurance contracts and the gross income
relating to these contracts was reported as income from assets backing
insurance policies.
Net premiums from insurance contracts
2005 2004
GBPm GBPm
Gross premiums from insurance contracts 909 1,069
Premiums ceded to reinsurers (37) (27)
-------- --------
Net premiums from insurance contracts 872 1,042
-------- --------
The application of IAS 39 and IFRS 4 in 2005 has affected year on year
comparatives of insurance results. These standards change the basis of
recognition for insurance premiums, claims and insurance contract liability
movements (together reported as net claims and benefits) and also of investment
management fees on unit linked products. IFRS 4 requires preparers to
distinguish portfolios with the legal form of insurance contracts between those
that contain significant insurance risk and those that are largely investment in
nature.
The change in accounting for investment contracts resulted in a substantial
decline in reported net premiums from insurance contracts in the Wealth
Management - closed life assurance activities and International Retail and
Commercial Banking businesses. There is a corresponding decline in net claims
and benefits paid on insurance contracts.
Other income
2005 2004
GBPm GBPm
Increase in fair value of assets held in respect of linked
liabilities to customers under investment contracts 9,234 -
Increase in liabilities held in respect of linked
liabilities to customers under investment contracts (9,234) -
Property rentals 54 46
Other income 93 85
-------- --------
147 131
-------- --------
In accordance with IAS 39, from 1st January 2005 certain asset management
products offered to institutional clients by Barclays Global Investors are
recognised as investment contracts. This results in a substantial increase in
the fair value of assets held in respect of linked liabilities to customers
under investment contracts and in the related liabilities.
Net claims and benefits paid on insurance contracts
2005 2004
GBPm GBPm
Gross claims and benefits paid on insurance contracts 694 1,275
Reinsurers' share of claims paid (49) (16)
-------- --------
Net claims and benefits paid on insurance contracts 645 1,259
-------- --------
The change in accounting for investment contracts results in a substantial
decline in reported net claims and benefits paid on insurance contracts in
Wealth Management - closed life assurance activities and International Retail
and Commercial Banking. There is a corresponding decline in net premiums from
insurance contracts.
Impairment charge and other credit provisions
2005 2004
GBPm GBPm
Impairment charges
The charges for the period in respect of impairment
for loans and advances comprise:
- New and increased 2,129 1,755
- Releases (333) (396)
- Recoveries (222) (255)
-------- --------
Total impairment charges for loans and advances 1,574 1,104
Impairment on available for sale assets 4 -
Other credit provisions
Charges for the period in respect of provision for undrawn
contractually committed facilities and guarantees provided (7) (11)
-------- --------
Total impairment charge and other credit provisions 1,571 1,093
-------- --------
Period-on-period comparison is affected by the adoption of IAS 39 on 1st January
2005, which has changed the absolute value and calculation basis of the
impairment charges and Potential Credit Risk Loans (PCRLs). In addition,
following the adoption of IAS 39 on 1st January 2005 wholesale and corporate
charges now include the impairment of private equity investments.
Total impairment charges and other credit provisions increased 44% (GBP478m) to
GBP1,571m (2004: GBP1,093m). This reflected some large one-off releases and
recoveries in 2004, the impact of acquisitions in 2005 and changes in
methodology. Excluding these factors, the underlying rate of growth in
impairment charges was 24%.
In the UK pressure on household cashflows due to a range of factors and the high
level of household indebtedness have led to a greater strain on personal
budgets. This has resulted in a deterioration in consumer credit quality which
has been evident from higher average delinquency balances and shorter periods
between delinquency and charge-off. Smaller business customers have also shown
some limited deterioration in credit quality. Wholesale and corporate credit
conditions remained steady. In other key markets for the Group, the US consumer
and corporate credit markets remained robust while the consumer and SME markets
in Iberia remained well underpinned by strong economic growth. In South Africa
good economic growth has led to buoyant domestic demand for credit, whilst
rising retail debt:income ratios were underpinned by growth in household income
and low interest rates.
As a result of an increase in impairment charges to the retail portfolios, and
to a lesser extent in the wholesale and corporate portfolios, the impairment
charges for the Group (excluding Absa) for the full-year were GBP1,551m (2004:
GBP1,093m). Impairment charges excluding Absa amounted to 0.57% (2004: 0.48%),
as a percentage of period-end total non-trading loans and advances.
Retail impairment charges, excluding Absa, increased to GBP1,235m (2004:
GBP811m), accounting for just under 80% of the Group's impairment charges.
Excluding Absa, retail impairment charges amounted to 1.05% (2004: 0.72%) of the
period-end total non-trading loans and advances. The increase was predominantly
in the UK cards and consumer loans portfolios.
In the wholesale and corporate businesses, excluding Absa, impairment charges
increased to GBP323m (2004: GBP282m). The increase occurred largely in UK
Business Banking and reflected the fact that the 2004 results included a large
one-off recovery of GBP57m. Underlying impairment charges excluding this item
were broadly flat. Wholesale and corporate impairment charges, excluding Absa,
were 0.21% (2004: 0.25%) of period-end total non-trading loans and advances.
Absa's impairment charge of GBP20m for the five month period was low in a benign
credit environment and also reflected a reduction in the number and value of
non-performing loans and a higher level of releases and recoveries.
Impairment charges by their very nature are subject to exceptional increases,
releases and recoveries from time to time. The presence of such items means that
the movements in the impairment charge from one period to another will differ
from the movement in the underlying trend. In 2004, the credit loss was reduced
by a number of one-off items, including an exceptional recovery of GBP57m in UK
Business Banking and a release of mortgage provisions of GBP40m (2005: release
GBP10m) in UK Retail Banking.
Operating expenses excluding amortisation of intangible
assets
2005 2004
GBPm GBPm
Staff costs (refer to page 52) 6,318 5,227
Administrative expenses 3,443 2,766
Depreciation 362 297
Impairment loss - intangible assets 9 9
Operating lease rentals 316 215
------ ------
Operating expenses excluding amortisation of intangible assets 10,448 8,514
------ ------
Operating expenses increased 23% (GBP1,934m) to GBP10,448m (2004: GBP8,514m).
The inclusion of Absa added operating expenses of GBP622m to the second half of
2005. Group operating expenses excluding Absa grew 15% reflecting higher
business activity.
Administrative expenses increased 24% (GBP677m) to GBP3,443m (2004: GBP2,766m).
The inclusion of Absa added administrative expenses of GBP257m in the second
half of 2005. Group administrative expenses excluding Absa grew 15% principally
as a result of higher business activity in Barclays Capital and Barclays Global
Investors and the inclusion of Barclaycard US for the full year. There was a
strong focus on cost control across the business, with particularly good results
in UK Retail Banking.
Administrative expenses included non-recurring costs relating to the write down
of capitalised IT related assets held centrally of GBP60m (2004: GBPnil).
Impairment losses of GBP9m (2004: GBP9m) reflected a further charge for the
impairment of certain capitalised IT related assets following a review of their
likely future economic benefit.
Operating lease rentals increased 47% (GBP101m) to GBP316m (2004: GBP215m). The
inclusion of Absa added operating lease rentals of GBP27m in the second half of
2005. Operating lease rentals excluding Absa increased primarily as a
consequence of the double occupancy costs associated with the head office
relocation to Canary Wharf.
The Group cost:income ratio remained steady at 61%. This reflected improved
productivity in UK Banking, Barclays Global Investors and Wealth Management; and
a stable performance by International Retail and Commercial Banking, offset by
an increase in non-recurring operating expenses in head office and other
functions.
The Group cost:net income ratio was 67% (2004: 66%).
Amortisation of intangible assets
2005 2004
GBPm GBPm
Internally generated software 20 19
Other software 3 -
Brands 9 -
Customer lists and relationships 27 -
Licences 13 3
Core deposit intangibles 7 -
-------- --------
Amortisation of intangible assets 79 22
-------- --------
The increase in the amortisation of intangible assets primarily reflects the
inclusion of Absa in the second half of 2005.
Staff costs
2005 2004
GBPm GBPm
Salaries and accrued incentive payments 5,036 4,098
Social security costs 412 339
Pension costs
- defined contribution plans 76 92
- defined benefit plans 271 235
Other post retirement benefits 27 29
Other 496 434
-------- --------
Staff costs 6,318 5,227
-------- --------
Included in salaries and accrued incentive payments is GBP338m (2004: GBP204m)
arising from equity settled share based payments.
Staff costs increased 21% (GBP1,091m) to GBP6,318m (2004: GBP5,227m). The
inclusion of Absa added staff costs of GBP296m during the second half of the
year. Excluding the impact of Absa, staff costs increased 15%.
Salaries and accrued incentive payments rose 23% (GBP938m) to GBP5,036m (2004:
GBP4,098m), principally due to increased headcount in Barclays Capital and
performance related payments primarily in Barclays Capital and Barclays Global
Investors and the inclusion of Absa. Excluding Absa salaries and accrued
incentive payments rose 16% (GBP662m).
Pension costs comprise all UK and international pension schemes. Included in
pension costs is a charge of GBP276m (2004: GBP261m) in respect of the Group's
main UK pension schemes.
