Final Results - Part 2

Barclays PLC 12 February 2004 PART 2 Personal Financial Services Personal Financial Services provides a wide range of products and services to 14 million personal customers throughout the United Kingdom, including current accounts, savings, mortgages, consumer loans and general insurance. These are available to customers through integrated channels comprising the branch network, automated teller machines, telephone banking and online banking. Personal Financial Services works closely with other businesses in the Group, in particular Barclays Private Clients, Barclaycard and Business Banking. Within Personal Financial Services, the principal goal has been to do more business with more customers. This has been achieved by building broader and deeper relationships with the existing customer base as well as attracting new customers. There has also been a focus on increasing risk adjusted returns and continuing to strengthen the quality of the lending portfolio. 2003 2002 £m £m Net interest income 1,949 1,834 Net fees and commissions 802 794 Other operating income 358 291 -------- -------- Operating income 3,109 2,919 -------- -------- Operating expenses excluding goodwill (1,789) (1,675) and restructuring costs Restructuring costs (50) (39) -------- -------- Operating expenses excluding goodwill (1,839) (1,714) -------- -------- Operating profit before provisions, excluding goodwill 1,270 1,205 Provisions for bad and doubtful debts (303) (334) -------- -------- Operating profit excluding goodwill 967 871 Profit from associated undertakings 6 3 -------- -------- Profit on ordinary activities before tax excluding goodwill and exceptional items 973 874 -------- -------- Personal Financial Services operating profit excluding goodwill increased 11% (£96m) to £967m (2002: £871m), reflecting good income momentum, continued good cost control and reduced provisions. Operating income increased 7% (£190m) to £3,109m (2002: £2,919m). Net revenue (operating income less provisions) increased 9% to £2,806m (2002: £2,585m). Operating income growth was broadly based: general insurance rose 32%; consumer finance rose 15%; mortgages rose 10%; and current accounts and savings rose 2%. Income from independent financial advice fell 28%. Net interest income increased 6% (£115m) to £1,949m (2002: £1,834m). Growth resulted from higher average product balances and improved asset margins. The retail savings margin remained stable. Consumer finance experienced good growth in average balances, up 6% to £6.8bn (2002: £6.4bn), and improved margins. Sales of the key Barclayloan product were particularly strong, increasing 32%. A significant part of the new consumer loan business was in the better risk grades. Average savings balances increased 6% to £30.9bn (2002: £29.2bn), after transferring some balances to Barclays Private Clients in the second half of 2003. Excluding the impact of the transfer average savings balances increased 9% to £31.8bn (2002: £29.2bn). Barclays branded savings continued to perform strongly, growing 19%. This was a market leading performance driven by Openplan. Average residential mortgage balances increased 8% to £59.0bn (2002: £54.5bn). The selective approach taken to certain sectors of the mortgage market has been maintained throughout 2003. Gross advances were £18.3bn (2002: £22.2bn), a gross market share of 7% (2002: 10%). Net lending of £2.0bn (2002: £6.9bn) represented a net market share of 2% (2002: 9%). UK residential mortgage balances ended the period at £59.8bn (31st December 2002: £57.8bn). The interest spread on new mortgage business increased. Net fees and commissions increased 1% (£8m) to £802m (2002: £794m). Underlying this were good performances from fee based current accounts and consumer finance, largely offset by continued weakness in the independent financial advisor (IFA) business. Other operating income increased by 23% (£67m) to £358m (2002: £291m). This resulted from a strong performance in general insurance activities, reflecting increased sales of personal protection insurance products, and a more favourable claims experience. A one-off income gain of £43m arose through an adjustment to insurance reserves. Contributing to the overall increase in operating income has been the continued success of Openplan. Customer numbers now total 2.6m (2002: 2.0m), with deeper customer relationships evident through significantly higher product penetration and income contribution than for non-Openplan relationships. The percentage of new to Group customers in Openplan has increased. Openplan