Final Results - Part 1

Barclays PLC 19 February 2008 Results Announcement BARCLAYS PLC RESULTS ANNOUNCEMENT FOR 2007 TABLE OF CONTENTS PAGE Performance highlights 2 Summary of key information 3 Financial highlights 4 Group Chief Executive's Review 5 Group Finance Director's Review 8 Consolidated income statement 11 Consolidated balance sheet 12 Results by business 14 Notes to the accounts 41 Consolidated statement of recognised income and expense 82 Summary consolidated cash flow statement 83 Performance management 84 Additional information 92 Appendix 1- Absa Group Limited results 98 Appendix 2- Profit before business disposals 100 Index 102 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 18th February 2008, does not comprise statutory accounts for the years ended 31st December 2007 or 31st December 2006, within the meaning of Section 240 of the Companies Act 1985 (the 'Act'). Statutory accounts for the year ended 31st December 2007, 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. Statutory accounts for the year ended 31st December 2006 have been delivered to the Registrar of Companies and the Group's auditors have reported on those accounts and have given an unqualified report which does not contain a statement under Section 237(2) or (3) of the Act. The 2007 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. 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, UK domestic and global economic and business conditions, the effects of continued volatility in credit markets, market related risks such as changes in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, changes in legislation, the further development of standards and interpretations under International Financial Reporting Standards (IFRS) applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS, 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, the success of future acquisitions and other strategic transactions 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. Absa Definitions 'Absa Group Limited' refers to the consolidated results of the South African group of which the parent company is listed on the Johannesburg Stock Exchange (JSE Limited) in which Barclays owns a controlling stake. 'Absa' refers to the results for Absa Group Limited as consolidated into the results of Barclays PLC; translated into Sterling with adjustments for amortisation of intangible assets, certain head office adjustments, transfer pricing and minority interests. 'International Retail and Commercial Banking-Absa' is the portion of Absa's results that is reported by Barclays within the International Retail and Commercial Banking business. 'Absa Capital' is the portion of Absa's results that is reported by Barclays within the Barclays Capital business. Glossary of terms 'Income' refers to total income net of insurance claims, unless otherwise specified. Profit before business disposals' represents profit before tax and disposal of subsidiaries, associates and joint ventures. Details of the impact on each business and the Group can be found in Appendix 2 on page 100. 'Cost:income ratio' is defined as operating expenses compared to total income net of insurance claims. 'Cost:net income' ratio is defined as operating expenses compared to total income net of insurance claims less impairment charges. 'Compensation:net income ratio' is defined as staff compensation based costs compared to total income net of insurance claims less impairment charges. 'Return on average economic capital' is defined as attributable profit compared to average economic capital. 'Average net income generated per member of staff' is defined as total operating income compared to the average of staff numbers for the reporting period. 'Risk Tendency' is a statistical estimate of the average loss for each loan portfolio for a 12-month period, taking into account the size of the portfolio and its risk characteristics under current economic conditions, and is used to track the change in risk as the portfolio of loans changes over time. 'Economic profit' is defined as profit after tax and minority interests less capital charge (average shareholders' equity excluding minority interests multiplied by the Group cost of capital). '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%. PERFORMANCE HIGHLIGHTS â€¢ Resilient performance for the year with results in line with Q3 trading update â€¢ Group profit before tax Â£7.1bn, demonstrating the benefits of increasing business diversification â€¢ Group profit before business disposals 3% ahead of prior year - Barclays Capital profit ahead of record 2006 performance, including Â£1.6bn of net losses from credit market turbulence - Barclays Global Investors and Barclays Wealth both benefiting from significant asset inflows - Improved profit and productivity in UK Banking - Strong profit growth at Barclaycard driven by returns on international investments and improved UK impairment - Very strong income growth in International Retail and Commercial Banking and significant investment for future growth â€¢ Tier 1 capital ratio well ahead of target at 7.8% â€¢ Final dividend increased 10% to 22.5p, making 34.0p for the full year (2006: 31.0p) John Varley, Group Chief Executive commented: 'Barclays delivered a resilient performance in 2007, with profits broadly in line with the record prior year results. Investment Banking and Investment Management performed well in the tough market conditions of 2007. Global Retail and Commercial Banking is showing good momentum in the UK, in Western Europe and especially in Emerging Markets. The strength of our diversified businesses gives us confidence for the period ahead.' SUMMARY OF KEY INFORMATION Group Results 2007 2006 % Change Â£m Â£m Total income net of insurance claims 23,000 21,595 7 Impairment charges and other credit provisions (2,795) (2,154) 30 Operating expenses (13,199) (12,674) 4 Profit before tax 7,076 7,136 (1) Profit before business disposals 7,048 6,813 3 Profit attributable to minority interests 678 624 9 Profit attributable to equity holders of the parent 4,417 4,571 (3) Economic profit 2,290 2,704 (15) p p Earnings per share 68.9 71.9 (4) Diluted earnings per share 66.7 69.8 (4) Dividend per share 34.0 31.0 10 % % Tier 1 Capital ratio(1) 7.8 7.7 Return on average shareholders' equity 20.3 24.7 Profit before tax by business(2) Â£m Â£m % Change UK Banking 2,653 2,546 4 -------- -------- UK Retail Banking 1,282 1,181 9 Barclays Commercial Bank 1,371 1,365 0 -------- -------- Barclaycard 540 458 18 International Retail and Commercial Banking 935 1,216 (23) Barclays Capital 2,335 2,216 5 Barclays Global Investors 734 714 3 Barclays Wealth 307 245 25 (1) Tier 1 Capital ratio is calculated under Basel I FSA requirements. (2) Summary excludes Head office functions and other operations. FINANCIAL HIGHLIGHTS 2007 2006 RESULTS Â£m Â£m Net interest income 9,610 9,143 Net fee and commission income 7,708 7,177 Principal transactions 4,975 4,576 Net premiums from insurance contracts 1,011 1,060 Other income 188 214 --------- --------- Total income 23,492 22,170 Net claims and benefits incurred under insurance contracts (492) (575) --------- --------- Total income net of insurance claims 23,000 21,595 Impairment charges and other credit provisions (2,795) (2,154) --------- --------- Net income 20,205 19,441 Operating expenses (13,199) (12,674) Share of post-tax results of associates and joint ventures 42 46 Profit on disposal of subsidiaries, associates and joint ventures 28 323 --------- --------- Profit before tax 7,076 7,136 --------- --------- Profit attributable to equity holders of the parent 4,417 4,571 Economic profit 2,290 2,704 PER ORDINARY SHARE p p Earnings 68.9 71.9 Diluted earnings 66.7 69.8 Dividend 34.0 31.0 Net asset value 353 303 PERFORMANCE RATIOS % % Return on average shareholders' equity 20.3 24.7 Cost:income ratio 57 59 Cost:net income ratio 65 65 2007 2006 BALANCE SHEET Â£m Â£m Shareholders' equity excluding minority interests 23,291 19,799 Minority interests 9,185 7,591 --------- --------- Total shareholders' equity 32,476 27,390 Subordinated liabilities 18,150 13,786 --------- --------- Total capital resources 50,626 41,176 --------- --------- Total assets 1,227,361 996,787 Risk weighted assets 353,476 297,833 CAPITAL RATIOS(1) % % Tier 1 ratio 7.8 7.7 Risk asset ratio 12.1 11.7 (1) Capital ratios are calculated under Basel I FSA requirements. GROUP CHIEF EXECUTIVE'S REVIEW Barclays delivered a resilient financial performance in 2007 in a year of contrasting market conditions. The excellent results of the first half were achieved in a relatively benign environment; in the second half we were not immune from the impact of the credit market turbulence, but profit before business disposals for the year still increased 3 per cent. I am pleased to report profits again above Â£7bn, which is well ahead of the average level of the previous three years. At a time of significant market turbulence, it is important to be clear and confident about strategy. The strategy of Barclays is to achieve superior growth through time by diversifying our profit base. The precondition of successful growth is relevance to customers. We seek to maximise the alignment between the sources of growth in the financial services industry (in particular anticipating what customers want and need) with what we have in Barclays (in terms of brand, capability and physical footprint). We recommit to our strategy following our bid for ABN AMRO, and in the light of the market volatility and because of our confidence that our strategy offers the best route to strong growth in the years ahead. The structure of the Group, which comprises two business groupings, Global Retail and Commercial Banking ('GRCB') and Investment Banking and Investment Management ('IBIM'), is designed both to enable us to be well positioned for the significant growth which we anticipate in the global financial services industry and to help us serve customers and clients well. We continued to invest heavily across the Group in 2007, increasing the number of employees who serve customers and clients and developing our distribution networks. In IBIM I believe that we handled well the stress test of market turbulence in the second half of 2007. Both Barclays Capital and Barclays Global Investors ended 2007 with profits ahead of 2006, which was a year of rapid growth and record profitability for both. We have benefited significantly from the business diversification that we have pursued in recent years: the development of capabilities by Barclays Capital in commodities, foreign exchange and equity products enabled us to deliver excellent income growth in those areas. The cost flexibility that we have built into the business model here has also served shareholders well, enabling us to reduce expenses year on year, and improve the cost:net income and compensation ratios. In Barclays Global Investors, iShares' assets under management grew over $100bn to $408bn, and this growth illustrates the significant diversification of Barclays Global Investors earnings base that we have engineered in recent years. Meanwhile Barclays Wealth is making good progress towards the achievement of its profit goal of Â£500m in the medium term, benefiting as it is from proximity to the structuring and manufacturing capabilities of Barclays Capital and Barclays Global Investors. We are building significant momentum in GRCB. In particular, we have been growing distribution to create a much broader business base for the years ahead. During 2007, we opened over 600 new branches and sales centres outside the United Kingdom, increasing by over one third the number of distribution points across these parts of our GRCB business. This growth is feeding through powerfully into activity levels. Income increased 28% in International Retail and Commercial Banking - excluding Absa in 2007. Absa performed well, including delivering on its synergy target 18 months ahead of schedule. In UK Banking, we delivered a further two percentage points improvement in our cost:income ratio, excluding the impact of the settlement on overdraft fees, bringing the total to eight percentage points improvement over three years compared with our target of six percentage points. The turnaround of UK Retail Banking continued during 2007, with strong income growth in core product areas, including mortgages. We have announced today our intention to reduce UK Retail Banking's cost:income ratio by a further three percentage points over the next three years. In Barclaycard, we have made excellent progress towards our goal of re-establishing a leadership position in the United Kingdom and in the aggressive expansion of our International Cards business. Profits in Barclaycard grew strongly in 2007 as we reduced