Staff numbers
2005 2004
UK Banking 39,900 41,800
-------- --------
UK Retail Banking 31,900 34,400
UK Business Banking 8,000 7,400
-------- --------
Barclays Capital 9,000 7,800
Barclays Global Investors 2,300 1,900
Wealth Management 7,200 7,200
Barclaycard 7,800 6,700
International Retail and Commercial Banking 46,200 12,100
-------- --------
International Retail and Commercial Banking - ex Absa 12,700 12,100
International Retail and Commercial Banking - Absa 33,500 -
-------- --------
Head office functions and other operations 900 900
-------- --------
Total Group permanent and fixed term contract staff
worldwide 113,300 78,400
Agency staff worldwide 7,000 4,300
-------- --------
Total including agency staff 120,300 82,700
-------- --------
Staff numbers are shown on a full-time equivalent basis. Total Group permanent
and contract staff comprise 59,100 (2004: 60,000) in the UK and 54,200 (2004:
18,400) internationally.
Since 2004 permanent and contract staff numbers increased by 34,900, primarily
as a result of the acquisition of Absa Group Limited, offset in part by the
implementation of restructuring programmes resulting in a decrease of 2,400
staff.
UK Banking staff numbers fell by 1,900 to 39,900 (2004: 41,800), reflecting the
cost management programme in UK Retail Banking partially offset by an increase
in UK Business Banking frontline staff and the inclusion of 200 Iveco Finance
staff.
Barclays Capital staff numbers rose by 1,200 to 9,000 (2004: 7,800), reflecting
the continued expansion of the business.
Barclays Global Investors increased staff numbers by 400 to 2,300 to support
strategic initiatives (2004: 1,900).
Barclaycard staff numbers rose by 1,100 to 7,800 (2004: 6,700), reflecting
growth of 300 in Barclaycard US, an increase of 200 in other international
operations and growth in customer facing staff in the UK.
International Retail and Commercial Banking increased staff numbers by 34,100,
primarily due to the inclusion of 33,500 Absa staff. International Retail and
Commercial Banking excluding Absa increased staff numbers by 600 to 12,700
(2004: 12,100), mainly due to growth in continental Europe, including over 100
from the acquisition of the ING Ferri business in France.
Head office functions and other operations staff numbers remained stable at 900
(2004: 900).
The increase in agency staff worldwide largely reflects the inclusion of 3,300
temporary staff at Absa.
The number of staff under notice at 31st December 2005, was 2,400.
Share of post-tax results of associates and joint ventures
2005 2004
GBPm GBPm
Loss from joint ventures (8) -
Profit from associates 53 56
-------- --------
Share of post-tax results of associates and joint ventures 45 56
-------- --------
The share of post-tax results of associates and joint ventures fell 20% (GBP11m)
to GBP45m (2004: GBP56m). A stronger underlying performance by FirstCaribbean in
2005 was more than offset by the impact of a gain in 2004 relating to the sale
of shares held in Republic Bank Ltd (Barclays share GBP28m). Losses from joint
ventures primarily related to Intelligent Processing Systems Limited, a cheque
processing joint venture in the UK.
Tax
The charge for the period is based upon a UK corporation tax rate of 30% for the
calendar year 2005 (full-year 2004: 30%). The effective rate of tax for 2005 was
27% (2004: 28%). This is lower than the standard rate due to the beneficial
effects of lower tax on certain overseas income and certain non-taxable gains.
The tax charge for the year includes GBP961m (2004: GBP1,028m) arising in the UK
and GBP478m (2004: GBP251m) arising overseas.
Profit attributable to minority interests
2005 2004
GBPm GBPm
International Retail and Commercial Banking - Absa minority
interests 116 -
Preference shares 113 2
Reserve capital instruments 93 -
Upper tier 2 instruments 11 -
Barclays Global Investors minority interests 41 22
Other minority interests 20 23
-------- --------
Profit attributable to minority interests 394 47
-------- --------
Profit attributable to minority interests increased due to the acquisition of
Absa, the inclusion of certain capital instruments within minority interests in
accordance with IAS 39 and an increase in the preference share capital of
subsidiary undertakings.
Earnings per share
2005 2004
Profit attributable to equity holders of the parent GBP3,447m GBP3,254m
Dilutive impact of convertible options GBP(38)m GBP(16)m
-------- --------
Profit attributable to equity holders of the parent
including GBP3,409m GBP3,238m
dilutive impact of convertible options
-------- --------
Basic weighted average number of shares in issue 6,337m 6,381m
Number of potential ordinary shares(1) 149m 124m
-------- --------
Diluted weighted average number of shares 6,486m 6,505m
-------- --------
p p
Basic earnings per ordinary share 54.4 51.0
Diluted earnings per ordinary share 52.6 49.8
Dividends on ordinary shares
The Board has decided to pay, on 28th April 2006, a final dividend for the year
ended 31st December 2005 of 17.4p per ordinary share, for shares registered in
the books of the Company at the close of business on 3rd March 2006.
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 2005 - 2006 tax year in mid-October 2006.
The amount payable for the 2005 final dividend is GBP1,105m (2004: GBP1,001m).
This amount excludes GBP24m payable on own shares held by employee benefit
trusts (2004: GBP16m).
For qualifying US and Canadian resident ADR holders, the final dividend of 17.4p
per ordinary share becomes 69.6p per ADS (representing four shares). The ADR
depositary will mail the dividend on 28th April 2006 to ADR holders on the
record on 3rd March 2006.
For qualifying Japanese shareholders, the final dividend of 17.4p per ordinary
share will be distributed in mid-May to shareholders on the record on 3rd March
2006.
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 do not live in or 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 April 2006 for it to be
effective in time for the payment of the final dividend on 28th April 2006.
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.
(1) Potential ordinary shares reflect the dilutive effect of share options
outstanding.
Analysis of amounts included in the balance sheet
Capital resources
As at
2005 01.01.05 2004
GBPm GBPm GBPm
Shareholders' equity excluding minority interests 17,426 15,287 15,870
-------- -------- --------
Preference shares 2,977 690 690
Reserve capital instruments 1,868 1,907 -
Upper tier 2 instruments 581 586 -
International Retail and Commercial Banking - Absa
minority interests 1,351 - -
Other minority interests 227 147 204
-------- -------- --------
Minority interests 7,004 3,330 894
-------- -------- --------
Total shareholders' equity 24,430 18,617 16,764
Loan capital 12,463 10,606 12,277
-------- -------- --------
Total capital resources 36,893 29,223 29,041
-------- -------- --------
The authorised share capital of Barclays PLC is GBP2,500m (2004: GBP2,500m)
comprising 9,996 million (2004: 9,996 million) ordinary shares of 25p shares and
1 million (2004: 1 million) staff shares of GBP1 each. Called up share capital
comprises 6,490 million (2004: 6,454 million) ordinary shares of 25p each and 1
million (2004: 1 million) staff shares of GBP1 each.
Total capital resources increased GBP7,670m to GBP36,893m since 1st January
2005.
Shareholders' equity, excluding minority interests, increased GBP2,139m since
1st January 2005. The increase primarily reflected profits attributable to
equity holders of the parent of GBP3,447m, offset by dividends of GBP1,581m.
Loan capital rose GBP1,857m reflecting capital raisings of GBP1,283m,
acquisition of Absa Group Limited's loan capital of GBP669m, accrued interest of
GBP210m and exchange rate movements of GBP207m; offset by redemptions of
GBP464m, fair value adjustments of GBP43m and amortisation of issue expenses of
GBP5m.
Minority interests increased GBP3,674m since 1st January 2005, primarily
reflecting the purchase of Absa Group Limited with minority interest of
GBP1,351m and the following issuances of preference shares during 2005:
- 140,000 preference shares of nominal EUR100 each (Principal amount: EUR1.4bn;
GBP978m) with a 4.75% dividend issued on 15th March 2005.
- 100,000 preference shares of nominal US$100 each (Principal amount:
US$1.0bn; GBP551m) with a 6.278% dividend issued on 8th June 2005.
- 75,000 preference shares of nominal GBP100 each (Principal amount: GBP750m)
with a 6% dividend issued on 22nd June 2005.
The impact of IAS 32 resulted in the reclassification of certain capital
instruments from debt to minority interests. This accounts for substantially all
of the increase in minority interests between 31st December 2004 and 1st January
2005.