from Barclays has attracted 1.25m customers (2002: 0.78m) across the UK. Product penetration was an average of 4.6 products per customer, well above the average of 2.6 outside Openplan. Annual customer income was £397, relative to £249 outside Openplan. Openplan from Woolwich customer numbers rose to 1.40m (2002: 1.21m) with average product penetration of 3.2 products per customer relative to 1.5 outside Openplan. Annual customer income was £311, relative to £165 outside Openplan. Operating expenses excluding goodwill rose 7% (£125m) to £1,839m (2002: £1,714m), with around half of the increase attributable to the impact of the pension charge of £40m (2002: credit £20m). Business as usual costs were tightly managed to improve operational efficiency, and staff numbers continued to decline. Headcount fell to 25,800 (2002: 27,200). Strategic investment spend increased. Integration costs associated with the Woolwich integration reduced to £50m (2002: £70m). The cost:income ratio was maintained at 59%. Provisions decreased 9% (£31m) to £303m (2002: £334m), reflecting the overall quality of the lending portfolio, improvements to risk management processes and a reduction in problem loans. Coverage ratios improved. The loan to value ratio within the mortgage book on a current valuation basis averaged 40% (2002: 45%). Barclays Private Clients Barclays Private Clients serves affluent and high net worth clients, primarily in the UK and continental Europe, providing banking and asset management services. The businesses have continued to maintain a strong focus on improving operational efficiency and developing a distinctive customer service. The comparison with the 2002 results is impacted by the Caribbean business being accounted for as an associated undertaking, following the formation of FirstCaribbean on 11th October 2002, and by the acquisitions made during 2003. The retail stockbroking business Charles Schwab Europe was acquired on 31st January 2003. In May 2003, Barclays announced the acquisition of Banco Zaragozano in Spain, which completed in mid July. The acquisition of Gerrard completed in mid December 2003. The contribution recognised from the closed life assurance activities is reported separately to provide increased transparency in the financial reporting within Barclays Private Clients. Barclays Private Clients works closely with other Group businesses, particularly Personal Financial Services, Business Banking, Barclays Global Investors and Barclays Capital, in order to enhance product development and customer service. 2003 2002 £m £m Net interest income 804 788 Net fees and commissions 515 594 Other operating income 31 19 -------- -------- Operating income 1,350 1,401 -------- -------- Operating expenses excluding goodwill and restructuring costs (941) (952) Restructuring costs (50) (44) -------- -------- Operating expenses (991) (996) -------- -------- Operating profit before provisions excluding goodwill 359 405 Provisions for bad and doubtful debts (31) (37) -------- -------- Operating profit - ongoing business 328 368 Profit from associated undertakings 23 (8) -------- -------- Profit on ordinary activities before tax excluding goodwill and exceptional items - ongoing business 351 360 Contribution from closed life assurance activities (77) (87) -------- -------- Profit on ordinary activities before tax excluding goodwill and exceptional items 274 273 -------- -------- Barclays Private Clients operating profit, excluding goodwill, for the ongoing business fell 11% (£40m) to £328m (2002: £368m). Barclays Private Clients, profit before tax excluding goodwill and exceptional items for the ongoing business and including the contribution of FirstCarribean, decreased 3% to £351m (2002: £360m). Net interest income increased 2% (£16m) to £804m (2002: £788m). The increase reflected a resilient core banking performance, the continued success of Openplan in Spain and the inclusion of Banco Zaragozano, which together more than offset the absence of the contribution from the Caribbean business. Average customer deposits increased 5% to £41bn (2002: £39bn), including the transfer of some client savings balances from Personal Financial Services in the second half of 2003. Excluding the impact of the transfer, average customer deposits increased 3% to £40bn (£39bn). Average loans increased 44% to £13bn (2002: £9bn). Margins remained broadly stable. Net fees and commissions decreased 13% (£79m) to £515m (2002: £594m). This reflected the impact of lower average equity market levels in 2003 on sales of investment products and