the impairment charge in the UK, and moved Barclaycard International, including Barclaycard US, into profit. In reviewing our use of capital and assets, our principal focus has been on the risk weighted balance sheet rather than the nominal balance sheet. Whilst we monitor internally a range of different ratios, our publicly expressed target has been to maintain a ratio of tier 1 capital to risk weighted assets of 7.25%. At the end of 2007 we were comfortably ahead of that target under both Basel I and Basel II measurement bases. Risk weighted asset growth in 2007 was 19%, a brisker rate than in recent years reflecting in part the syndication constraints of the second half of the year. We expect the rate of growth in risk weighted assets in 2008 to be slower than that of 2007. We have increased the dividend by 10 per cent to 34p (2006: 31p), which includes a final dividend of 22.5p (2006: 20.5p). The maintenance of our policy of growing dividends broadly in line with the rate of underlying earnings over time reflects the Board's confidence in the future. Our dividend remains more than twice covered by earnings, which we believe is consistent with the funding requirements of our organic growth plans. We have today announced new multi-year performance goals. These are designed to stretch us, and we see them as reflective of the potential that exists within our businesses and our people. As in 2003, when we last set new goals, we aim to achieve significant growth in economic profit over the next four years and thereby to deliver top quartile Total Shareholder Return (TSR) relative to our competitor peer group. Over the last four years Barclays achieved a cumulative total of Â£8.3bn of economic profit, against a target range of Â£6.5bn to Â£7.0bn. Despite exceeding our economic profit goal by some way, we ranked in the third quartile of our peer group in terms of TSR which was a disappointing outcome. Our new goal is to generate a cumulative total of between Â£9.3bn and Â£10.6bn of economic profit between 2008 and 2011. This represents an annual growth rate in economic profit of 5 to10 per cent. We estimate that if we achieve the upper end of the range, we will also achieve our goal of top quartile TSR relative to our peer group. I am pleased to report that our strategic collaboration with China Development Bank is off to a good start. This is an important part of our long term plans to develop a more significant presence in emerging markets, particularly Asia where group profits more than doubled in 2007, and I look forward to reporting to shareholders on the growing returns that we will generate from this relationship in the coming years. This has been a challenging year for our staff, and we have them to thank for delivering the results we have achieved despite multiple distractions in difficult market circumstances. I am proud of their commitment to putting our customers first and I am confident that we enter our new goal period with a team as good as any in the banking industry. What is the outlook for 2008? We see another year in which global economic growth will be 4%, or something close to that. The emerging economies account for about a third of global GDP, but they account for two thirds of global GDP growth and they continue to perform strongly. However, in many economies of the developed world, there will be a slow-down, and in particular we expect economic growth in the UK and the US to be below the trend of recent years. In an environment such as this we will have to be disciplined in our risk management and rigorous in our approach to lending. But our experience of 2007 gives us confidence, and we enter 2008 with a strong capital base, a consistent strategic direction, a well diversified set of businesses and significant opportunities for growth in the medium term. John Varley Group Chief Executive GROUP FINANCE DIRECTOR'S REVIEW Group Performance Barclays financial performance in 2007 demonstrated the benefits of the successful execution of our strategic priorities in recent years. We delivered profit before tax of Â£7,076m, broadly in line with the record results of 2006 and up 3% excluding gains from business disposals. Earnings per share were 68.9p and we increased the full year dividend payout to 34p, a rise of 10%. Income grew 7% to Â£23,000m, well ahead of expense growth. Growth was well spread by business, with strong contributions from International Retail and Commercial Banking, Barclays Global Investors and Barclays Wealth. Net income, after impairment charges, grew 4% and included net losses of Â£1,635m relating to credit market turbulence, net of Â£658m of gains arising from the fair valuation of notes issued by Barclays Capital and settlements on overdraft fees in relation to prior years of Â£116m in UK Retail Banking. Impairment charges and other credit provisions rose 30% to Â£2,795m. Impairment charges relating to US sub-prime mortgages and other credit market exposures were Â£782m. Excluding these sub-prime related charges, impairment charges improved 7% to Â£2,013m. In UK Retail Banking and Barclaycard, impairment charges improved significantly, as a consequence of reductions in flows into delinquency and arrears balances in UK cards and unsecured loans. UK mortgage impairment charges remained negligible, with low levels of defaults, and the wholesale and corporate sector remained stable. The significant increase in impairment charges in International Retail and Commercial Banking was driven by very strong book growth. Operating expenses increased 4% to Â£13,199m. We invested in growing the branch network and distribution channels in International Retail and Commercial Banking and in infrastructure development in Barclays Global Investors. Costs were lower in UK Banking and broadly flat in Barclays Capital. Gains from property disposals were Â£267m (2006: Â£432m). The Group cost:income ratio improved two percentage points to 57%. Business Performance - Global Retail and Commercial Banking In UK Banking we improved the cost:income ratio a further two percentage points to 48%, excluding settlements on overdraft fees in relation to prior years. On this basis we have delivered a cumulative eight percentage point improvement in the past three years, well ahead of our target of six percentage points. UK Retail Banking profit before tax grew 9% to Â£1,282m. Income grew 2% excluding settlements on overdraft fees in relation to prior years, reflecting a very strong performance in Personal Customer Retail Savings and good performances in Current Accounts, Local Business and Home Finance, partially offset by lower income from loan protection insurance. Enhancements in product offering and continued improvements in processing capacity enabled a strong performance in mortgage origination, with a share of net new lending of 8%. Operating expenses were well controlled and improved 3%. Impairment charges improved 12% reflecting lower charges in unsecured consumer lending and Local Business. This was driven by improvements in the collection process which led to reduced flows into delinquency, lower levels of arrears and stable charge-offs. Mortgage impairment charges remained negligible. Barclays Commercial Bank delivered profit before tax of Â£1,371m. Profit before business disposals improved 5%. Income improved 7% driven by very strong growth in fees and commissions and steady growth in net interest income. Non-interest income increased to 32% of total income reflecting continuing focus on cross sales and efficient balance sheet utilisation. Operating expenses rose 6%, reflecting increased investment in product development and support, sales force capability and operational efficiency. Impairment charges increased Â£38m as a result of asset growth and higher charges in Larger Business. Barclaycard profit before tax increased to Â£540m, 18% ahead of the prior year. Steady income relative to 2006 reflected strong growth in Barclaycard International offset by a reduction in UK card extended credit balances as we re-positioned the UK business and reduced lower credit quality exposures including the sale of the Monument card portfolio. As a result, impairment charges improved 21%, reflecting more selective customer recruitment, client management and improved collections. Operating expenses increased 12%, driven by continued investment in Barclaycard International and the non-recurrence of a property gain included in the 2006 results. Barclaycard US continued to make good progress, and for the first time made a profit for the year. International Retail and Commercial Banking profits declined 23% to Â£935m. Results in 2006 included a Â£247m profit on disposals and Â£41m post tax profit share from FirstCaribbean International Bank. 2007 results reflected a 12% decline in the average value of the Rand. International Retail and Commercial Banking - excluding Absa delivered a profit before tax of Â£246m. Income rose 28% as we significantly increased the pace of organic growth across the business, with especially strong growth in Emerging Markets and Spain. Operating expenses grew 32% as we expanded the distribution footprint, opening 324 new branches and 157 new sales centres and also invested in rolling out a common technology platform and processes across the business. Impairment increased to Â£79m including very strong balance sheet growth and lower releases. International Retail and Commercial Banking - Absa Sterling profit fell Â£9m to Â£689m after absorbing the 12% decline in the average value of the Rand. Absa Group Limited profit before tax grew 23% in Rand terms, reflecting very strong growth in retail banking, corporate banking and Absa Capital (reported in Barclays Capital). Retail loans and advances grew 22% and retail deposits grew 20%. We delivered synergies of R1,428m, achieving our synergy target 18 months ahead of schedule. Business Performance - Investment Banking and Investment Management Barclays Capital improved on the record performance of 2006 delivering a 5% increase in profit before tax to Â£2,335m. Net income was ahead of last year, reflecting very strong performances in most asset classes including interest rates, currencies, equity products and commodities. Results also included net losses arising from credit market turbulence of Â£1,635m net of gains from the fair valuation of issued notes of Â£658m. All geographies outside the US enjoyed significant growth in income and profits. Strong cost control led to operating expenses declining slightly year on year. The cost:net income ratio improved by 1% to 63%. Barclays Global Investors (BGI) profit before tax increased 3% to Â£734m. Income grew 16%, driven by very strong growth in management fees and in securities lending revenues. Profit and income growth were both affected by the 8% depreciation in the average value of the US Dollar. BGI costs increased 25% as we continued to build our infrastructure across multiple products and platforms to support future growth. The cost:income ratio rose to 62%. Assets under management grew US$265bn to US$2.1 trillion, including net new assets of US$86bn. Barclays Wealth profit before tax rose 25% to Â£307m. Income growth of 11% was driven by increased client funds and greater transaction volumes. Costs were well controlled as business volumes rose and the cost:income ratio improved three percentage points to 76%. We continued to invest in client facing staff and infrastructure. Redress costs declined. Total client assets increased 14% to Â£133bn. Head Office Functions and Other Operations Head Office functions and other operations loss before tax increased 65% to Â£428m reflecting higher inter-segment adjustments and lower gains from hedging activities. Capital Management At 31st December 2007, our Basel I Tier 1 Capital ratio was 7.8% (2006: 7.7%). We started managing capital ratios under Basel II from 1st January 2008. Our Basel II Tier 1 Capital ratio was 7.6%. Our Equity Tier 1 ratio was 5.0% under Basel I (2006: 5.3%) and 5.1% under Basel II. We have increased the proposed dividend payable to shareholders in respect of 2007 by 10%. We maintain our progressive approach to dividends, expecting dividend growth broadly to match earnings growth over time. Chris Lucas Group Finance Director CONSOLIDATED INCOME STATEMENT 2007 2006 Â£m Â£m --------- --------- Interest income 25,308 21,805 Interest expense (15,698) (12,662) --------- --------- Net interest income 9,610 9,143 --------- --------- Fee and commission income 8,678 8,005 Fee and commission expense (970) (828) --------- --------- Net fee and commission income 7,708 7,177 --------- --------- Net trading income 3,759 3,614 Net investment income 1,216 962 --------- --------- Principal transactions 4,975 4,576 Net premiums from