Capital ratios
Weighted risk assets and capital resources, as defined for supervisory purposes
by the Financial Services Authority (FSA), comprised:
As at
2005 01.01.05 2004
Weighted risk assets: GBPm GBPm GBPm
Banking book
On-balance sheet 180,808 148,328 148,621
Off-balance sheet 31,351 28,191 26,741
Associated undertakings and joint ventures 3,914 3,020 3,020
-------- -------- --------
Total banking book 216,073 179,539 178,382
-------- -------- --------
Trading book
Market risks 23,216 22,106 22,106
Counterparty and settlement risks 29,859 18,113 18,113
-------- -------- --------
Total trading book 53,075 40,219 40,219
-------- -------- --------
Total weighted risk assets 269,148 219,758 218,601
-------- -------- --------
Capital resources:
Tier 1
Called up share capital 1,623 1,614 1,614
Eligible reserves 16,837 14,933 15,670
Minority interests(1) 6,634 2,824 2,890
Tier one notes(2) 981 920 920
Less: intangible assets (7,180) (4,747) (4,432)
-------- -------- --------
Total qualifying tier 1 capital 18,895 15,544 16,662
-------- -------- --------
Tier 2
Revaluation reserves 25 25 25
Available for sale - equity gains 223 - -
Collectively assessed impairment allowances 2,306 2,046 -
General provisions - - 564
Minority Interests 515 397 -
Qualifying subordinated liabilities(3)
Undated loan capital 3,212 3,176 3,573
Dated loan capital 7,069 5,647 5,647
Other - 3 2
-------- -------- --------
Total qualifying tier 2 capital 13,350 11,294 9,811
-------- -------- --------
Tier 3: short term subordinated liabilities(3) - 286 286
-------- -------- --------
Less: Supervisory deductions:
Investments not consolidated for supervisory
purposes (782) (781) (1,047)
Other deductions (961) (496) (496)
-------- -------- --------
(1,743) (1,277) (1,543)
-------- -------- --------
Total net capital resources 30,502 25,847 25,216
-------- -------- --------
Tier 1 ratio 7.0% 7.1% 7.6%
Risk asset ratio 11.3% 11.8% 11.5%
(1) Includes reserve capital instruments of GBP1,735m (1st January 2005:
GBP1,627m; 31st December 2004: GBP1,627m).
(2) Tier one notes are included in undated loan capital in the consolidated
balance sheet.
(3) Subordinated liabilities are included in tiers 2 or 3, subject to limits
laid down in the supervisory requirements.
At 31st December 2005, the tier 1 capital ratio was 7.0% and the risk asset
ratio was 11.3%. From 1st January 2005, net total capital resources rose
GBP4.7bn and weighted risk assets increased GBP49.4bn.
Tier 1 capital rose GBP3.4bn, including GBP1.9bn arising from profits
attributable to equity holders net of dividends paid. Minority interests within
tier 1 capital increased GBP3.8bn primarily due to the issuance of GBP2.3bn of
preference shares by Barclays Bank PLC and the minority interest arising on the
acquisition of a majority stake in Absa Group Limited. Deductions for intangible
assets increased GBP2.4bn, primarily due to goodwill and intangible assets
arising from the acquisition of Absa Group Limited. Tier 2 capital increased
GBP2.1bn of which GBP1.5bn related to loan capital. The tier 3 capital debt
matured in April 2005.
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
2005 01.01.05
GBPm GBPm
Shareholders' equity excluding minority interests 17,426 15,287
Available for sale reserve (225) (314)
Cash flow hedging reserve (70) (302)
Retained earnings
Defined benefit pension scheme 1,215 1,252
Additional companies in regulatory consolidation and (145) 266
non-consolidated companies
Foreign exchange on RCIs and upper tier 2 loan stock 289 459
Other adjustments (30) (101)
-------- --------
Called up share capital and eligible reserves 18,460 16,547
-------- --------
Total assets and weighted risk assets
Total assets increased 29% to GBP924.4bn (1st January 2005: GBP715.6bn).
Weighted risk assets increased 22% to GBP269.1bn (1st January 2005: GBP219.8bn).
Loans and advances to customers that have been securitised or subject to similar
risk transfer increased GBP17.3bn to GBP21.6bn (2004: GBP4.3bn). Securitised or
risk transferred assets are included within total assets but are excluded from
weighted risk assets. The increase in weighted risk assets since 1st January
2005 reflects a rise of GBP36.5bn in the banking book and a rise of GBP12.9bn in
the trading book.
UK Retail Banking total assets decreased 4% to GBP69.2bn (1st January 2005:
GBP71.9bn). This was mainly attributable to lower residential mortgage balances.
Weighted risk assets decreased 15% to GBP32.3bn (1st January 2005: GBP37.8bn),
reflecting lower mortgage balances and a GBP4.5bn securitisation of mortgage
assets in the second half of 2005, which more than offset strong growth in
non-mortgage loans.
UK Business Banking total assets increased 21% to GBP72.0bn (1st January 2005:
GBP59.5bn), reflecting strong growth in lending balances. Weighted risk assets
increased 13% to GBP61.9bn (1st January 2005: GBP54.8bn), the increase being
lower than asset growth mostly as a result of GBP5.0bn securitisation of
corporate loans in the second half of 2005. The acquisition of a 51% stake in
Iveco Finance, completed in June, increased total assets and weighted risk
assets by GBP1.8bn. Excluding the impact of Iveco Finance, assets and weighted
risk assets increased 18% and 10% respectively.
Barclays Capital total assets increased 28% to GBP581.9bn (1st January 2005:
GBP454.4bn). This was mainly attributable to increases in debt securities and
reverse repurchase agreements as the business continued to grow, and in
derivative financial instruments as a result of business growth and market
movements. Weighted risk assets increased 21% to GBP96.1bn (1st January 2005:
GBP79.5bn), below the rate of balance sheet growth. This reflected trading book
weighted risk assets moving in line with risk rather than the balance sheet, the
lower weighting of fully collateralised reverse repurchase agreements and the
availability of legally enforceable netting agreements with derivative
counterparties.
Barclays Global Investors total assets increased 32% to GBP80.9bn (1st January
2005: GBP61.4bn) due to growth in asset management products reported on the
balance sheet. For the amounts related to asset management products, equal and
offsetting balances are reflected within liabilities to customers. Weighted risk
assets rose 42% to GBP1.7bn (1st January 2005: GBP1.2bn) due to growth in the
business.
Wealth Management total assets increased 7% to GBP6.1bn (1st January 2005:
GBP5.7bn). Weighted risk assets increased 7% to GBP4.5bn (1st January 2005:
GBP4.2bn) reflecting good growth in lending balances.
Barclaycard total assets increased 11% to GBP25.8bn (1st January 2005:
GBP23.2bn) driven by growth in lending balances. Weighted risk assets dropped by
6% to GBP20.4bn (1st January 2005: GBP21.6bn) reflecting increased
securitisation activity during the second half of 2005.
International Retail and Commercial Banking excluding Absa total assets
increased 19% to GBP34.2bn (1st January 2005: GBP28.8bn) reflecting strong
volume growth in European mortgages and African corporate lending. Weighted risk
assets increased 16% to GBP21.6bn (1st January 2005: GBP18.7bn), which was lower
than the increase in assets, reflecting strong growth in mortgage balances,
which carry a 50% weighting, and the securitisation of assets in Spain during
2005.
International Retail and Commercial Banking - Absa total assets were GBP39.4bn
and weighted risk assets GBP28.4bn. Growth in assets since acquisition has been
driven by increases in retail lending balances.
Head office functions and other operations total assets increased 83% to
GBP7.7bn (1st January 2005: GBP4.2bn). The increase includes financial
instruments acquired for hedging purposes. Weighted risk assets increased 16% to
GBP2.2bn (1st January 2005: GBP1.9bn) below the rate of balance sheet growth
primarily due to lower risk weighting for assets held for hedging purposes.
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 has been enhanced to reflect
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. A single cost of equity is applied to calculate
the cost of risk. Economic capital allocations reflect varying levels 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 will form the basis of the Group's submission
for the Basel II Internal Capital Adequacy Assessment Process (ICAAP).
Economic capital demand(1)
2005 2004
GBPm GBPm
UK Banking 5,250 4,650
-------- --------
UK Retail Banking 2,300 2,200
UK Business Banking 2,950 2,450
-------- --------
Barclays Capital 2,550 2,100
Barclays Global Investors 150 150
Wealth Management 400 300
Wealth Management - closed life assurance activities 50 100
Barclaycard 2,800 2,450
International Retail and Commercial Banking 1,550 1,000
-------- --------
International Retail and Commercial Banking - ex Absa 1,150 1,000
International Retail and Commercial Banking - Absa(2) 400 -
-------- --------
Head office functions and other operations(3) 250 200
-------- --------
Business unit economic capital 13,000 10,950
Capital held at Group centre(4) 1,050 1,400
-------- --------
Economic capital requirement (excluding goodwill) 14,050 12,350
Average historic goodwill and intangible assets(5) 6,450 5,600
-------- --------
Total economic capital requirement(6) 20,500 17,950
-------- --------
UK Retail Banking economic capital allocation increased GBP100m to GBP2.3bn. The
impact of growth was offset by risk transfer transactions within UK mortgages.
UK Business Banking economic capital allocation increased GBP500m to GBP2.95bn
as a consequence of asset growth and the acquisition of the Iveco Finance
business.
Barclays Capital economic capital increased GBP450m to GBP2.55bn reflecting
underlying growth in loan and derivative portfolios, additional equity
investments and the growth in business and operational risk economic capital.
Wealth Management economic capital allocation increased GBP100m to GBP400m as a
consequence of general growth across the business and the recalibration of
business and operational risk economic capital.
Wealth Management - closed life assurance activities economic capital allocation
reduced GBP50m to GBP50m reflecting the impact of IFRS removing the volatility
previously associated with embedded value accounting.