on fund management fees, together with the absence of the contribution from the Caribbean business. The average level of the FTSE 100 Index was 12% lower than in the prior year at 4,051 (2002: 4,599). Fee income improved significantly in the second half of 2003, reflecting volume growth and the recovery in equity markets towards the year-end. Average daily deal volumes in UK retail stockbroking, including Charles Schwab Europe, increased to 8,350 (2002: 6,300). The stockbroking business maintained its leading UK position with a 19% (2002: 12%) market share of client order business. Operating expenses excluding goodwill decreased 1% (£5m) to £991m (2002: £996m). The tight control of costs, together with the impact of the deconsolidation of the Caribbean business, fully mitigated the additional pensions charge of £28m (2002: credit £13m), the inclusion of costs relating to Banco Zaragozano and Charles Schwab Europe, and increased restructuring charges. The cost: income ratio was 73% (2002: 71%). Provisions decreased £6m to £31m (2002: £37m), reflecting the impact of the Caribbean transaction. Total customer funds, comprising customer deposits and assets under management (including assets managed by Legal & General under the strategic alliance), increased £24bn to £109bn (31st December 2002: £85bn). This was due to the inclusion of funds relating to the acquired businesses of Charles Schwab Europe, Banco Zaragozano and Gerrard (which together amounted to £19bn), the impact of new business, favourable exchange rate movements and improved stock market levels. Customer deposits increased by £5bn to £44bn (31st December 2002: £39bn) , reflecting the inclusion of Banco Zaragozano and savings balances of £1.9bn which were transferred from Personal Financial Services in the second half of 2003. Sales of Legal & General life and pensions products have fallen in line with industry trends. Sales of funds and bonds were impacted by reduced customer demand for investment products. Openplan in UK Premier attracted £1.1bn of new mortgage balances together with £1.3bn of additional savings in the year. Income in Spain, excluding Banco Zaragozano, continued to grow significantly in 2003, increasing 22% (£32m) to £179m (2002: £147m). This reflected the continued success of Openplan mortgage products together with favourable exchange rate movements. 15,000 new customers were recruited to Openplan in Spain in 2003. The first benefits of the integration of Banco Zaragozano were evident: sales of non-core assets totalling some £175m, representing 23% of the purchase consideration; progress has been made on the combination of head office functions and technology integration; and Barclays products have been successfully launched into the Banco Zaragozano customer base. The majority of the restructuring costs will be borne in 2004 and 2005. The contribution from the closed life assurance activities, a loss of £77m (2002: loss of £87m), comprises the embedded value of the closed Barclays Life fund and former Woolwich Life fund together with the costs relating to redress for customers in respect of sales of endowment policies. Of the loss of £77m, in the Group's results, £42m is included within other operating income and £35m within net interest income. Total costs relating to customer redress in respect of mortgage endowment policies were £95m (2002: £19m). Barclaycard Barclaycard is one of the leading credit card businesses in Europe. In addition to its operations in the United Kingdom, Barclaycard is active in Germany, Spain, Greece, France, Italy and across Africa. Barclaycard offers a full range of credit card services to individual and corporate customers, together with card payment facilities to retailers and other businesses. Barclaycard continued to grow both its domestic and international businesses through organic and non-organic activity in 2003. In April, Barclaycard purchased the global rights (excluding UK and Singapore) to use the Manchester United credit card brand. Barclaycard has launched a Manchester United branded credit card into five countries. Barclaycard acquired Clydesdale Financial Services, a retailer point of sale finance business in May and, in August, entered into a strategic alliance with the Standard Bank of South Africa. Barclaycard, already established in Spain, is currently working with Banco Zaragozano to accelerate growth in this market. 