insurance contracts 1,011 1,060 Other income 188 214 --------- --------- Total income 23,492 22,170 Net claims and benefits incurred under insurance contracts (492) (575) --------- --------- Total income net of insurance claims 23,000 21,595 Impairment charges and other credit provisions (2,795) (2,154) --------- --------- Net income 20,205 19,441 --------- --------- Operating expenses excluding amortisation of intangible assets (13,013) (12,538) Amortisation of intangible assets (186) (136) --------- --------- Operating expenses (13,199) (12,674) Share of post-tax results of associates and joint ventures 42 46 Profit on disposal of subsidiaries, associates and joint ventures 28 323 --------- --------- Profit before tax 7,076 7,136 Tax (1,981) (1,941) --------- --------- Profit after tax 5,095 5,195 --------- --------- Profit attributable to minority interests 678 624 Profit attributable to equity holders of the parent 4,417 4,571 --------- --------- 5,095 5,195 --------- --------- p p Basic earnings per ordinary share 68.9 71.9 Diluted earnings per ordinary share 66.7 69.8 Dividends per ordinary share: Interim dividend 11.5 10.5 Final dividend proposed 22.5 20.5 --------- --------- Total dividend 34.0 31.0 --------- --------- Â£m Â£m Interim dividend paid 768 666 Final dividend proposed 1,485 1,307 --------- --------- Total dividend 2,253 1,973 --------- --------- CONSOLIDATED BALANCE SHEET 2007 2006 Â£m Â£m Assets Cash and balances at central banks 5,801 7,345 Items in the course of collection from other banks 1,836 2,408 Trading portfolio assets 193,691 177,867 Financial assets designated at fair value: held on own account 56,629 31,799 held in respect of linked liabilities to customers under investment contracts 90,851 82,798 Derivative financial instruments 248,088 138,353 Loans and advances to banks 40,120 30,926 Loans and advances to customers 345,398 282,300 Available for sale financial investments 43,072 51,703 Reverse repurchase agreements and cash collateral on securities borrowed 183,075 174,090 Other assets 5,150 5,850 Current tax assets 518 557 Investments in associates and joint ventures 377 228 Goodwill 7,014 6,092 Intangible assets 1,282 1,215 Property, plant and equipment 2,996 2,492 Deferred tax assets 1,463 764 ----------- --------- Total assets 1,227,361 996,787 ----------- --------- CONSOLIDATED BALANCE SHEET 2007 2006 Â£m Â£m Liabilities Deposits from banks 90,546 79,562 Items in the course of collection due to other banks 1,792 2,221 Customer accounts 294,987 256,754 Trading portfolio liabilities 65,402 71,874 Financial liabilities designated at fair value 74,489 53,987 Liabilities to customers under investment contracts 92,639 84,637 Derivative financial instruments 248,288 140,697 Debt securities in issue 120,228 111,137 Repurchase agreements and cash collateral on securities lent 169,429 136,956 Other liabilities 10,499 10,337 Current tax liabilities 1,311 1,020 Insurance contract liabilities, including unit-linked liabilities 3,903 3,878 Subordinated liabilities 18,150 13,786 Deferred tax liabilities 855 282 Provisions 830 462 Retirement benefit liabilities 1,537 1,807 ----------- --------- Total liabilities 1,194,885 969,397 ----------- --------- Shareholders' equity Called up share capital 1,651 1,634 Share premium account 56 5,818 Other reserves 874 390 Retained earnings 20,970 12,169 Less: treasury shares (260) (212) ----------- --------- Shareholders' equity excluding minority interests 23,291 19,799 Minority interests 9,185 7,591 ----------- --------- Total shareholders' equity 32,476 27,390 ----------- --------- Total liabilities and shareholders' equity 1,227,361 996,787 ----------- --------- 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: Global Retail and Commercial Banking â€¢ UK Banking, comprising - UK Retail Banking - Barclays Commercial Bank (formerly UK Business Banking) â€¢ Barclaycard â€¢ International Retail and Commercial Banking, comprising - International Retail and Commercial Banking - excluding Absa - International Retail and Commercial Banking - Absa Investment Banking and Investment Management â€¢ Barclays Capital â€¢ Barclays Global Investors â€¢ Barclays Wealth Head office functions and other operations UK Banking UK Banking delivers banking solutions to Barclays UK retail and business banking customers. It offers a range of integrated products and services and access to the expertise of other Group businesses. Customers are served through a variety of channels comprising the branch network, automated teller machines, telephone banking, online banking and relationship managers. UK Banking is managed through two business areas, UK Retail Banking and Barclays Commercial Bank. UK Retail Banking UK Retail Banking comprises Personal Customers, Home Finance, Local Business, Consumer Lending and Barclays Financial Planning. This cluster of businesses aims to build broader and deeper relationships with its Personal and Local Business customers through providing a wide range of products and financial services. Personal Customers and Home Finance provide access to current account and savings products, Woolwich branded mortgages and general insurance. Consumer Lending provides unsecured loan and protection products and Barclays Financial Planning provides investment advice and products. Local Business provides banking services, including money transmission, to small businesses. Barclays Commercial Bank Barclays Commercial Bank provides banking services to organisations with an annual turnover of more than Â£1m. Customers are served via a network of relationship and industry sector specialists, which provides solutions constructed from a comprehensive suite of banking products, support, expertise and services, including specialist asset financing and leasing facilities. Customers are also offered access to the products and expertise of other businesses in the Barclays Group, particularly Barclays Capital, Barclaycard and Barclays Wealth. Barclaycard Barclaycard is a multi-brand credit card and consumer lending business which also processes card payments for retailers and merchants and issues credit and charge cards to corporate customers and the UK Government. It is one of Europe's leading credit card businesses and has an increasing presence in the United States. In the UK, Barclaycard comprises Barclaycard UK Cards, Barclaycard Partnerships (SkyCard, Thomas Cook, Argos and Solution Personal Finance), Barclays Partner Finance (formerly CFS) and FirstPlus. Outside the UK, Barclaycard provides credit cards in the United States, Germany, Spain, Italy and Portugal. In the Nordic region, Barclaycard operates through Entercard, a joint venture with Swedbank. Barclaycard works closely with other parts of the Group, including UK Retail Banking, Barclays Commercial Bank and International Retail and Commercial Banking, to leverage their distribution capabilities. International Retail and Commercial Banking International Retail and Commercial Banking provides banking services to Barclays personal and corporate customers outside the UK. The products and services offered to customers are tailored to meet customer needs and the regulatory and commercial environments within each country. For reporting purposes the operations are grouped into two components: International Retail and Commercial Banking - excluding Absa and International Retail and Commercial Banking - Absa. International Retail and Commercial Banking works closely with all other parts of the Group to leverage synergies from product and service propositions. International Retail and Commercial Banking - excluding Absa International Retail and Commercial Banking - excluding Absa provides a range of banking services to retail and corporate customers in Western Europe and Emerging Markets, including current accounts, savings, investments, mortgages and loans. Barclays Western Europe business includes Spain, Italy, France and Portugal. Emerging Markets includes operations in Africa, India and the Middle East. International Retail and Commercial Banking - Absa International Retail and Commercial Banking - Absa represents Barclays consolidation of Absa, excluding Absa Capital which is included as part of Barclays Capital. Absa Group Limited is one of South Africa's largest financial services organisations serving personal, commercial and corporate customers predominantly in South Africa. International Retail and Commercial Banking - Absa serves retail customers through a variety of distribution channels and offers a full range of banking services, including current and deposit accounts, mortgages, instalment finance, credit cards, bancassurance products and wealth management services. It also offers customised business solutions for commercial and large corporate customers. Barclays Capital Barclays Capital is a leading global investment bank which provides large corporate, institutional and government clients with solutions to their financing and risk management needs. Barclays Capital services a wide variety of client needs, from capital raising and managing foreign exchange, interest rate, equity and commodity risks, through to providing technical advice and expertise. Activities are organised into three principal areas: Rates, which includes fixed income, foreign exchange, commodities, emerging markets, money markets, prime services and equity products; Credit, which includes primary and secondary activities for loans and bonds for investment grade, high yield and emerging market credit, as well as hybrid capital products, asset based finance, mortgage backed securities, credit derivatives, structured capital markets and large asset leasing; and Private Equity. Barclays Capital includes Absa Capital, the investment banking business of Absa. Barclays Capital works closely with all other parts of the Group to leverage synergies from client relationships and product capabilities. Barclays Global Investors Barclays Global Investors (BGI) is one of the world's largest asset managers and a leading global provider of investment management products and services. BGI offers structured investment strategies such as indexing, global asset allocation and risk controlled active products including hedge funds and provides related investment services such as securities lending, cash management and portfolio transition services. In addition, BGI is the global leader in assets and products in the exchange traded funds business, with over 320 funds for institutions and individuals trading globally. BGI's investment philosophy is founded on managing all dimensions of performance: a consistent focus on controlling risk, return and cost. BGI collaborates with the other Barclays businesses, particularly Barclays Capital and Barclays Wealth, to develop and market products and leverage capabilities to better serve the client base. Barclays Wealth Barclays Wealth serves high net worth, affluent and intermediary clients worldwide, providing private banking, asset management, stockbroking, offshore banking, wealth structuring and financial planning services and manages the closed life assurance activities of Barclays and Woolwich in the UK. Barclays Wealth works closely with all other parts of the Group to leverage synergies from client relationships and product capabilities. Head office functions and other operations Head office functions and other operations comprises: â€¢ Head office and central support functions â€¢ Businesses in transition â€¢ Consolidation adjustments. Head office and central support functions comprises the following areas: Executive Management, Finance, Treasury, Corporate Affairs, Human Resources, Strategy and Planning, Internal Audit, Legal, Corporate Secretariat, Property, Tax, Compliance and Risk. Costs incurred wholly on behalf of the businesses are recharged to them. Businesses in transition principally relate to certain lending portfolios that are centrally managed with the objective of maximising recovery from the assets. Consolidation adjustments largely reflect the elimination of inter-segment transactions. UK Banking 2007 2006 Income Statement Information Â£m Â£m Net interest income 4,596 4,467 Net fee and commission income 1,932 1,874 -------- -------- Net trading income 9 2 Net investment income 47 28 -------- -------- Principal transactions 56 30 Net premiums from insurance contracts 252 342 Other income 58 63 -------- -------- Total income 6,894 6,776 Net claims and benefits incurred under insurance contracts (43) (35) -------- -------- Total income net of insurance claims 6,851 6,741 Impairment charges (849) (887) -------- -------- Net income 6,002 5,854 -------- -------- Operating expenses excluding amortisation of intangible assets (3,358) (3,387) Amortisation of intangible assets (12) (2) -------- -------- Operating expenses (3,370) (3,389) Share of post-tax results of associates and joint ventures 7 5 Profit on disposal of subsidiaries, associates and joint ventures 14 76 -------- -------- Profit before tax 2,653 2,546 -------- -------- Balance Sheet Information Loans and advances to customers Â£145.3bn Â£131.0bn Customer accounts Â£147.9bn Â£139.7bn Total assets Â£161.8bn Â£147.6bn Performance Ratios Return on average economic capital(1) 29% 32% Cost:income ratio(1) 49% 50% Cost:net income ratio(1) 56% 58% Other Financial Measures Risk Tendency(1),(2) Â£775m Â£790m Economic profit(1) Â£1,272m Â£1,327m Risk weighted assets Â£99.8bn Â£93.0bn Key Fact Number of UK branches 1,733 2,014 (1) Defined on page iv. (2) Further information on risk tendency is included on page 90. UK Banking profit before tax increased 4% (Â£107m) to Â£2,653m (2006: Â£2,546m) driven principally by solid income growth. Results included gains from the sale and leaseback of properties and property sales of Â£232m (2006: Â£313m). The cost:income ratio improved one percentage point to 49%. Excluding the impact of settlements on overdraft fees in relation to prior years, the cost:income ratio improved two percentage points to 48%, making eight percentage points of improvement from 2004 to 2007 compared to the target of six percentage points. UK Retail Banking 2007 2006 Income Statement Information Â£m Â£m Net interest income 2,858 2,765 Net fee and commission income 1,183 1,232 Net premiums from insurance contracts 252 342 Other income 47 42 -------- -------- Total income 4,340 4,381 Net claims and benefits incurred under insurance contracts (43) (35) -------- -------- Total income net of insurance claims 4,297 4,346 Impairment charges (559) (635) -------- -------- Net income 3,738 3,711 -------- -------- Operating expenses excluding amortisation of intangible assets (2,455) (2,531) Amortisation of intangible assets (8) (1) -------- -------- Operating expenses (2,463) (2,532) Share of post-tax results of associates and joint ventures 7 2 -------- -------- Profit before tax 1,282 1,181 -------- -------- Balance Sheet Information Loans and advances to customers Â£82.0bn Â£74.7bn Customer accounts Â£87.1bn Â£82.3bn Total assets Â£87.8bn Â£81.7bn Performance Ratios Return on average economic capital(1) 28% 28% Cost:income ratio(1) 57% 58% Cost:net income ratio(1) 66% 68% Other Financial Measures Risk Tendency(1),(2) Â£470m Â£500m Economic profit(1) Â£622m Â£589m Risk weighted assets Â£46.0bn Â£43.0bn Key Facts Number of UK current accounts(3) 11.3m 11.5m Number of UK savings accounts 11.1m 11.0m Total UK mortgage balances Â£69.8bn Â£61.7bn Number of Local Business customers 643,000 630,000 (1) Defined on page iv. (2) Further information on risk tendency is included on page 90. (3) Decrease reflects the consolidation of Woolwich and Barclays current accounts. UK Retail Banking profit before tax increased 9% (Â£101m) to Â£1,282m (2006: Â£1,181m) due to reduced costs and a strong improvement in impairment. Income grew 2% (Â£67m) before the impact of settlements on overdraft fees in relation to prior years (Â£116m). This was driven by very strong growth in Personal Customer Retail Savings and good growth in Personal Customer Current Accounts, Home Finance and Local Business. Including the impact of settlements on overdraft fees, income decreased Â£49m to Â£4,297m (2006: Â£4,346m). Net interest income increased 3% (Â£93m) to Â£2,858m (2006: Â£2,765m). Growth was driven by a higher contribution from deposits, through a combination of good balance sheet growth and an increased liability margin. Total average customer deposit balances increased 7% to Â£81.9bn (2006: Â£76.5bn), supported by the launch of new products. Mortgage volumes increased significantly, driven by an improved mix of longer term value products for customers, higher levels of retention and continuing improvements in processing capability. Mortgage balances were Â£69.8bn at the end of the period (31st December 2006: Â£61.7bn), an approximate market share of 6% (2006: 6%). Gross advances were 25% higher at Â£23.0bn (2006: Â£18.4bn). Net lending was Â£8.0bn (2006: Â£2.4bn), representing market share of 8% (2006: 2%). The average loan to value ratio of the residential mortgage book on a current valuation basis was 33%. The average loan to value ratio of new residential mortgage lending in 2007 was 54%. Consumer Lending balances decreased 4% to Â£7.9bn (2006: Â£8.2bn), reflecting the impact of tighter lending criteria. Overall asset margins decreased as a result of the increased proportion of mortgages and contraction in unsecured loans. Net fee and commission income reduced 4% (Â£49m) to Â£1,183m (2006: Â£1,232m). There was strong Current Account income growth in Personal Customers and good growth within Local Business. This was more than offset by settlements on overdraft fees. Net premiums from insurance underwriting activities reduced 26% (Â£90m) to Â£252m (2006: Â£342m), as there continued to be lower customer take-up of loan protection insurance. Net claims and benefits on insurance contracts increased to Â£43m (2006: Â£35m). Impairment charges decreased 12% (Â£76m) to Â£559m (2006: Â£635m) reflecting lower charges in unsecured Consumer Lending and Local Business. This was driven by improvements in the collection process which led to reduced flows into delinquency, lower levels of arrears and stable charge-offs. Mortgage impairment charges remained negligible. Operating expenses reduced 3% (Â£69m) to Â£2,463m (2006: Â£2,532m), reflecting strong and active management of all expense lines, targeted processing improvements and back office consolidation. Gains from the sale of property were Â£193m (2006: Â£253m). Increased investment was focused on: improving the overall customer experience through converting and improving the branch network; revitalising the product offering; increasing operational and process efficiency; and meeting regulatory requirements. The cost:income ratio improved one percentage point to 57%. Excluding the impact of settlements on overdraft fees, the cost:income ratio improved two percentage points to 56%. Barclays Commercial Bank 2007 2006 Income Statement Information Â£m Â£m Net interest income 1,738 1,702 Net fee and commission income 749 642 --------- --------- Net trading income 9 2 Net investment income 47 28 --------- --------- Principal transactions 56 30 Other income 11 21 --------- --------- Total income 2,554 2,395 Impairment charges (290) (252) --------- --------- Net income 2,264 2,143 --------- --------- Operating expenses excluding amortisation of intangible assets (903) (856) Amortisation of intangible assets (4) (1) --------- --------- Operating expenses (907) (857) Share of post-tax results of associates and joint ventures - 3 Profit on disposal of subsidiaries, associates and joint ventures 14 76 --------- --------- Profit before tax 1,371 1,365 --------- --------- Balance Sheet Information Loans and advances to customers Â£63.3bn Â£56.3bn Customer accounts Â£60.8bn Â£57.4bn Total assets Â£73.9bn Â£65.9bn Performance Ratios Return on average economic capital(1) 30% 37% Cost:income ratio(1) 36% 36% Cost:net income ratio(1) 40% 40% Other Financial Measures Risk Tendency(1),(2) Â£305m Â£290m Economic profit(1) Â£650m Â£738m Risk weighted assets Â£53.8bn Â£50.0bn Key Fact Number of Commercial Bank customers 81,000 77,000 (1) Defined on page iv. (2) Further information on risk tendency is included on page 90. Barclays Commercial Bank profit before tax increased Â£6m to Â£1,371m (2006: Â£1,365m) due to continued good income growth partially offset by lower gains from business disposals. Profit before business disposals increased 5% to Â£1,357m (2006: Â£1,289m). Income increased 7% (Â£159m) to Â£2,554m (2006: Â£2,395m). Non-interest income increased to 32% of total income (2006: 29%), reflecting continuing focus on cross sales and efficient balance sheet utilisation. There was very strong growth in net fee and commission income, which increased 17% (Â£107m) to Â£749m (2006: Â£642m) due to very strong performance in lending fees. There was also good growth in transaction related income, foreign exchange and derivatives transactions undertaken on behalf of clients. Net interest income improved 2% (Â£36m) to Â£1,738m (2006: Â£1,702m). Average customer lendings increased 3% to Â£53.6bn (2006: Â£52.0bn) and 5%, excluding the impact of the vehicle leasing and European vendor finance businesses sold in 2006. Average customer accounts grew 4% to Â£46.4bn (2006: Â£44.8bn). The asset margin decreased by twelve basis points to 1.80%, reflecting an increased focus on higher quality lending and competitive market conditions. The liabilities margin remained broadly stable at 1.49%. Income from principal transactions, primarily reflecting venture capital and other equity realisations, increased 87% (Â£26m) to Â£56m (2006: Â£30m). Impairment charges increased 15% (Â£38m) to Â£290m (2006: Â£252m), mainly due to a higher level of impairment losses in Larger Business as impairment trended towards risk tendency. There was a reduction in impairment levels in Medium Business due to a tightening of the lending criteria. Operating expenses increased 6% (Â£50m) to Â£907m (2006: Â£857m). Operating expenses are net of gains of Â£39m (2006: Â£60m) on the sale of property. Growth in operating expenses was focused on continuing investment in operations, infrastructure, and new initiatives in product development and sales capability. Barclaycard 2007 2006 Income Statement Information Â£m Â£m Net interest income 1,394 1,383 Net fee and commission income 1,080 1,106 Net investment income 11 15 Net premiums from insurance contracts 40 18 Other income (26) - --------- --------- Total income 2,499 2,522 Net claims and benefits incurred under insurance contracts (13) (8) --------- --------- Total income net of insurance claims 2,486 2,514 Impairment charges (838) (1,067) --------- --------- Net income 1,648 1,447 --------- --------- Operating expenses excluding amortisation of intangible assets (1,073) (964) Amortisation of intangible assets (28) (17) --------- --------- Operating expenses (1,101) (981) Share of post-tax results of associates and joint ventures (7) (8) --------- --------- Profit before tax 540 458 --------- --------- Balance Sheet Information Loans and advances to customers Â£20.1bn Â£18.2bn Total assets Â£22.2bn Â£20.1bn Performance Ratios Return on average economic capital(1) 19% 16% Cost:income ratio(1) 44% 39% Cost:net income ratio(1) 67% 68% Other Financial Measures Risk Tendency(1),(2) Â£945m Â£1,135m Economic profit(1) Â£183m Â£137m Risk weighted assets Â£19.9bn Â£17.0bn Key Facts Number of Barclaycard UK customers 10.1m 9.8m Number of retailer relationships 93,000 93,000 UK credit cards - average outstanding balances Â£8.4bn Â£9.4bn UK credit cards - average extended credit Â£6.9bn Â£8.0bn balances International - average outstanding balances Â£3.9bn Â£2.9bn International - average extended credit balances Â£3.3bn Â£2.5bn International cards in issue 8.8m 6.4m Secured lending - average outstanding loans Â£4.3bn Â£3.4bn (1) Defined on page iv. (2) Further information on risk tendency is included on page 90. Barclaycard profit before tax increased 18% (Â£82m) to Â£540m (2006: Â£458m), driven by strong international growth coupled with a significant improvement in UK impairment charges. Other income included a Â£27m loss on disposal of part of the Monument card portfolio. 