Barclaycard economic capital allocation increased GBP350m to GBP2.8bn, due to
growth in outstandings and the inclusion of Barclaycard US for the full year.
(1) Calculated using a five point average over the year.
(2) Average economic capital demand for Absa relates to 5 months of 2005. As at
31st December 2005 the capital demand amounted to GBP950m.
(3) Includes Transition Businesses and capital for central functional risks.
(4) The Group's practice is to maintain an appropriate level of excess capital,
held at Group centre, which is not allocated to business units. This
variance arises as a result of capital management timing and includes
capital held to cover pension contribution risk.
(5) Average goodwill relates to purchased goodwill and intangible assets from
business acquisitions. Absa goodwill is included for 5 months of 2005. As at
31st December 2005 Absa goodwill and intangibles amounted to GBP1.8bn and
total goodwill and intangibles was GBP7.9bn.
(6) Total period-end economic capital requirement as at 31st December 2005 stood
at GBP21,850m (1st January 2005: GBP18,150m; 31st December 2004:
GBP19,400m).
International Retail and Commercial Banking excluding Absa economic capital
allocation increased GBP150m to GBP1.15bn due to the recalibration of business
and operational risk economic capital together with exposure growth in Africa
and Spain. Absa added GBP400m to the average economic capital demand reflecting
5 months of the allocation after excluding the risk borne by the minority
interest.
Capital held at the Group centre fell GBP350m to GBP1.05bn as a result of the
acquisition of Absa, partially offset by an increase in available funds to
support economic capital (see Economic capital supply on page 63).
Economic capital supply
The Group has determined that the impacts of IFRS should be modified in
calculating available funds for economic capital. This applies specifically to:
- Cashflow 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 upon which the capital charge is based.
- Available for sale reserve - unrealised gains and losses on such securities
are included in shareholders' equity until disposal or impairment. Such gains
and losses will be excluded from shareholders' equity for the purposes of
calculating the capital charge. 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 deriving the capital
charge, the Group will not deduct the pension deficit from shareholders'
equity.
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 average supply of capital to support the economic capital framework is set
out below(1):
2005 2004
GBPm GBPm
Shareholders' equity excluding minority interests less
goodwill(2) 10,850 10,450
Retirement benefits liability 1,350 1,750
Cashflow hedging reserve (250) -
Available for sale reserve (250) -
Preference shares 2,350 150
-------- --------
Available funds for economic capital excluding goodwill 14,050 12,350
Average historic goodwill and intangible assets(2) 6,450 5,600
-------- --------
Available funds for economic capital(3) 20,500 17,950
-------- --------
(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. Absa goodwill is included for 5 months of 2005. As at
31st December 2005, Absa goodwill and intangibles amounted to GBP1.8bn.
(3) Available funds for economic capital as at 31st December 2005 stood at
GBP21,850m (1st January 2005: GBP18,150m; 31st December 2004: GBP19,400m).
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) (2004:
9.5%). The costs of preference shares servicing are included in minority
interests.
The economic profit performance in 2005 and 2004 is shown below:
2005 2004
GBPm GBPm
Profit after tax and minority interests 3,447 3,254
Addback of amortisation charged on acquired intangible
assets(2) 29 6
-------- --------
Profit for economic profit purposes 3,476 3,260
-------- --------
Average shareholders' equity excluding minority
interests(3), (4) 10,850 10,450
Deduct reserve for unrealised gains on cashflow hedging
reserve(4) (250) -
Deduct reserve for unrealised gains on available for sale
financial instruments(4) (250) -
Add: retirement benefits liability 1,350 1,750
Goodwill and intangible assets arising on acquisitions
(4),(5) 6,450 5,600
-------- --------
Average shareholders' equity for economic profit purposes
(3),(4) 18,150 17,800
-------- --------
Capital charge at 9.5% (1,724) (1,692)
-------- --------
-------- --------
Economic profit 1,752 1,568
-------- --------
(1) The Group's cost of capital for 2006 is unchanged at 9.5%.
(2) Amortisation charged for purchased intangibles only, 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, 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.
(5) Absa goodwill is included for 5 months of 2005. As at 31st December 2005
Absa goodwill and intangibles amounted to GBP1.8bn.
Economic profit generated by business
2005 2004
GBPm GBPm
UK Banking 1,219 1,158
-------- --------
UK Retail Banking 557 473
UK Business Banking 662 685
-------- --------
Barclays Capital 619 521
Barclays Global Investors 299 195
Wealth Management 109 70
Wealth Management - closed life assurance activities (7) (77)
Barclaycard 183 350
International Retail and Commercial Banking 238 111
-------- --------
International Retail and Commercial Banking - ex Absa 115 111
International Retail and Commercial Banking - Absa 123 -
-------- --------
Head office functions and other operations (375) (146)
-------- --------
2,285 2,182
Historic goodwill (615) (533)
Variance to average shareholders' funds
(excluding minority interest) 82 (81)
-------- --------
Economic profit 1,752 1,568
-------- --------
Economic profit for the Group increased 12% (GBP184m) to GBP1,752m (2004:
GBP1,568m). The rise in economic profit was less than the increase in profit
before tax due to the increased share of minority interests. The rise in
economic profit was greater than the increase in earnings per share due to the
more efficient use of capital across the Group.
UK Business Banking economic profit fell 3% (GBP23m) to GBP662m (2004: GBP685m)
reflecting an increase in profit before tax of 10% and an increase of 20% in
economic capital due to growth in lending balances and the acquisition of the
Iveco Finance business.
International Retail and Commercial Banking excluding Absa economic profit rose
4% (GBP4m) to GBP115m (2004: GBP111m) reflecting an increase in profit before
tax of 21% and an increase of 15% in economic capital due to exposure growth in
Africa and Spain.
GROUP PERFORMANCE MANAGEMENT
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 new 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 and is unchanged from the prior goal period. TSR is defined as the
value created for shareholders through share price appreciation, plus
re-invested 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.
For the two years from 31st December 2003 to 31st December 2005, Barclays
delivered TSR of 34% and was positioned 5th within its peer group, which is
second quartile. The TSR of the FTSE 100 Index for this period was 34%.
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) to support top quartile TSR over the 2004 to 2007
goal period.
Economic profit for 2005 was GBP1.75bn, which, added to the GBP1.57bn generated
in 2004, delivered a cumulative total of GBP3.32bn for the goal period to date.
This equates to compound annual growth in economic profit of 18% per annum for
the goal period to date.
(1) Peer group for 2005 remained unchanged from 2004: ABN Amro, BBVA, BNP
Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan, Lloyds TSB,
Royal Bank of Scotland and UBS. The peer group is unchanged for 2006.
(2) Economic profit is defined on page 64.
(3) Restated for IFRS.
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
provides statistical estimates of losses expected to arise within the next year
based on averages in the ranges of possible losses expected from each of the
current portfolios. This can be contrasted with impairment allowances required
under accounting standards, which are based on objective evidence of 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.
2005 2004
GBPm GBPm
UK Banking 450 375
-------- --------
UK Retail Banking 170 150
UK Business Banking 280 225
-------- --------
Barclays Capital 85 70
Wealth Management 5 5
Barclaycard 1,100 860
International Retail and Commercial Banking 195 65
-------- --------
International Retail and Commercial Banking - ex Absa 75 65
International Retail and Commercial Banking - Absa 120 -
-------- --------
Transition Businesses(1) 10 20
-------- --------
Risk Tendency 1,845 1,395
-------- --------
Risk Tendency increased 32% (GBP450m) to GBP1,845m (2004: GBP1,395m). The
largest increase occurred in Barclaycard, which rose GBP240m to GBP1,100m,
reflecting the deterioration of credit conditions in the UK credit card market.
Risk Tendency increased in UK Business Banking due to the growth in the loan
book and the acquisition of the Iveco Finance business.
(1) Included within head office functions and other operations.
ADDITIONAL INFORMATION
Basis of preparation
The Group adopted the requirements of International Financial Reporting
Standards and International Accounting Standards (collectively IFRS) for the
first time for the purpose of preparing financial statements for the year ended
31st December 2005.
The Group issued an IFRS Transition Report on 11th May 2005 that provided the
reconciliations required by IFRS and the provisional accounting policies
expected to be applied in the preparation of the 2005 financial statements. The
Interim Results Announcement on 5th August 2005 amended the reconciliations and
the provisional accounting policies for the use of the fair value option. The
financial information in this Results Announcement has been prepared in
accordance with these amended accounting policies. A summary of the Group's
significant accounting policies will be included in the 2005 Annual Report.
Group structure changes from 2004
The presentation of results by business differs from that provided in 2004 in
the following respects:
- International Retail and Commercial Banking and Wealth Management
(previously called Private Clients) are reported as separate business
divisions and not aggregated, reflecting the differences in the nature of the
products and services and changes in management accountability. Absa is
included in International Retail and Commercial Banking to reflect the nature
of the products and services and the management accountability. International
Retail and Commercial Banking excluding and including Absa are reported as
separate components to provide useful information about this significant
acquisition.
- The results for Wealth Management - closed life assurance activities are
provided separately from those for the rest of Wealth Management in order to
provide more clarity on the impact of these activities.