2006 results reflected a property gain of Â£38m. Income decreased 1% (Â£28m) to Â£2,486m (2006: Â£2,514m) reflecting strong growth in Barclaycard International, offset by a decline in UK Cards revenue resulting from a more cautious approach to lending in the UK and a Â£27m loss on disposal of part of the Monument card portfolio. Net interest income increased 1% (Â£11m) to Â£1,394m (2006: Â£1,383m) due to strong organic growth in international average extended credit card balances, up 32% to Â£3.3bn and average secured consumer lending balances up 26% to Â£4.3bn, partially offset by lower UK average extended credit card balances which fell 14% to Â£6.9bn. Margins fell to 6.59% (2006: 7.13%) due to higher average base rates across core operating markets and a change in the product mix with an increased weighting to secured lending. Net fee and commission income fell 2% (Â£26m) to Â£1,080m (2006: Â£1,106m) with growth in Barclaycard International offset by our actions in response to the Office of Fair Trading's findings on late and overlimit fees in the UK which were implemented in August 2006. Impairment charges improved 21% (Â£229m) to Â£838m (2006: Â£1,067m) reflecting reduced flows into delinquency, lower levels of arrears and lower charge-offs in UK Cards. We made changes to our impairment methodologies to standardise our approach and in anticipation of Basel II. The net positive impact of these changes in methodology was offset by an increase in impairment charges in Barclaycard International and secured consumer lending. Operating expenses increased 12% (Â£120m) to Â£1,101m (2006: Â£981m). Excluding a property gain of Â£38m in 2006, operating expenses increased 8% (Â£82m) reflecting continued investment in expanding our businesses in Europe and the US. Costs in the UK businesses were broadly flat, with investment in new UK product innovations such as Barclaycard OnePulse being funded out of operating efficiencies. Barclaycard International continued to gain momentum, delivering a profit before tax of Â£77m against a loss before tax of Â£36m in 2006. We concluded seven new credit card partnership deals across Western Europe. The Entercard joint venture continued to perform ahead of plan and entered the Danish market, extending its reach across the Scandinavian region. Barclaycard US was profitable, with very strong average balance growth and a number of new card partnerships including Lufthansa Airlines and Princess Cruise Lines. International Retail and Commercial Banking 2007 2006 Income Statement Information Â£m Â£m Net interest income 1,890 1,653 Net fee and commission income 1,210 1,221 --------- --------- Net trading income 69 6 Net investment income 179 188 --------- --------- Principal transactions 248 194 Net premiums from insurance contracts 372 351 Other income 87 74 --------- --------- Total income 3,807 3,493 Net claims and benefits incurred under insurance contracts (284) (244) --------- --------- Total income net of insurance claims 3,523 3,249 Impairment charges (252) (167) --------- --------- Net income 3,271 3,082 --------- --------- Operating expenses excluding amortisation of intangible assets (2,279) (2,077) Amortisation of intangible assets (77) (85) --------- --------- Operating expenses (2,356) (2,162) Share of post-tax results of associates and joint ventures 7 49 Profit on disposal of subsidiaries, associates and joint ventures 13 247 --------- --------- Profit before tax 935 1,216 --------- --------- Balance Sheet Information Loans and advances to customers Â£70.1bn Â£53.2bn Customer accounts Â£28.8bn Â£22.1bn Total assets Â£89.5bn Â£68.6bn Performance Ratios Return on average economic capital(1) 16% 36% Cost:income ratio(1) 67% 67% Cost:net income ratio(1) 72% 70% Other Financial Measures Risk Tendency(1),(2) Â£475m Â£220m Economic profit(1) Â£150m Â£493m Risk weighted assets Â£53.3bn Â£40.8bn Key Facts Number of branches 2,014 1,653 Number of sales centres 335 52 Number of distribution points 2,349 1,705 (1) Defined on page iv. (2) Further information on risk tendency is included on page 90. International Retail and Commercial Banking profit before tax decreased Â£281m to Â£935m (2006: Â£1,216m). International Retail and Commercial Banking - excluding Absa profit before tax in 2006 included a Â£247m gain on the sale of associate FirstCaribbean International Bank and a Â£41m share of its post-tax results. Profit before tax in 2007 included gains from the sale and leaseback of property of Â£23m (2006: Â£55m). Very strong profit growth in Rand terms in International Retail and Commercial Banking - Absa was offset by a 12% decline in the average value of the Rand. A significant investment was made in infrastructure and distribution, including the opening of 644 new branches and sales centres across Western Europe, Emerging Markets and Absa. International Retail and Commercial Banking - excluding Absa 2007 2006 Income Statement Information Â£m Â£m Net interest income 753 604 Net fee and commission income 425 366 --------- --------- Net trading income 68 17 Net investment income 109 66 --------- --------- Principal transactions 177 83 Net premiums from insurance contracts 145 111 Other income 9 20 --------- --------- Total income 1,509 1,184 Net claims and benefits incurred under insurance contracts (170) (138) --------- --------- Total income net of insurance claims 1,339 1,046 Impairment charges (79) (41) --------- --------- Net income 1,260 1,005 --------- --------- Operating expenses excluding amortisation of intangible assets (1,007) (765) Amortisation of intangible assets (16) (9) --------- --------- Operating expenses (1,023) (774) Share of post-tax results of associates and joint ventures 1 40 Profit on disposal of subsidiaries, associates and joint ventures 8 247 --------- --------- Profit before tax 246 518 --------- --------- Balance Sheet Information Loans and advances to customers Â£39.3bn Â£29.0bn Customer accounts Â£15.7bn Â£11.0bn Total assets Â£52.2bn Â£38.2bn Performance Ratios Return on average economic capital(1) 11% 36% Cost:income ratio(1) 76% 74% Cost:net income ratio(1) 81% 77% Other Financial Measures Risk Tendency(1),(2) Â£220m Â£75m Economic profit(1) Â£20m Â£309m Risk weighted assets Â£29.7bn Â£20.1bn Key Facts Number of branches 1,177 853 Number of sales centres 171 14 Number of distribution points 1,348 867 (1) Defined on page iv. (2) Further information on risk tendency is included on page 90. International Retail and Commercial Banking - excluding Absa profit before tax decreased 53% (Â£272m) to Â£246m (2006: Â£518m). Profit before tax in 2006 included a Â£247m gain on the sale of associate FirstCaribbean International Bank and a Â£41m share of its post-tax results. Profit before tax in 2007 included gains from the sale and leaseback of property in 2007 of Â£23m (2006: Â£55m). The performance reflected very strong income growth driven by a rapid growth in distribution points to 1,348 (2006: 867) as well as the launch of new businesses in India and UAE and a full retail and commercial banking offering in Italy. Income increased 28% (Â£293m) to Â£1,339m (2006: Â£1,046) driven by excellent performances in Western Europe and Emerging Markets. Net interest income increased 25% (Â£149m) to Â£753m (2006: Â£604m). Total average customer loans increased 22% (Â£6.1bn) to Â£33.3bn (2006: Â£27.2bn) with lending margins broadly stable. Mortgage balance growth in Western Europe was very strong, with average Euro balances up 16% (EUR4.2bn) to EUR30.1bn (2006: EUR25.9bn). Average customer deposits increased 20% (Â£2.1bn) to Â£12.5bn (2006: Â£10.4bn) driven by growth in Western Europe and Emerging Markets. Net fee and commission income grew 16% (Â£59m) to Â£425m (2006: Â£366m), reflecting strong performances in Western Europe driven by the expansion of the customer base. Principal transactions increased Â£94m to Â£177m (2006: Â£83m) reflecting gains on equity investments, and higher foreign exchange income across Emerging Markets. Impairment charges rose 93% (Â£38m) to Â£79m (2006: Â£41m). The increase reflected very strong balance sheet growth in 2006 and 2007 and the impact of lower releases in 2007. Operating expenses grew 32% (Â£249m) to Â£1,023m (2006: Â£774m) driven by the rapid expansion of the distribution network across all regions and investment in people and infrastructure to support future growth across the franchise. Operating expenses included property sales in Spain of Â£23m (2006: Â£55m). Western Europe continued to perform strongly. Profit before tax increased 30% (Â£56m) to Â£245m (2006: Â£189m). Barclays Spain profit before tax increased 53% (Â£72m) to Â£207m (2006: Â£135m) driven by increased customer lending, higher service commissions and equity investment realisations. France also performed well driven by good growth in the balance sheet, higher fees and commissions and good cost control. Income grew very strongly in Italy as a result of the opening of new branches and the roll-out of a complete retail and commercial banking offering but this was more than offset by higher investment costs. Profit before tax decreased in Portugal, with very strong income growth offset by increased investment in the expansion of the business. Emerging Markets profit before tax increased 25% (Â£28m) to Â£142m (2006: Â£114m) reflecting a very strong rise in income across a broad range of markets, with particularly strong growth in Egypt, UAE, Kenya, Ghana, Tanzania, Uganda and India. The income growth benefited from increased investment in the business across all geographies, including branch openings and the launch of retail banking services in India and the UAE. International Retail and Commercial Banking - Absa 2007 2006 Income Statement Information Â£m Â£m Net interest income 1,137 1,049 Net fee and commission income 785 855 --------- --------- Net trading income/(loss) 1 (11) Net investment income 70 122 --------- --------- Principal transactions 71 111 Net premiums from insurance contracts 227 240 Other income 78 54 --------- --------- Total income 2,298 2,309 Net claims and benefits incurred under insurance contracts (114) (106) --------- --------- Total income net of insurance claims 2,184 2,203 Impairment charges (173) (126) --------- --------- Net income 2,011 2,077 --------- --------- Operating expenses excluding amortisation of intangible assets (1,272) (1,312) Amortisation of intangible assets (61) (76) --------- --------- Operating expenses (1,333) (1,388) Share of post-tax results of associates and joint ventures 6 9 Profit on disposal of subsidiaries, associates and joint ventures 5 - --------- --------- Profit before tax 689 698 --------- --------- Balance Sheet Information Loans and advances to customers Â£30.8bn Â£24.2bn Customer accounts Â£13.1bn Â£11.1bn Total assets Â£37.3bn Â£30.4bn Performance Ratios Return on average economic capital(1) 23% 34% Cost:income ratio(1) 61% 63% Cost:net income ratio(1) 66% 67% Other Financial Measures Risk Tendency(1),(2) Â£255m Â£145m Economic profit(1) Â£130m Â£184m Risk weighted assets Â£23.6bn Â£20.7bn Key Facts Number of branches 837 800 Number of sales centres 164 38 Number of distribution points 1,001 838 Number of ATMs 7,884 7,411 Number of retail customers 9.7m 8.3m Number of corporate customers 100,000 84,000 (1) Defined on page iv. (2) Further information on risk tendency is included on page 90. International Retail and Commercial Banking - Absa profit before tax decreased to Â£689m (2006: Â£698m). Appendix 1 on page 98 summarises the Rand results of Absa Group Limited for the year to 31st December 2007 as reported to the JSE Limited. Impact on Barclays results Absa Group Limited's profit before tax of R14,067m (2006: R11,417m) is translated into Barclays results at an average exchange rate of R14.11/Â£ (2006: R12.47/Â£), a 12% depreciation in the average value of the Rand against Sterling. Consolidation adjustments reflected the amortisation of intangible assets of Â£55m (2006: Â£75m) and internal funding and other adjustments of Â£98m (2006: Â£72m). The resulting profit before tax of Â£844m (2006: Â£769m) is represented within International Retail and Commercial Banking - Absa Â£689m, (2006: Â£698m) and Barclays Capital, Â£155m (2006: Â£71m). Absa Group Limited's total assets were R640,909m (2006: R495,112m), growth of 29%. This is translated into Barclays results at a period-end exchange rate of R13.64/Â£ (2006: R13.71/Â£). The capital investment was hedged against currency movements in 2007. Barclays Capital 2007 2006 Income Statement Information Â£m Â£m Net interest income 1,179 1,158 Net fee and commission income 1,235 952 --------- --------- Net trading income 3,739 3,562 Net investment income 953 573 --------- --------- Principal transactions 4,692 4,135 Other income 13 22 --------- --------- Total income 7,119 6,267 Impairment charges and other credit provisions (846) (42) --------- --------- Net income 6,273 6,225 --------- --------- Operating expenses excluding amortisation of intangible assets (3,919) (3,996) Amortisation of intangible assets (54) (13) --------- --------- Operating expenses (3,973) (4,009) Share of post-tax results of associates and joint ventures 35 - --------- --------- Profit before tax 2,335 2,216 --------- --------- Balance Sheet Information Total assets Â£839.7bn Â£657.9bn Performance Ratios Return on average economic capital(1) 33% 41% Cost:income ratio(1) 56% 64% Cost:net income ratio(1) 63% 64% Compensation:net income ratio 47% 49% Other Financial Measures Risk Tendency(1),(2) Â£140m Â£95m Economic profit(1) Â£1,172m Â£1,181m Risk weighted assets Â£169.1bn Â£137.6bn Average DVaR(1) Â£42.0m Â£37.1m Average net income generated per member of staff ('000)(1),(3) Â£466 Â£575 Corporate lending portfolio Â£52.3bn Â£40.6bn Key Facts 2007 2006 League League table Issuance table Issuance position value position value All international bonds (all currencies) 2nd US$273.2bn 1st US$271.9bn Europe overall debt 1st US$226.5bn 1st US$259.5bn Sterling bonds 1st Â£15.5bn 1st Â£27.3bn US investment grade corporate bonds 10th US$4.7bn 7th US$6.0bn (1) Defined on page iv. (2) Further information on risk tendency is included on page 90. (3) Adjusted to exclude contribution and headcount from HomEq and EquiFirst Barclays Capital delivered profits ahead of the record results achieved in 2006 despite challenging trading conditions in the second half of the year. Profit before tax increased 5% (Â£119m) to Â£2,335m (2006: Â£2,216m). There was strong income growth across the Rates businesses and excellent results in Continental Europe, Asia and Africa demonstrating the breadth of the client franchise. Net income was slightly ahead at Â£6,273m (2006: Â£6,225m) and costs were tightly managed, declining slightly year on year. Absa Capital delivered very strong growth in profit before tax to Â£155m (2006: Â£71m). The US sub-prime driven market dislocation affected performance in the second half of 2007. Exposures relating to US sub-prime were actively managed and declined over the period. Barclays Capital's 2007 results reflected net losses related to the credit market turbulence of Â£1,635m, of which Â£795m was included in income, net of Â£658m gains arising from the fair valuation of notes issued by Barclays Capital. Impairment charges included Â£840m against ABS CDO Super Senior exposures, other credit market exposures and drawn leveraged finance underwriting positions. Further detail is provided in the notes to this announcement. Income increased 14% (Â£852m) to Â£7,119m (2006: Â£6,267m) as a result of very strong growth in interest rate, currency, equity, commodity and emerging market asset classes. There was excellent income growth in Continental Europe, Asia, and Africa. Average DVaR increased 13% to Â£42.0m (2006: Â£37.1m) in line with income. Secondary income, comprising principal transactions (net trading income and net investment income) and net interest income, is mainly generated from providing client financing and risk management solutions. Secondary income increased 11% (Â£578m) to Â£5,871m (2006: Â£5,293m). Net trading income increased 5% (Â£177m) to Â£3,739m (2006: Â£3,562m) with strong contributions from fixed income, commodities, equities, foreign exchange and prime services businesses. These were largely offset by net losses in the business affected by sub-prime mortgage related writedowns. The general widening of credit spreads that occurred over the course of the second half of 2007 also reduced the carrying value of the Â£57bn of issued notes held at fair value on the balance sheet, resulting in gains of Â£658m. Net investment income increased 66% (Â£380m) to Â£953m (2006: Â£573m) as a result of a number of private equity realisations, investment disposals in Asia and structured capital markets transactions. Net interest income increased 2% (Â£21m) to Â£1,179m (2006: Â£1,158m), driven by higher contributions from money markets. The corporate lending portfolio increased 29% to Â£52.3bn (2006: Â£40.6bn), largely due to an increase in drawn leveraged finance positions and a rise in drawn corporate loan balances. Primary income, which comprises net fee and commission income from advisory and origination activities, grew 30% (Â£283m) to Â£1,235m (2006: Â£952m), with good contributions from bonds and loans. Impairment charges and other credit provisions of Â£846m included Â£722m against ABS CDO Super Senior exposures, Â£60m from other credit market exposures and Â£58m relating to drawn leveraged finance underwriting positions. Other impairment charges on loans and advances amounted to a release of Â£7m (2006: Â£44m release) before impairment charges on available for sale assets of Â£13m (2006: Â£86m). Operating expenses decreased 1% (Â£36m) to Â£3,973m (2006: Â£4,009m). The cost:net income ratio improved to 63% (2006: 64%) and the compensation cost:net income ratio improved by two percentage points to 47% (2006: 49%). Performance related pay, discretionary investment spend and short term contractor resources represented 42% (2006: 50%) of the cost base. Amortisation of intangible assets of Â£54m (2006: Â£13m) principally related to mortgage service rights. Total headcount increased 3,000 during 2007 to 16,200 (2006: 13,200) including 800 from the acquisition of EquiFirst. The majority of organic growth was in Asia Pacific. Barclays Global Investors 2007 2006 Income Statement Information Â£m Â£m Net interest (expense)/income (8) 10 Net fee and commission income 1,936 1,651 --------- --------- Net trading income 5 2 Net investment (expense)/income (9) 2 --------- --------- Principal transactions (4) 4 Other income 2 - --------- --------- Total income 1,926 1,665 --------- --------- Operating expenses excluding amortisation of intangible assets (1,184) (946) Amortisation of intangible assets (8) (5) --------- --------- Operating expenses (1,192) (951) --------- --------- Profit before tax 734 714 --------- --------- Balance Sheet Information Total assets Â£89.2bn Â£80.5bn Performance Ratios Return on average economic capital(1) 241% 228% Cost:income ratio(1) 62% 57% Other Financial Measures Economic profit(1) Â£430m Â£376m Risk weighted assets Â£2.0bn Â£1.4bn Average net income generated per member of staff ('000)(1) Â£631 Â£666 Key Facts Assets under management (Â£): Â£1,044bn Â£927bn --------- --------- indexed Â£615bn Â£566bn iShares Â£205bn Â£147bn active Â£224bn Â£214bn --------- --------- Net new assets in period (Â£) Â£42bn Â£37bn Assets under management (US$): US$2,079bn US$1,814bn --------- --------- indexed US$1,225bn US$1,108bn iShares US$408bn US$287bn active US$446bn US$419bn --------- --------- Net new assets in period (US$) US$86bn US$68bn Number of iShares products 324 191 Number of institutional clients 3,000 2,900 (1) Defined on page iv. (2) Further information on risk tendency is included on page 90. Barclays Global Investors delivered solid growth in profit before tax, which increased 3% (Â£20m) to Â£734m (2006: Â£714m). Very strong US Dollar income and strong profit growth was partially offset by the 8% depreciation in the average value of the US Dollar against Sterling. Income grew 16% (Â£261m) to Â£1,926m (2006: Â£1,665m). Net fee and commission income grew 17% (Â£285m) to Â£1,936m (2006: Â£1,651m). This was primarily attributable to increased management fees and securities lending. Incentive fees increased 6% (Â£12m) to Â£198m (2006: Â£186m). Higher asset values, driven by higher market levels and good net new inflows, contributed to the growth in income. Operating expenses increased 25% (Â£241m) to Â£1,192m (2006: Â£951m) as a result of significant investment in key product and channel growth initiatives and in infrastructure as well as growth in the underlying business. Operating expenses included charges of Â£80m (2006: Â£nil) related to selective support of liquidity products managed in the US. The cost:income ratio rose five percentage points to 62% (2006: 57%). Headcount increased 700 to 3,400 (2006: 2,700). Headcount increased in all geographical regions and across product groups and the support functions, reflecting continued investment to support further growth. Total assets under management increased 13% (Â£117bn) to Â£1,044bn (2006: Â£927bn) comprising Â£42bn of net new assets, Â£12bn attributable to the acquisition of Indexchange Investment AG (Indexchange), Â£66bn of favourable market movements and Â£3bn of adverse exchange movements. In US$ terms assets under management increased 15% (US$265bn) to US$2,079bn (2006: US$1,814bn), comprising US$86bn of net new assets, US$23bn attributable to acquisition of Indexchange, US$127bn of favourable market movements and US$29bn of positive exchange rate movements. Barclays Wealth 2007 2006 Income Statement Information Â£m Â£m Net interest income 431 392 Net fee and commission income 739 674 --------- --------- Net trading income 3 2 Net investment income 52 154 --------- --------- Principal transactions 55 156 Net premium from insurance contracts 195 210 Other income 19 16 --------- --------- Total income 1,439 1,448 Net claims and benefits incurred under insurance contracts (152) (288) --------- --------- Total Income net of insurance claims 1,287 1,160 Impairment charges (7) (2) --------- --------- Net income 1,280 1,158 --------- --------- Operating expenses excluding amortisation of intangible assets (967) (909) Amortisation of intangible assets (6) (4) --------- --------- Operating expenses (973) (913) --------- --------- Profit before tax 307 245 --------- --------- Balance Sheet Information Loans and advances to customers Â£9.0bn Â£6.2bn Customer accounts Â£34.4bn Â£28.3bn Total assets Â£18.0bn Â£15.0bn Performance Ratios Return on average economic capital(1) 51% 40% Cost:income ratio(1) 76% 79% Other Financial Measures Risk Tendency(1),(2) Â£10m Â£10m Economic profit(1) Â£233m Â£130m Risk weighted assets Â£7.7bn Â£6.1bn Average net income generated per member of staff ('000) (1) Â£188 Â£181 Key Fact Total client assets Â£132.5bn Â£116.1bn (1) Defined on page iv. (2) Further information on risk tendency is included on page 90. Barclays Wealth profit before tax showed very strong growth of 25% (Â£62m) to Â£307m (2006: Â£245m). Performance was driven by broadly based income growth, reduced redress costs and tight cost control, partially offset by additional volume related costs and increased investment in people and infrastructure to support future growth. Income increased 11% (Â£127m) to Â£1,287m (2006: Â£1,160m). Net interest income increased 10% (Â£39m) to Â£431m (2006: Â£392m) reflecting strong growth in both customer deposits and lending. Average deposits grew 13% to Â£31.2bn (2006: Â£27.7bn). Average lending grew 35% to Â£7.4bn (2006: Â£5.5bn) driven by increased lending to high net worth, affluent and intermediary clients. Assets margin increased 3 basis points to 1.11% (2006: 1.08%) reflecting changes in the product mix. The liabilities margin reduced by 7 basis points to 1.03% (2006: 1.10%) driven by competitive pricing of products. Net fee and commission income grew 10% (Â£65m) to Â£739m (2006: Â£674m). This reflected growth in client assets and higher transactional income from increased sales of investment products and solutions. Principal transactions decreased Â£101m to Â£55m (2006: Â£156m) as a result of lower growth in the value of unit linked insurance contracts. Net premiums from insurance contracts reduced Â£15m to Â£195m (2006: Â£210m). These reductions were offset by a lower charge for net claims and benefits incurred under insurance contracts of Â£152m (2006: Â£288m). Operating expenses increased 7% to Â£973m (2006: Â£913m) with greater volume related costs and a significant increase in investment partially offset by efficiency gains and lower customer redress costs of Â£19m (2006: Â£67m). Ongoing investment programmes included increased hiring of client facing staff and improvements to infrastructure with the upgrade of technology and operations platforms. The cost:income ratio improved three percentage points to 76% (2006: 79%). Total client assets, comprising customer deposits and client investments, increased 14% (Â£16.4bn) to Â£132.5bn (2006: Â£116.1bn) reflecting strong net new asset inflows and the acquisition of Walbrook, an independent fiduciary services company, which completed on 18th May 2007. Head office functions and other operations 2007 2006 Income Statement Information Â£m Â£m Net interest income 128 80 Net fee and commission expense (424) (301) --------- --------- Net trading (loss)/income (66) 40 Net investment (expense)/income (17) 2 --------- --------- Principal transactions (83) 42 Net premiums from insurance contracts 152 139 Other income 35 39 --------- --------- Total income (192) (1) Impairment (charges)/releases (3) 11 --------- --------- Net income (195) 10 --------- --------- Operating expenses excluding amortisation of intangible assets (233) (259) Amortisation of intangible assets (1) (10) --------- --------- Operating expenses (234) (269) Profit on disposal of associates and joint ventures 1 - --------- --------- Loss before tax (428) (259) --------- --------- Balance Sheet Information Total assets Â£7.1bn Â£7.1bn Other Financial Measures Risk Tendency(1),(2) Â£10m Â£10m Risk weighted assets Â£1.6bn Â£1.9bn (1) Defined on page iv. (2) Further information on risk tendency is included on page 90. Head office functions and other operations loss before tax increased Â£169m to Â£428m (2006: Â£259m). Group segmental reporting is performed in accordance with Group accounting policies. This means that inter-segment transactions are recorded in each segment as if undertaken on an arm's length basis. Adjustments necessary to eliminate inter-segment transactions are included in Head office functions and other operations. The impact of such inter-segment adjustments increased Â£86m to Â£233m (2006: Â£147m). These adjustments included internal fees for structured capital market activities of Â£169m (2006: Â£87m) and fees paid to Barclays Capital for debt and equity raising and risk management advice of Â£65m (2006: Â£23m), both of which increased net fee and commission expense in head office. The impact on the inter-segment adjustments of the timing of the recognition of insurance commissions included in Barclaycard was a reduction in head office income of Â£9m (2006: Â£44m). This net reduction was reflected in a decrease in net fee and commission income of Â£162m (2006: Â£184m) and an increase in net premium income of Â£153m (2006: Â£140m). Principal transactions decreased to a loss of Â£83m (2006: Â£42m profit). 