- The 2004 results of Barclaycard and UK Retail Banking have been restated to
reflect the 2005 change in allocation of branch network costs and insurance
sales between the two divisions. This had the impact of increasing Barclaycard
profit before tax by GBP59m in 2004 and reducing UK Banking profit before tax
in 2004 by the same amount. This restatement was reflected in the IFRS
Transition Report issued on 11th May 2005 and the Interim Results Announcement
for the half-year ended 30th June 2005.
Acquisitions and disposals
On 1st June 2005, Barclays Asset and Sales Finance ('BASF') acquired a 51% share
and controlling stake in Fiat's Iveco Vehicle Finance Business. The transaction
will expand BASF's commercial vehicle expertise.
On 30th June 2005, EnterCard, the joint venture between Barclays Bank PLC and
ForeningsSparbanken (also known as Swedbank), which was announced on 4th
February 2005, began operations. Barclays Bank PLC has a 50% economic interest
in the joint venture. EnterCard provides credit cards in the Nordic market,
initially in Sweden and Norway.
On 1st July 2005, Barclays acquired the wealth business of ING Securities Bank
(France) consisting of ING Ferri and ING Private Banking.
On 9th May 2005, Barclays announced the terms of a recommended acquisition of a
majority stake in Absa Group Limited ('Absa'). The acquisition was subject to a
number of conditions, one of which was the approval of the South African
Minister of Finance under the Banks Act, 1990, of South Africa. As part of the
Banks Act approval process, Barclays confirmed its long-term commitment to
investing in South Africa pursuant to the acquisition of Absa and its intention
to retain a controlling stake. Barclays also acknowledged the importance of
maintaining the South African character of Absa, in which regard the Chairman of
Absa, Dr. Danie Cronje, would continue to serve as chairman and would become a
non-executive director of Barclays PLC and Barclays Bank PLC and Dr. Steve
Booysen would remain as Group Chief Executive of Absa. Three Barclays
representatives were appointed to the Absa board. Barclays has consolidated Absa
from 27th July 2005. As at 31st December 2005, Barclays shareholding was
377,527,453 ordinary shares (56.6%).
The acquisition was endorsed by Absa's black economic empowerment partner. Batho
Bonke Capital (Proprietary) Limited, and the Absa Share Ownership Trust, hold
redeemable cumulative option-holding preference shares in Absa. These redeemable
preference shares have the same rights as ordinary shares, including voting
rights (amounting to approximately 11% of the aggregate voting rights), save for
the rights relating to dividends, redemption and option liquidation. Each
redeemable preference share carries the option to acquire one Absa ordinary
share at a discount to the market price during an option exercise period
commencing on 2nd July 2007 and ending on 1st July 2009.
Change in accounting estimate
The Group has undertaken a review of the actual useful economic lives of
property, plant and equipment. As a result of this review, the assumed useful
economic lives of the costs of adaptation of freehold and leasehold property and
equipment installed in freehold and leasehold property have increased from 10
years to a range of 10-15 years. The useful economic lives of fixtures and
fittings and other equipment have increased from 5 years to a range of 5-10
years. This change in accounting estimate better reflects historical experience
and has been applied prospectively from 1st January 2005. This reduced the
depreciation charge in 2005 by GBP30m.
Hedge accounting
The element of ineffectiveness arising on hedges that qualify for hedge
accounting is included in net interest income.
Share capital
The Group manages its debt and equity capital actively. The Group will seek to
renew its authority to buy back ordinary shares at the 2006 Annual General
Meeting to provide additional flexibility in the management of the Group's
capital resources.
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
There is continuing political and regulatory scrutiny of, and major changes in,
legislation and regulation of the retail banking and consumer credit industries
in the UK and elsewhere.
In the European Union (EU) as a whole, this includes an inquiry into retail
banking in all 25 member states by the European Commission's Directorate General
for Competition. The inquiry is looking at retail banking in Europe generally
and the Group is co-operating with the inquiry. The outcome of the inquiry is
unclear, but it may have an impact on retail banking in one or more of the EU
countries in which the Group operates and therefore on the Group's business in
that sector.
In the UK, in September 2005 the Office of Fair Trading (OFT) received a
super-complaint from the Citizens Advice Bureau relating to payment protection
insurance (PPI). As a result of its inquiries, the OFT then announced in
December 2005 that it will commence a market study on PPI in March 2006. The
scope and impact of the study is not known at present.
In relation to UK consumer credit:
- The OFT has carried out investigations into Visa and MasterCard credit
card interchange rates. The decision by the OFT in the MasterCard interchange
case is being appealed to the Competition Appeals Tribunal and the appeal is
expected to be heard towards the end of 2006. The OFT's investigation in the
Visa interchange case is at an earlier stage.
- The OFT also has a continuing investigation into the level of late and
over-limit fees on credit cards. The OFT issued a press release in July 2005
stating that their provisional conclusion was that these fees were excessive
and need to be reduced to be fair. The OFT gave Barclaycard, and seven other
credit card companies, three months to provide suitable undertakings regarding
the basis of these charges or otherwise to address the concerns of the OFT.
Barclaycard responded to the OFT in October 2005 further explaining the
position Barclaycard takes in respect of late and over-limit fees and has
continued to work with the OFT to address its concerns. Barclays continues to
consider the impact of the provisional finding on the credit card industry and
Barclaycard, including steps to mitigate any financial impact on shareholders.
These investigations are looking at several aspects of the UK consumer credit
industry and the Group is co-operating with them. Their outcome is not known but
they may have an impact on the consumer credit industry in general and therefore
on the Group's business in this sector.
The OFT announced in January 2006 that it would be reviewing the undertakings
given following the conclusion of the Competition Commission Inquiry in 2002
into the supply of banking services to SMEs. The OFT will commence that review
in March 2006 and anticipate that it will take them 9 months. The Group will
cooperate fully with that review.
Recent developments
On 1st January 2006 Barclays completed the sale to Absa Group Limited of the
Barclays South African branch business (the 'business'). The business consists
of the Barclays Capital South African operations and Corporate and Business
Banking activities carried out by International Retail and Commercial Banking
(South African branch), together with the associated assets and liabilities.
NOTES
1. Assets held in respect of linked liabilities to customers under investment
contracts/liabilities arising from investment contracts
As at
2005 01.01.05 2004
GBPm GBPm GBPm
Non-trading financial instruments fair valued
through profit and loss held in respect of
linked liabilities 83,193 63,124 -
Cash and bank balances within the funds 2,008 1,485 -
-------- -------- --------
Assets held in respect of linked liabilities to
customers under investment contracts 85,201 64,609 -
-------- -------- --------
Liabilities arising from investment contracts (85,201) (64,609) -
-------- -------- --------
These assets comprise assets under management held on behalf of clients,
required to be recognised on the balance sheet under IAS 39.
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.
2005
Contract
notional Fair value
amount Assets Liabilities
Derivatives designated as held for GBPm GBPm GBPm
trading
Foreign exchange derivatives 1,184,074 18,485 (17,268)
Interest rate derivatives 15,374,057 81,028 (79,701)
Credit derivatives 609,381 4,172 (4,806)
Equity and stock index and commodity
derivatives 637,452 32,481 (35,128)
---------- -------- --------
Total derivative assets/(liabilities)
held for trading 17,804,964 136,166 (136,903)
---------- -------- --------
Derivatives designated in hedge
accounting relationships
Derivatives designated as cash flow
hedges 40,080 232 (483)
Derivatives designated as fair value
hedges 33,479 423 (331)
Derivatives designated as hedges of
net investments 5,919 2 (254)
---------- -------- --------
Total derivative assets/(liabilities)
designated in hedge accounting
relationships 79,478 657 (1,068)
---------- -------- --------
Total recognised derivative
assets/(liabilities) 17,884,442 136,823 (137,971)
---------- -------- --------
Total derivative notionals at 31st December 2005 have grown from 1st January
2005 due primarily to increases in the volume of fixed income derivatives. This
reflects the larger client base and clients' increased use of Barclays
electronic trading platforms in Europe and the US. Credit derivatives volumes
have also increased significantly, due to growth in the market for these
products.