2006 included a Â£55m profit from a hedge of the expected Absa foreign currency earnings. 2007 included a loss of Â£33m relating to fair valuation of call options embedded within retail US$ preference shares arising from widening of own credit spreads. Operating expenses decreased Â£35m to Â£234m (2006: Â£269m). The primary driver of this decrease was the receipt of a break fee relating to the ABN Amro transaction which, net of transaction costs, reduced expenses by Â£58m. This was partially offset by lower rental income and lower proceeds on property sales. NOTES 1. Net interest income 2007 2006 Â£m Â£m Cash and balances with central banks 145 91 Available for sale investments 2,580 2,811 Loans and advances to banks 1,416 903 Loans and advances to customers 19,559 16,290 Other 1,608 1,710 --------- --------- Interest income 25,308 21,805 --------- --------- Deposits from banks (2,720) (2,819) Customer accounts (4,110) (3,076) Debt securities in issue (6,651) (5,282) Subordinated liabilities (878) (777) Other (1,339) (708) --------- --------- Interest expense (15,698) (12,662) --------- --------- Net interest income 9,610 9,143 --------- --------- Group net interest income increased 5% (Â£467m) to Â£9,610m (2006: Â£9,143m) reflecting balance sheet growth across a number of businesses. Group net interest income reflects structural hedges which function to reduce the impact of the volatility of short-term interest rate movements on equity and customer balances that do not re-price with market rates. The contribution of structural hedges relative to average base rates decreased to Â£351m expense (2006: Â£26m income), largely due to the smoothing effect of the structural hedge on changes in interest rates. Other interest expense principally includes interest on repurchase agreements and hedging activity. Business Margins 2007 2006 % % UK Retail Banking assets 1.20 1.32 UK Retail Banking liabilities 2.15 2.05 Barclays Commercial Bank assets 1.80 1.92 Barclays Commercial Bank liabilities 1.49 1.46 Barclaycard assets 6.59 7.13 International Retail and Commercial Banking - ex Absa assets 1.32 1.29 International Retail and Commercial Banking - ex Absa liabilities 1.91 2.06 International Retail and Commercial Banking - Absa assets 2.86 2.95 International Retail and Commercial Banking - Absa liabilities(1) 3.25 2.90 Barclays Wealth assets 1.11 1.08 Barclays Wealth liabilities 1.03 1.10 Average Balances 2007 2006 Â£m Â£m UK Retail Banking assets 78,502 73,593 UK Retail Banking liabilities 81,848 76,498 Barclays Commercial Bank assets 53,600 52,018 Barclays Commercial Bank liabilities 46,367 44,839 Barclaycard assets 19,191 17,918 International Retail and Commercial Banking - ex Absa assets 33,321 27,210 International Retail and Commercial Banking - ex Absa liabilities 12,484 10,423 International Retail and Commercial Banking - Absa assets 26,132 24,388 International Retail and Commercial Banking - Absa liabilities(1) 11,659 11,071 Barclays Wealth assets 7,403 5,543 Barclays Wealth liabilities 31,151 27,744 (1) International Retail and Commercial Banking - Absa liabilities business margins, average balances and business net interest income for 2006 have been restated. Business net interest income 2007 2006 Â£m Â£m UK Retail Banking assets 939 970 UK Retail Banking liabilities 1,763 1,566 Barclays Commercial Bank assets 963 999 Barclays Commercial Bank liabilities 693 655 Barclaycard assets 1,266 1,278 International Retail and Commercial Banking - ex Absa assets 439 349 International Retail and Commercial Banking - ex Absa liabilities 238 216 International Retail and Commercial Banking - Absa assets 746 719 International Retail and Commercial Banking - Absa liabilities(1) 379 321 Barclays Wealth assets 82 60 Barclays Wealth liabilities 320 306 --------- --------- Business net interest income 7,828 7,439 --------- --------- Reconciliation of business interest income to Group net interest income 2007 2006 Â£m Â£m Business net interest income 7,828 7,439 Other: Barclays Capital 1,179 1,158 Barclays Global Investors (8) 10 Other 611 536 --------- --------- Group net interest income 9,610 9,143 --------- --------- Business net interest income is derived from the interest rate earned on average assets or paid on average liabilities relative to the average Bank of England base rate, local equivalents for international businesses or the rate managed by the bank using derivatives. The margin is expressed as annualised business interest income over the relevant average balance. Asset and liability margins cannot be added together as they are relative to the average Bank of England base rate, local equivalent for international businesses or the rate managed by the bank using derivatives. The benefit of capital attributed to these businesses is excluded from the calculation of business margins and business net interest income. Average balances are calculated on daily averages for most UK banking operations and monthly averages elsewhere. Within the reconciliation of Group net interest income, there is an amount captured as Other. This relates to the benefit of capital excluded from the business margin calculation, Head office functions and other operations and net funding on non-customer assets and liabilities. (1) International Retail and Commercial Banking - Absa liabilities business margins, average balances and business net interest income for 2006 have been restated. UK Retail Banking assets margin decreased 12 basis points to 1.20% (2006: 1.32%) principally due to the increased proportion of mortgages and the contraction in unsecured loans. UK Retail Banking liabilities margin increased 10 basis points to 2.15% (2006: 2.05%) due to pricing initiatives and changes in the product mix. Barclays Commercial Bank assets margin decreased by 12 basis points to 1.80% (2006: 1.92%) due to changes in the product mix. Barclays Commercial Bank liabilities margin remained broadly stable at 1.49% (2006: 1.46%). Barclaycard assets margin decreased 54 basis points to 6.59% (2006: 7.13%) due to higher average base rates across core markets and an increased weighting to secured lending. International Retail and Commercial Banking - excluding Absa assets margin of 1.32% (2006: 1.29%) was broadly stable. International Retail and Commercial Banking - excluding Absa liabilities margin decreased 15 basis points to 1.91% (2006: 2.06%) primarily driven by changes in the product and country mix. International Retail and Commercial Banking - Absa assets margin decreased 9 basis points to 2.86% (2006: 2.95%) due to increased competition, increases in interest rates and changes in the product mix. The liabilities margin increased 35 basis points to 3.25% (2006: 2.90%) driven by a re-pricing of customer deposits and higher interest rates. Barclays Wealth assets margin increased 3 basis points to 1.11% (2006: 1.08%) due to changes in the product mix. The liabilities margin decreased 7 basis points to 1.03% (2006: 1.10%) due to competitive pricing. The impact of the structural hedge on customer balances has been included within business margins and has smoothed the impact of changing interest rates before the impact of changes in product mix or product pricing. 2. Net fee and commission income 2007 2006 Â£m Â£m Brokerage fees 109 70 Investment management fees 1,787 1,535 Securities lending 241 185 Banking and credit related fees and commissions 6,363 6,031 Foreign exchange commission 178 184 --------- --------- Fee and commission income 8,678 8,005 --------- --------- Fee and commission expense (970) (828) --------- --------- Net fee and commission income 7,708 7,177 --------- --------- Net fee and commission income increased 7% (Â£531m) to Â£7,708m (2006: Â£7,177m). Fee and commission income rose 8% (Â£673m) to Â£8,678m (2006: Â£8,005m) reflecting increased management and securities lending fees in Barclays Global Investors, increased client assets and higher transactional income in Barclays Wealth and higher income generated from lending fees in Barclays Commercial Bank. Fee income in Barclays Capital increased primarily due to the acquisition of HomEq. 3. Principal transactions 2007 2006 Â£m Â£m Rates related business 4,162 2,848 Credit related business (403) 766 --------- --------- Net trading income 3,759 3,614 --------- --------- Cumulative gain from disposal of available for sale assets 560 307 Dividend income 26 15 Net income from financial instruments designated at fair value 293 447 Other investment income 337 193 --------- --------- Net investment income 1,216 962 --------- --------- Principal transactions 4,975 4,576 --------- --------- Principal transactions increased 9% (Â£399m) to Â£4,975m (2006: Â£4,576m). Net trading income increased 4% (Â£145m) to Â£3,759m (2006: Â£3,614m). The majority of the Group's net trading income arises in Barclays Capital. Growth in the Rates related business reflects very strong performances in fixed income, commodities, foreign exchange, equity and prime services. The Credit related business includes net losses from credit market turbulence and the benefits of widening credit spreads on the fair value of issued notes. Further detail on the impact on net trading income of the changes in fair value of financial instruments is provided in note 17. Net investment income increased 26% (Â£254m) to Â£1,216m (2006: Â£962m). The cumulative gain from disposal of available for sale assets increased 82% (Â£253m) to Â£560m (2006: Â£307m) largely as a result of a number of private equity realisations and divestments. Net income from financial instruments designated at fair value decreased by 34% (Â£154m) largely due to lower growth in the value of linked insurance assets within Barclays Wealth. Fair value movements on insurance assets included within net investment income contributed Â£113m (2006: Â£205m). 4. Net premiums from insurance contracts 2007 2006 Â£m Â£m Gross premiums from insurance contracts 1,062 1,108 Premiums ceded to reinsurers (51) (48) --------- --------- Net premiums from insurance contracts 1,011 1,060 --------- --------- Net premiums from insurance contracts decreased 5% (Â£49m) to Â£1,011m (2006: Â£1,060m), primarily due to lower customer take up of loan protection insurance. 5. Other income 2007 2006 Â£m Â£m Increase in fair value of assets held in respect of linked liabilities to customers under investment contracts 5,592 7,417 Increase in liabilities to customers under investment contracts (5,592) (7,417) Property rentals 53 55 Loss on part disposal of Monument credit card portfolio (27) - Other 162 159 --------- --------- Other income 188 214 --------- --------- Certain asset management products offered to institutional clients by Barclays Global Investors are recognised as investment contracts. Accordingly the invested assets and the related liabilities to investors are held at fair value and changes in those fair values are reported within Other income. 6. Net claims and benefits incurred under insurance contracts 2007 2006 Â£m Â£m Gross claims and benefits incurred under insurance contracts 520 588 Reinsurers' share of claims incurred (28) (13) --------- --------- Net claims and benefits incurred under insurance contracts 492 575 --------- --------- Net claims and benefits incurred under insurance contracts decreased 14% (Â£83m) to Â£492m (2006: Â£575m). Net claims and benefits incurred under insurance contracts excluding Absa decreased by 19%, principally reflecting lower investment gains attributable to customers in Barclays Wealth. 