The Group's total contract notional amount and the fair derivative asset and
liability position before the effect of netting or allowable cash collateral
offset as at 31st December 2004 was as follows:
2004
Contract
notional Fair value
amount Assets Liabilities
GBPm GBPm GBPm
Foreign exchange derivatives 824,894 20,302 (22,332)
Interest rate derivatives 11,296,699 66,031 (62,753)
Credit derivatives 191,408 1,452 (1,217)
Equity and stock index and commodity
derivatives 321,035 9,455 (10,053)
---------- -------- --------
Total derivative assets/(liabilities)
before netting or cash collateral
offset 12,634,036 97,240 (96,355)
---------- -------- --------
The Group's total derivative asset and liability position as presented on the
balance sheet was as follows:
2005
Contract
notional Fair value
amount Assets Liabilities
GBPm GBPm GBPm
Derivative assets/(liabilities)
designated as held for trading 17,804,964 136,166 (136,903)
Derivative assets/(liabilities)
designated in hedge accounting
relationships 79,478 657 (1,068)
---------- -------- --------
Total recognised derivative
assets/(liabilities) 17,884,442 136,823 (137,971)
---------- -------- --------
As at
01.01.05
Contract
notional Fair value
amount Assets Liabilities
GBPm GBPm GBPm
Derivative assets/(liabilities)
designated as held for trading 12,381,890 92,490 (93,217)
Derivative assets/(liabilities)
designated in hedge accounting
relationships 89,894 1,721 (1,212)
---------- -------- --------
Total recognised derivative
assets/(liabilities) 12,471,784 94,211 (94,429)
---------- -------- --------
3. Loans and advances to banks
As at
2005 01.01.05 2004
By geographical area GBPm GBPm GBPm
United Kingdom 4,624 5,813 3,949
Other European Union 5,423 4,274 1,813
United States 13,267 8,459 7,668
Africa 880 425 425
Rest of the World 6,915 6,781 5,725
-------- -------- --------
31,109 25,752 19,580
Reverse repurchase agreements - - 61,075
Less: Allowance for impairment/provision (4) (24) (23)
-------- -------- --------
Total loans and advances to banks 31,105 25,728 80,632
-------- -------- --------
Of the total loans and advances to banks, placings with banks were GBP12.7bn
(2004: GBP66.7bn). Placings with banks have decreased primarily due to the
reclassification of reverse repurchase agreements to a separate balance sheet
category.
4. Loans and advances to customers
As at
2005 01.01.05 2004
GBPm GBPm GBPm
Retail business 144,039 108,506 106,296
Wholesale business 128,303 101,366 100,497
-------- -------- --------
272,342 209,872 206,793
Reverse repurchase agreements - - 58,304
Less: Allowances for impairment/provisions (3,446) (2,613) (2,688)
-------- -------- --------
Total loans and advances to customers 268,896 207,259 262,409
-------- -------- --------
By geographical area
United Kingdom 163,759 148,197 146,248
Other European Union 38,923 26,350 26,210
United States 22,925 21,813 20,982
Africa 33,221 2,776 2,759
Rest of the World 13,514 10,736 10,594
-------- -------- --------
272,342 209,872 206,793
Reverse repurchase agreements - - 58,304
Less: Allowance for impairment/provisions (3,446) (2,613) (2,688)
-------- -------- --------
Total loans and advances to customers 268,896 207,259 262,409
-------- -------- --------
By industry
Financial institutions 43,102 36,865 25,132
Agriculture, forestry and fishing 3,785 2,247 2,345
Manufacturing 13,779 9,477 9,044
Construction 5,020 3,637 3,278
Property 16,325 5,747 8,992
Energy and water 6,891 3,194 3,709
Wholesale and retail distribution and leisure 17,760 11,897 11,099
Transport 5,960 3,812 3,742
Postal and communication 1,313 828 834
Business and other services 24,247 20,924 23,223
Home loans(1) 89,529 78,030 80,855
Other personal 35,543 27,400 27,602
Finance lease receivables 9,088 5,814 6,938
-------- -------- --------
272,342 209,872 206,793
Reverse repurchase agreements - - 58,304
Less: Allowance for impairment/provisions (3,446) (2,613) (2,688)
-------- -------- --------
Total loans and advances to customers 268,896 207,259 262,409
-------- -------- --------
As at 1st January 2005, total loans and advances decreased GBP55.1bn to
GBP207.3bn (2004: GBP262.4bn) primarily due to the reclassification of reverse
repurchase agreements to a separate balance sheet category.
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.
(1) Excludes commercial property mortgages.
5. Allowance for impairment on loans and advances/provisions for bad and
doubtful debts
2005 2004
GBPm GBPm
At beginning of period(1) 2,637 2,946
Acquisitions and disposals 555 21
Exchange and other adjustments 125 (33)
Unwind of discount (76) -
Amounts written off (see below) (1,587) (1,582)
Recoveries (see below) 222 255
Amounts charged against profit (see below) 1,574 1,104
-------- --------
At end of period 3,450 2,711
-------- --------
Amounts written off
United Kingdom (1,306) (1,280)
Other European Union (56) (63)
United States (143) (50)
Africa (81) (15)
Rest of the World (5) (174)
-------- --------
(1,591) (1,582)
-------- --------
Recoveries
United Kingdom 160 217
Other European Union 13 9
United States 15 14
Africa 16 4
Rest of the World 18 11
-------- --------
222 255
-------- --------
Impairment/provisions charged against profit:
New and increased impairment allowances/provisions
United Kingdom 1,763 1,358
Other European Union 113 131
United States 105 85
Africa 109 47
Rest of the World 39 134
-------- --------
2,129 1,755
-------- --------
Less: Releases of impairment allowance/provision
United Kingdom (221) (120)
Other European Union (25) (20)
United States (14) (14)
Africa (56) (16)
Rest of the World (17) (20)
-------- --------
(333) (190)
-------- --------
Recoveries (222) (255)
-------- --------
Impairment charged against profit/net specific
provisions charge 1,574 1,310
General provision release(2) - (206)
-------- --------
Net charge to profit(3) 1,574 1,104
-------- --------
(1) Due to the adoption of IAS 32 and IAS 39 on 1st January 2005 and the
consequent restatement of the impairment allowance, the period end value at
31st December 2004 does not correspond to the opening value at the beginning
of 2005. The period end and opening values are reconciled on page 77.
(2) The distinction between specific and general provisions which was made in UK
GAAP does not exist under IFRS.
(3) This excludes other credit provisions and impairment on available for sale
assets detailed on page 50.
2005 2004
GBPm GBPm
Allowance/specific provisions
United Kingdom 2,266 1,683
Other European Union 284 149
United States 130 155
Africa 647 70
Rest of the World 123 90
-------- --------
Total allowance/specific provisions 3,450 2,147
General provisions(1) - 564
-------- --------
3,450 2,711
-------- --------
A reconciliation of UK GAAP provisions to IFRS impairment allowances is as
follows:
GBPm
UK GAAP provision as at 31st December 2004 2,711
IFRS interest and fees not recognised (157)
UK GAAP interest in suspense as at 31st December 2004 40
UK GAAP fees in suspense as at 31st December 2004 19
Additional impairment allowances resulting from the application of
revised Calculation methodologies at 1st January 2005 24
--------
IFRS impairment allowances as at 1st January 2005 2,637
--------
(1) The distinction between specific and general provisions which was made in UK
GAAP does not exist under IFRS.
6. Potential credit risk loans
The following tables present an analysis of potential credit risk loans
(non-performing and potential problem loans).
As at
2005 01.01.05 2004
Potential credit risk loans GBPm GBPm GBPm
Summary
Impaired loans(1) 4,550 3,536 3,550
Accruing loans which are contractually overdue
90 days or more as to principal or interest 609 538 550
-------- -------- --------
5,159 4,074 4,100
Restructured loans 51 15 15
-------- -------- --------
Total non-performing loans 5,210 4,089 4,115
Potential problem loans 929 795 798
-------- -------- --------
Total potential credit risk loans 6,139 4,884 4,913
-------- -------- --------
Geographical split
Impaired loans(1):
United Kingdom 2,965 2,680 2,697
Other European Union 345 308 301
United States 230 284 284
Africa 831 115 116
Rest of the World 179 149 152
-------- -------- --------
Total 4,550 3,536 3,550
-------- -------- --------
Accruing loans which are contractually overdue
90 days or more as to principal or interest
United Kingdom 539 501 513
Other European Union 53 34 34
United States - 1 1
Africa 17 1 1
Rest of the World - 1 1
-------- -------- --------
Total 609 538 550
-------- -------- --------
(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
2005 01.01.05 2004
GBPm GBPm GBPm
Restructured loans:
United Kingdom 5 2 2
Other European Union 7 - -
United States 16 13 13
Africa 23 - -
Rest of the World - - -
-------- -------- --------
Total 51 15 15
-------- -------- --------
Total non-performing loans:
United Kingdom 3,509 3,183 3,212
Other European Union 405 342 335
United States 246 298 298
Africa 871 116 117
Rest of the World 179 150 153
-------- -------- --------
Total 5,210 4,089 4,115
-------- -------- --------
Potential problem loans:
United Kingdom 640 655 658
Other European Union 26 32 32
United States 12 27 27
Africa 248 67 67
Rest of the World 3 14 14
-------- -------- --------
Total 929 795 798
-------- -------- --------
Total potential credit risk loans:
United Kingdom 4,149 3,838 3,870
Other European Union 431 374 367
United States 258 325 325
Africa 1,119 183 184
Rest of the World 182 164 167
-------- -------- --------
Total 6,139 4,884 4,913
-------- -------- --------
Allowance coverage of non-performing loans(1): % % %
United Kingdom 64.6 64.2 68.1
Other European Union 70.1 69.9 60.9
United States 52.8 53.7 57.0
Africa 74.3 71.6 68.4
Rest of the World 68.7 75.3 71.9
-------- -------- --------
Total 66.2 64.5 66.9
-------- -------- --------
Allowance coverage of total potential credit risk % % %
loans(1):
United Kingdom 54.6 53.2 56.5
Other European Union 65.9 63.9 55.6
United States 50.4 49.2 52.3
Africa 57.8 45.4 43.5
Rest of the World 67.6 68.9 65.9
-------- -------- --------
Total 56.2 54.0 56.0
-------- -------- --------
(1) In 2004, the geographical coverage ratios include an allocation of general
provisions.
Since 1st January 2005, non-performing loans (NPLs) increased 27% to GBP5,210m
(1st January 2005: GBP4,089m). Excluding Absa NPLs of GBP725m at the year-end,
NPLs increased 10%. Other than Absa, the increase in NPLs occurred mainly in the
UK retail businesses with NPLs in the wholesale and corporate businesses
decreasing modestly.
Potential problem loans (PPLs) increased 17% from the beginning of the year to
GBP929m (1st January 2005: GBP795m). Excluding Absa PPLs of GBP176m at the
year-end, PPLs decreased 5%. Excluding Absa, retail businesses PPLs increased
38%, but this was more than offset by the 30% decline in PPLs to wholesale and
corporate businesses.
Potential Credit Risk Loans (PCRLs) increased 26% to GBP6,139m (1st January
2005: GBP4,884m). Excluding Absa PCRLs of GBP901m at the year-end, PCRLs
increased 7%. Other than Absa, the increase in PCRLs occurred mainly in the UK
retail businesses.
The value of PCRLs at 31st December 2004 was restated for the adoption of IFRS
on 1st January 2005. This restatement has not been applied to the numbers for
2004 and, as a consequence, these numbers are not directly comparable with the
current values. In addition, due to enhanced modelling, PCRLs in the mortgage
business have been restated. The restatement has been applied to the prior
periods shown, causing increases of GBP172m at 31st December 2004 and at 1st
January 2005. This restatement does not reflect changes in credit quality but
arises from the application of revised methodology.
Including Absa, the NPL and PCRL coverage ratios increased to 66.2% and 56.2%
respectively at the end of 2005. These ratios are higher than those excluding
Absa due to the fact that Absa has a higher proportion of retail lending which,
in general, tends to carry a higher level of coverage than corporate lending.
Excluding Absa, coverage of NPLs and PCRL by the stock of impairment allowances,
at 64.8%, (1st January 2005: 64.5%) and 55.5% (1st January 2005: 54.0%) were
broadly in line with those reported at 1st January 2005.
7. Available for sale financial investments
As at
2005 01.01.05 2004
GBPm GBPm GBPm
Debt securities 50,024 46,059 -
Equity securities 1,250 675 -
Treasury bills 2,223 1,143 -
Other eligible bills - 220 -
-------- -------- --------
Available for sale financial investments 53,497 48,097 -
-------- -------- --------
As at 1st January 2005, financial instruments have been classified and measured
in accordance with IAS 39. In general, investment securities held under UK GAAP
have been classified as available for sale under IFRS.
8. Other assets
As at
2005 01.01.05 2004
GBPm GBPm GBPm
Sundry debtors 3,569 3,042 3,711
Prepayments 722 415 467
Balances arising from off-balance sheet instruments - - 18,174
Accrued income 329 190 3,563
-------- -------- --------
Other assets 4,620 3,647 25,915
-------- -------- --------
As at 1st January 2005, balances arising from off-balance sheet instruments were
reclassified to derivative financial instruments.
Also from 1st January 2005, accrued income no longer includes accrued interest,
which is now included within the classes of financial instruments to which the
accrued interest relates.
9. Insurance assets, including unit-linked assets
As at
2005 01.01.05 2004
GBPm GBPm GBPm
Reinsurer's share of provisions 114 109 109
Assets held to cover linked liabilities - - 5,870
Assets held to cover non-linked liabilities - - 2,597
-------- -------- --------
Insurance assets, including unit-linked assets 114 109 8,576
-------- -------- --------
In 2005, investment and insurance contracts are separately accounted for in
accordance with IAS 39 and IFRS 4. At 1st January 2005, this has resulted in the
majority of the assets within the life assurance businesses being classified as
financial assets designated at fair value. These assets are held both in respect
of linked liabilities to customers under investment contracts and also held on
own account. In 2004, assets held to cover linked liabilities and provision for
linked liabilities were aggregated and reported as insurance assets and
insurance contract liabilities.
10. Insurance contract liabilities, including unit-linked liabilities
As at
2005 01.01.05 2004
GBPm GBPm GBPm
Long term business provision:
- Provision for linked liabilities 1,532 1,460 5,821
- Provision for non-unit linked liabilities 2,187 2,100 2,520
Provision for claims outstanding 48 36 36
-------- -------- --------
Insurance contract liabilities, including
unit-linked liabilities 3,767 3,596 8,377
-------- -------- --------
In 2005, investment and insurance contracts are separately accounted for in
accordance with IAS 39 and IFRS 4. In 2004, assets held to cover linked
liabilities and provision for linked liabilities were aggregated and reported as
insurance assets and insurance contract liabilities.
11. Other liabilities
As at
2005 01.01.05 2004
GBPm GBPm GBPm
Obligations under finance leases payable 289 353 353
Balances arising from off-balance sheet
financial instruments - - 18,009
Sundry creditors 6,131 5,021 3,851
Accruals and deferred income 4,711 4,495 6,820
Short positions in securities - - 53,903
-------- -------- --------
Other liabilities 11,131 9,869 82,936
-------- -------- --------
As at 1st January 2005, balances arising from off-balance sheet instruments were
reclassified to derivative financial instruments and short positions in
securities were reclassified to trading portfolio liabilities.
Also from 1st January 2005, accruals and deferred income no longer includes
accrued interest, which is now included within the classes of financial
instruments to which the accrued interest relates.
12. Other provisions for liabilities
As at
2005 01.01.05 2004
GBPm GBPm GBPm
Customer loyalty provisions - - 12
Redundancy and restructuring 74 97 97
Undrawn contractually committed facilities
and guarantees 55 55 55
Onerous contracts 79 39 39
Sundry provisions 309 212 213
-------- -------- --------
Other provisions for liabilities 517 403 416
-------- -------- --------
As at 1st January 2005, the customer loyalty provision has been reclassified to
other liabilities.
Other provisions for liabilities rose GBP101m to GBP517m (2004: GBP416m),
principally reflecting the inclusion of Absa (GBP45m) and property costs
relating to the head office relocation to Canary Wharf (GBP40m).
13. Retirement benefit liabilities
The Group's IAS 19 pension deficit across all schemes as at 31st December 2005
was GBP2,879m (2004: GBP2,464m). This comprises net recognised liabilities of
GBP1,737m (2004: GBP1,786m) and unrecognised actuarial losses of GBP1,142m
(2004: GBP678m). The net recognised liabilities comprises retirement benefit
liabilities of GBP1,823m (2004: GBP1,865m) and assets of GBP86m (2004: GBP79m).
The Group's IAS 19 pension deficit in respect of the main UK scheme as at 31st
December 2005 was GBP2,535m (2004: GBP2,220m). The actuarial funding position of
the main UK pension scheme as at 31st December 2005, estimated from the formal
triennial valuation in 2004, was a surplus of GBP900m (2004: deficit of GBP50m).
Cash contributions to the Group's schemes totalled GBP373m in 2005 (2004:
GBP279m), including GBP354m to the main UK scheme (2004: GBP255m). The Pensions
Protection Fund (PPF) solvency ratio(1) for the main UK scheme as at 31st
December 2005 was estimated to be 110%.
(1) The PPF solvency ratio represents the funds assets as a percentage of
pension liabilities calculated using a section 179 valuation model to be
finalised in March 2006 and agreed with the PPF.
14. Legal proceedings
Proceedings, including a class action, have been brought in the United States
against a number of defendants, including Barclays, following the collapse of
Enron. In each case the claims are against groups of defendants. Barclays
considers that the claims against it are without merit and is defending them
vigorously. The trial of the class action claims relating to Enron is currently
scheduled to begin in October 2006. A court ordered mediation commenced in
September 2003 but no material progress has been made towards a resolution of
the litigation, although certain other defendants have reached settlements. In
addition, in respect of investigations relating to Enron, Barclays is continuing
to provide information in response to enquiries by regulatory and governmental
authorities in the United States and elsewhere. It is not possible to estimate
Barclays possible loss in relation to these matters, nor the effect that it
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
investigation of transactions between Barclays and Enron. Barclays has also been
in negotiations in the Enron bankruptcy proceedings. Barclays does not expect
that the amount of any settlement with the Commission or in the bankruptcy
proceedings 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.
15. Contingent liabilities and commitments
As at
2005 01.01.05 2004
Contingent liabilities GBPm GBPm GBPm
Acceptances and endorsements 283 303 303
Guarantees and assets pledged as
collateral for security 38,035 30,011 30,011
Other contingent liabilities 8,825 8,245 8,245
-------- -------- --------
47,143 38,559 38,559
-------- -------- --------
Commitments
Standby facilities, credit lines and other
commitments 203,785 134,051 134,051
-------- -------- --------
Contingent liabilities increased 22% (GBP8.5bn) to GBP47.1bn (1st January 2005:
GBP38.6bn) due to increases in securities lending activity within Barclays
Global Investors. The inclusion of Absa increased contingent liabilities by
GBP1.6bn.