7. Impairment charges and other credit provisions 2007 2006 Impairment charges on loans and advances Â£m Â£m New and increased impairment allowances 2,871 2,722 Releases (338) (389) Recoveries (227) (259) -------- --------- Impairment charges on loans and advances (see note 21) 2,306 2,074 Other credit provisions Charges/(credits) in respect of undrawn contractually committed facilities and guarantees 476 (6) -------- --------- Impairment charges on loans and advances and other credit provisions 2,782 2,068 Impairment charges on available for sale assets 13 86 -------- --------- Impairment charges and other credit provisions 2,795 2,154 -------- --------- Impairment charges and other credit provisions on ABS CDO Super Senior and other credit market exposures included above: Impairment charges on loans and advances 313 - Charges in respect of undrawn facilities 469 - -------- Impairment charges and other credit provisions on ABS CDO Super Senior and other credit market positions 782 - -------- --------- Total impairment charges and other credit provisions increased 30% (Â£641m) to Â£2,795m (2006: Â£2,154m). Impairment charges on loans and advances and other credit provisions increased 35% (Â£714m) to Â£2,782m (2006: Â£2,068m) reflecting charges of Â£782m against ABS CDO Super Senior and other credit market positions. Impairment charges on loans and advances and other credit provisions as a percentage of Group total loans and advances increased to 0.71% (2006: 0.65%); total loans and advances grew 23% to Â£389,290m (2006: Â£316,561m). Retail Retail impairment charges on loans and advances fell 11% (Â£204m) to Â£1,605m (2006: Â£1,809m). Retail impairment charges as a percentage of period end total loans and advances reduced to 0.98% (2006: 1.30%); total retail loans and advances increased 18% to Â£164,062m (2006: Â£139,350m). Barclaycard impairment charges improved 21% (Â£229m) to Â£838m (2006: Â£1,067m) reflecting reduced flows into delinquency, lower levels of arrears and lower charge-offs in UK Cards. We made changes to our impairment methodologies to standardise our approach and in anticipation of Basel II. The net positive impact of these changes in methodology was offset by the increase in impairment charges in Barclaycard International and secured consumer lending. Impairment charges in UK Retail Banking decreased by Â£76m (12%) to Â£559m (2006: Â£635m), reflecting lower charges in unsecured Consumer Lending and Local Business driven by improved collection processes, reduced flows into delinquency, lower arrears trends and stable charge-offs. In UK Home Finance, asset quality remained strong and mortgage charges remained negligible. Mortgage delinquencies as a percentage of outstandings remained stable and amounts charged off were low. Impairment charges in International Retail and Commercial Banking - excluding Absa rose by Â£38m (93%) to Â£79m (2006: Â£41m) reflecting very strong balance sheet growth in 2006 and 2007 and the impact of lower releases in 2007. Arrears in some of International Retail and Commercial Banking - Absa's retail portfolios deteriorated in 2007, driven by interest rate increases in 2006 and 2007 resulting in pressure on collections. Wholesale and corporate Wholesale and corporate impairment charges on loans and advances increased Â£436m to Â£701m (2006: Â£265m). Wholesale and corporate impairment charges as a percentage of period end total loans and advances increased to 0.31% (2006: 0.15%); total loans and advances grew 27% to Â£225,228m (2006: Â£177,211m). Barclays Capital impairment charges and other credit provisions of Â£846m included a charge of Â£782m against ABS CDO Super Senior and other credit market exposures and Â£58m net of fees relating to drawn leveraged finance positions. The impairment charge in Barclays Commercial Bank increased Â£38m (15%) to Â£290m (2006: Â£252m), primarily due to higher impairment charges in Larger Business, partially offset by a lower charge in Medium Business due to a tightening of the lending criteria. 8. Operating expenses 2007 2006 Â£m Â£m Staff costs (refer to page 51) 8,405 8,169 Administrative expenses 3,978 3,980 Depreciation 467 455 Impairment loss - property and equipment and intangible assets 16 21 Operating lease rentals 414 345 Gain on property disposals (267) (432) Amortisation of intangible assets 186 136 -------- -------- Operating expenses 13,199 12,674 -------- -------- Operating expenses grew 4% (Â£525m) to Â£13,199m (2006: Â£12,674m). The increase was driven by growth of 3% (Â£236m) in staff costs to Â£8,405m (2006: Â£8,169m) and lower gains on property disposals. Administrative expenses remained flat at Â£3,978m (2006: Â£3,980m) reflecting good cost control across all businesses. Operating lease rentals increased 20% (Â£69m) to Â£414m (2006: Â£345m), primarily due to increased property held under operating leases. Operating expenses were reduced by gains from the sale of property of Â£267m (2006: Â£432m) as the Group continued the sale and leaseback of some of its freehold portfolio, principally in UK Banking. Amortisation of intangible assets increased 37% (Â£50m) to Â£186m (2006: Â£136m) primarily reflecting the amortisation of mortgage servicing rights relating to the acquisition of HomEq in November 2006. The Group cost:income ratio improved two percentage points to 57% (2006: 59%). Staff costs 2007 2006 Â£m Â£m Salaries and accrued incentive payments 6,993 6,635 Social security costs 508 502 Pension costs defined contribution plans 141 128 defined benefit plans 150 282 Other post retirement benefits 10 30 Other 603 592 -------- -------- Staff costs 8,405 8,169 -------- -------- Staff costs increased 3% (Â£236m) to Â£8,405m (2006: Â£8,169m). Salaries and accrued incentive payments rose 5% (Â£358m) to Â£6,993m (2006: Â£6,635m), reflecting increased permanent and fixed term staff worldwide. Defined benefit plans pension costs decreased 47% (Â£132m) to Â£150m (2006: Â£282m). This was mainly due to lower service costs. Staff numbers 2007 2006 UK Banking 41,200 42,600 -------- -------- UK Retail Banking 32,800 34,500 Barclays Commercial Bank 8,400 8,100 -------- -------- Barclaycard 7,800 8,500 International Retail and Commercial Banking 58,300 47,800 -------- -------- International Retail and Commercial Banking-ex Absa 22,100 13,900 International Retail and Commercial Banking-Absa 36,200 33,900 -------- -------- Barclays Capital 16,200 13,200 Barclays Global Investors 3,400 2,700 Barclays Wealth 6,900 6,600 Head office functions and other operations 1,100 1,200 -------- -------- Total Group permanent staff worldwide 134,900 122,600 -------- -------- Staff numbers are shown on a full-time equivalent basis. Total Group permanent and fixed term contract staff comprised 61,900 (31st December 2006: 62,400) in the UK and 73,000 (31st December 2006: 60,200) internationally. UK Retail Banking headcount decreased 1,700 to 32,800 (31st December 2006: 34,500), due to efficiency initiatives in back office operations and the transfer of operations personnel to Barclays Commercial Bank. Barclays Commercial Bank headcount increased 300 to 8,400 (31st December 2006: 8,100) due to the transfer of operations personnel from UK Retail Banking and additional investment in front line staff to drive improved geographical coverage. Barclaycard staff numbers decreased 700 to 7,800 (31st December 2006: 8,500), due to efficiency initiatives implemented across the UK operation and the sale of part of the Monument card portfolio, partially offset by an increase in the International cards businesses. International Retail and Commercial Banking staff numbers increased 10,500 to 58,300 (31st December 2006: 47,800). International Retail and Commercial Banking - excluding Absa staff numbers increased 8,200 to 22,100 (31st December 2006: 13,900) due to growth in the distribution network. International Retail and Commercial Banking - Absa staff numbers increased 2,300 to 36,200 (31st December 2006: 33,900), reflecting growth in the business and distribution network. Barclays Capital staff numbers increased 3,000 to 16,200 (31st December 2006: 13,200) including 800 from the acquisition of EquiFirst. This reflected further investment in the front office, systems development and control functions to support continued business expansion. The majority of organic growth was in Asia Pacific. Barclays Global Investors staff numbers increased 700 to 3,400 (31st December 2006: 2,700). Headcount increased in all geographical regions and across product groups and the support functions, reflecting continued investment to support further growth. Barclays Wealth staff numbers increased 300 to 6,900 (31st December 2006: 6,600) principally due to the acquisition of Walbrook and increased client facing professionals. 9. Share of post-tax results of associates and joint ventures 2007 2006 Â£m Â£m Profit from associates 33 53 Profit/(loss) from joint ventures 9 (7) -------- -------- Share of post-tax results of associates and joint ventures 42 46 -------- -------- The overall share of post-tax results of associates and joint ventures decreased Â£4m to Â£42m (2006: Â£46m). The share of results from associates decreased Â£20m mainly due to the sale of FirstCaribbean International Bank (2006: Â£41m) at the end of 2006, partially offset by an increased contribution from private equity associates. The share of results from joint ventures increased by Â£16m mainly due to the contribution from private equity entities. 10. Profit on disposal of subsidiaries, associates and joint ventures 2007 2006 Â£m Â£m Profit on disposal of subsidiaries, associates and joint ventures 28 323 -------- -------- The profit on disposal in 2007 relates mainly to the disposal of the Group's shareholdings in Gabetti Property Solutions (Â£8m) and Intelenet Global Services (Â£13m). 11. Tax The tax charge for the period was based on a UK corporation tax rate of 30% (2006: 30%). The effective rate of tax for 2007, based on profit before tax, was 28.0% (2006: 27.2%). The effective tax rate differed from 30% as it took account of the different tax rates applied to profits earned outside the UK, non-taxable gains and income and adjustments to prior year tax provisions. The forthcoming change in the UK rate of corporation tax from 30% to 28% on 1st April 2008 led to an additional tax charge in 2007 as a result of its effect on the Group's net deferred tax asset. The tax charge for the year included Â£946m (2006: Â£1,234m) arising in the UK and Â£1,035m (2006: Â£707m) arising overseas. The effective tax rate for 2007 was higher than the 2006 rate, principally because there was a higher level of profit on disposals of subsidiaries, associates and joint ventures offset by losses or exemptions in 2006. 12. Profit attributable to minority interests 2007 2006 Â£m Â£m Absa Group Limited 299 262 Preference shares 198 175 Reserve capital instruments 87 92 Upper tier 2 instruments 16 15 Barclays Global Investors minority interests 40 47 Other minority interests 38 33 -------- -------- Profit attributable to minority interests 678 624 -------- -------- 13. Earnings per share 2007 2006 Profit attributable to equity holders of the parent Â£4,417m Â£4,571m Dilutive impact of convertible options (Â£25m) (Â£30m) -------- -------- Profit attributable to equity holders of the parent including dilutive impact of convertible options Â£4,392m Â£4,541m Basic weighted average number of shares in issue 6,410m 6,357m Number of potential ordinary shares(1) 177m 150m -------- -------- Diluted weighted average number of shares 6,587m 6,507m -------- -------- p p Basic earnings per ordinary share 68.9 71.9 Diluted earnings per ordinary share 66.7 69.8 The calculation of basic earnings per share is based on the profit attributable to equity holders of the parent and the weighted average number of shares excluding own shares held in employee benefit trusts and shares held for trading. The basic and diluted weighted average number of shares in issue in 2007 reflected 336.8 million shares issued on 14th August 2007, 299.5 million of which were repurchased by 31st December 2007. The buyback programme was subsequently completed on 31st January 2008. The weighted average number of shares in issue in 2007 was increased by 54 million shares as a result of this temporary increase. When calculating the diluted earnings per share, the profit attributable to equity holders of the parent is adjusted for the conversion of outstanding options into shares within Absa Group Limited and Barclays Global Investors UK Holdings Limited. The weighted average number of ordinary shares excluding own shares held in employee benefit trusts and shares held for trading, is adjusted for the effects of all dilutive potential ordinary shares, totalling 177 million (2006: 150 million). (1) Potential ordinary shares reflect the dilutive impact of share options outstanding. This information is provided by RNS The company news service from the London Stock Exchange

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Barclays (BARC)

Thursday, 23rd May 2024

COMPANIES COVERED:

HL. QQ. AJB

Another day and another round of takeover talk with Hargreaves Lansdown being eyed by private equity suitors. AJ Bell also advances on upbeat earnings news whilst QinetiQ upgrades its profit guidance, too.

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