Commitments increased 52% (GBP69.7bn) to GBP203.8m (1st January 2005:
GBP134.1bn) primarily because of the inclusion of Absa and new facilities within
Barclays Capital, Barclaycard and UK Banking. The inclusion of Absa increased
commitments by GBP23.6bn.
16. Market risk
Barclays policy is that the market risks associated with business activities are
clearly identified, assessed and controlled within agreed limits and that the
market risks arising from trading activities are concentrated in Barclays
Capital.
Barclays uses a 'value at risk' measure as the primary mechanism for controlling
market risk. Daily Value at Risk (DVaR) is an estimate of the potential loss
which might arise from unfavourable market movements, if the current positions
were to be held unchanged for one business day, measured to a confidence level
of 98%. Daily losses exceeding the DVaR figure are likely to occur, on average,
twice in every one hundred business days.
In 2005, the DVaR methodology for credit spread risk was enhanced. The original
methodology was currency dependent and incorporated seven credit categories,
these being interest rate swaps and six credit rating based categories. The
enhanced 'specific credit spread' method replaces the rating and currency based
approach with a name specific approach and was rolled out in phases across a
number of business lines. The enhanced model captures concentration risk and
responds quickly to changing market conditions and individual company
circumstances. 'Specific credit spread' risk is reported within credit spread
risk in the table on page 85.
Also in 2005, a methodology enhancement was introduced for inflation products.
Inflation risk is reported within Interest rate risk in the table on page 85.
The impact of these methodology changes was not material and has not been
reflected in the 2004 comparative data.
Analysis of Barclays Capital's market risk exposures
Barclays Capital's market risk exposure, as measured by average total Daily
Value at Risk, decreased by 7% in 2005. This was mainly a consequence of
increased geographical and product diversification resulting from business
growth.
DVaR
Twelve months to
31st December 2005
-------------------
Average High(1) Low(1)
GBPm GBPm GBPm
Interest rate risk 25.3 44.8 15.4
Credit spread risk 23.0 28.3 19.0
Foreign exchange risk 2.8 5.3 1.4
Equities risk 5.9 8.2 3.9
Commodities risk 6.8 11.4 4.5
Diversification effect (31.9) - -
------- -------- -------
Total DVaR(2) 31.9 40.4 25.4
------- -------- -------
Twelve months to
31st December 2004
-------------------
Average High(1) Low(1)
GBPm GBPm GBPm
Interest rate risk 25.0 53.6 15.1
Credit spread risk 22.6 32.9 16.0
Foreign exchange risk 2.4 7.4 0.9
Equities risk 4.2 7.9 2.2
Commodities risk 6.0 14.4 2.2
Diversification effect (25.9) - -
------- ------- -------
Total DVaR 34.3 46.8 24.0
------- ------- -------
(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.
(2) The year-end total DVaR for 2005 was GBP37.4m (2004: GBP31.9m).
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
2005 2004
GBPm GBPm
Net movements in available for sale reserve (109) -
Net movements in cash flow hedging reserve (119) -
Currency translation differences arising during the year 300 (58)
Tax 50 -
Other movements (102) -
-------- --------
Amounts included directly in equity 20 (58)
Profit for the year 3,841 3,301
-------- --------
Total recognised income and expense for the year 3,861 3,243
-------- --------
Attributable to:
Equity holders of the parent 3,379 3,196
Minority interests 482 47
-------- --------
3,861 3,243
-------- --------
The consolidated statement of recognised income and expense reflects the
accumulated income and expense for the year, including items taken directly to
equity and reserves.
In accordance with IAS 39, gains or losses arising from the change in fair value
of available for sale assets are recognised in the available for sale reserve
except for impairment losses and foreign exchange gains or losses on monetary
items such as debt securities, which are recognised in income. 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
income.
In accordance with IAS 39, 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 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 are transferred to income in the same period or
periods during which the hedged item effects profit or loss.
Exchange differences arising on the net investments in foreign operations and
effective hedges of net investments are recognised in the translation reserve
and transferred to income on the disposal of the net investment.
Tax comprises tax on items taken directly to reserves, including tax on the
available for sale reserve and cash flow hedging reserve.
Other movements primarily reflects the change in insurance liabilities taken
directly to reserves.
SUMMARY CONSOLIDATED CASH FLOW STATEMENT
2005 2004
GBPm GBPm
Net cash (outflow)/inflow from operating activities (10,498) 5,171
Net cash outflow from investing activities (5,181) (6,998)
Net cash inflow from financing activities 15,119 2,960
Net gain on exchange rate changes on cash and cash
equivalents (237) (470)
-------- --------
Net (decrease)/increase in cash and cash equivalents (797) 663
Cash and cash equivalents at beginning of period 21,602 13,854
-------- --------
Cash and cash equivalents at end of period 20,805 14,517
-------- --------
The opening cash and cash equivalents balance has been adjusted by GBP7.1bn to
reflect the application of IAS 32 and IAS 39.
In 2005 the inflow from securitisations of GBP14.0bn (2004: GBP4.2bn) is
included in net cash inflow from financing activities and net cash outflow from
operating 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: + 44 (0) 870 609 4535.
Listing
The principal trading market for Barclays PLC ordinary shares is the London
Stock Exchange. Ordinary shares are also listed on the New York Stock Exchange
and 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 2005, 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, shown above, once they
have been published in late March. Once filed with the SEC, copies of the Form
20-F will also be available from the Barclays Investor Relations' website
(details below) and from the SEC's website (www.sec.gov).
Results timetable
Ex Dividend Date Wednesday, 1st March 2006
Dividend Record Date Friday, 3rd March 2006
2006 Annual General Meeting Thursday, 27th April 2006
Dividend Payment Date Friday, 28th April 2006
2006 Trading Update* Thursday, 25th May 2006
2006 Interim Results Announcement* Thursday, 3rd August 2006
*Note that these announcement dates are provisional and subject to change.
Economic data 2005 2004
Period end - US$/GBP 1.72 1.92
Average - US$/GBP 1.82 1.83
Period end - EUR/GBP 1.46 1.41
Average - EUR/GBP 1.46 1.47
Period end - R/GBP 10.87 10.86
Average - R/GBP 11.57 11.83
For further information please contact:
Investor Relations Media Relations
-------------------- -----------------
Mark Merson/James S Johnson Stephen Whitehead/Chris Tucker
+44 (0) 20 7116 5752/2927 +44 (0) 20 7116 6060/6223
More information on Barclays can be found on our website at the following
address:www.investorrelations.barclays.co.uk
An interview with John Varley, Group Chief Executive, is available in video,
audio and text on http://www.investorrelations.barclays.co.uk and
http://www.cantos.com.
Index of Main Reference Points
Acquisitions and disposals 69
Additional information 68
Allowance for impairment on
loans and advances 76
Amortisation of intangible assets 52
Available for sale financial investments 80
Balance sheet (consolidated) 12-13
Barclaycard 16, 34
Barclays Capital 15, 26
Barclays Global Investors 15, 28
Basis of preparation 68
Business margins 45
Capital ratios 57
Capital resources 56
Cash flow statement - summary (consolidated) 87
Change in accounting estimate 70
Competition and regulatory matters 71
Contingent liabilities and commitments 83
Derivative financial instruments 72
Dividends on ordinary shares 55
Daily Value at Risk (DVaR) 84
Earnings per share 55
Economic capital 60
Economic capital demand 61
Economic capital supply 63
Economic data 88
Economic profit 64
Filings with the SEC 70
Financial highlights 4
Goals reporting 66
Group Chief Executive's Statement 5
Group Finance Director's Review 8
Group share schemes 70
Group structure changes from 2004 68
Head office functions and other
operations 17, 42
Hedge accounting 70
IFRS ii, 9
Impairment charge and other
credit provisions 50
Income statement (consolidated) 11
Insurance assets 81
Insurance contract liabilities 81
International Retail and Commercial
Banking 16, 37
- excluding Absa 16, 38
- Absa 16, 40
Legal proceedings 83
Loans and advances to banks 74
Loans and advances to customers 75
Market risk 84
Net fee and commission income 47
Net premiums from insurance contracts 49
Net claims and benefits paid on
insurance contracts 49
Net interest income 44
Operating expenses 51
Other assets 81
Other information 88
Other liabilities 82
Other income 49
Other provisions for liabilities 82
Performance summary 2
Performance ratios 4
Potential credit risk loans 78
Principal transactions 48
Profit attributable to minority interests 54
Profit before tax 1
Recent developments 71
Reconciliation of regulatory capital 58
Results by business 14
Results timetable 88
Retirement benefit liabilities 82
Risk asset ratio 57
Risk Tendency 67
Share capital 70
Share of post-tax results of associates
and joint ventures 54
Staff costs 52
Staff numbers 53
Statement of recognised income and expense
(consolidated) 86
Summary of key information 1
Tax 54
Total assets 19, 59
UK Banking 14, 20
UK Business Banking 14, 24
UK Retail Banking 14, 22
Wealth Management 15, 30
Wealth Management-closed life
assurance activities 15, 32
Weighted risk assets 19, 59