2003 2002 £m £m Net interest income 1,037 886 Net fees and commissions 793 696 -------- -------- Operating income 1,830 1,582 -------- -------- Operating expenses excluding goodwill and restructuring costs (633) (553) Restructuring costs (13) (12) -------- -------- Operating expenses excluding goodwill (646) (565) -------- -------- Operating profit before provisions excluding goodwill 1,184 1,017 Provisions for bad and doubtful debts (462) (402) -------- -------- Operating profit excluding goodwill 722 615 Profit from joint ventures 2 (4) -------- -------- Profit on ordinary activities before tax excluding goodwill and exceptional items 724 611 -------- -------- Barclaycard operating profit excluding goodwill increased 17% (£107m) to £722m (2002: £615m). Operating income increased 16% (£248m) to £1,830m (2002: £1,582m). Net revenue (operating income less provisions) increased 16% (£188m) to £1,368m (2002: £1,180m). Net interest income increased 17% (£151m) to £1,037m (2002: £886m), due to good growth in UK average extended credit balances, up 14% to £7.4bn (2002: £6.5bn). Growth in new UK customers remained strong, up 27%, with 1,547,000 (2002: 1,218,000) recruited in the period. Net fees and commissions increased 14% (£97m) to £793m (2002: £696m), as a result of higher cardholder activity and good volume growth within the merchant acquiring business. Operating expenses excluding goodwill increased 14% (£81m) to £646m (2002: £565m). The increase reflected higher business volumes and greater marketing activity. Strategic investment spend increased as Barclaycard enhanced operational capabilities. The cost:income ratio improved to 35% (2002: 36%). Provisions increased 15% (£60m) to £462m (2002: £402m), in line with the growth in lending. Barclaycard International made a profit of £4m (2002: loss £14m) whilst maintaining significant ongoing investment in the existing businesses and launching into new markets. Income increased by 48% and average extended credit balances rose by 43%. The number of Barclaycard International cards in issue rose to 1.42m (2002: 1.28m). Business Banking Business Banking provides relationship banking to the Group's large, medium and small business customers in the United Kingdom. Customers are served by a network of relationship and industry sector specialist managers who provide local access to an extensive range of products and services, as well as offering business information and support. Customers are also offered access to business centres in continental Europe and to the products and expertise of other businesses in the Group. The strategy to accelerate business growth is underpinned by the Value Aligned Performance Measurement (VAPM) system which is linked to targets and reward. The VAPM outputs demonstrate the additional value that is generated through the acquisition of new customers, together with the strengthening and the expansion of relationships with existing customers. In accordance with the Competition Commission Inquiry transitional pricing remedy, Business Banking offered qualifying small and medium enterprise customers interest on current accounts, or an alternative of discounted money transmission charges, with effect from 1st January 2003. 2003 2002 £m £m Net interest income 1,665 1,626 Net fees and commissions 925 864 Other operating income 38 24 -------- -------- Operating income 2,628 2,514 -------- -------- Operating expenses excluding goodwill and restructuring costs (1,032) (1,019) Restructuring costs (39) (42) -------- -------- Operating expenses excluding goodwill (1,071) (1,061) -------- -------- Operating profit before provisions excluding goodwill 1,557 1,453 Provisions for bad and doubtful debts (249) (226) -------- -------- Operating profit excluding goodwill 1,308 1,227 Profit from associated undertakings 3 (2) -------- -------- Profit on ordinary activities before tax excluding goodwill amortisation and exceptional items 1,311 1,225 -------- -------- Business Banking operating profit excluding goodwill increased 7% (£81m) to £1,308m (2002: £1,227m), as a result of good income growth, continued tight cost management and well controlled risk. Operating income increased 5% (£114m) to £2,628m (2002: £2,514m). Net revenue (operating income less provisions) increased 4% (£91m) to £2,379m (2002: £2,288m). Net interest income increased 2% (£39m) to £1,665m (2002: £1,626m). Average lending balances increased 11% to £47.0bn (2002: £42.3bn) and average deposit balances increased 5% to £46.2bn (2002: £43.9bn). Lending margins were maintained and lending growth was concentrated towards higher quality large and medium business customers. The impact of the Competition Commission Inquiry transitional pricing remedy and the lower interest rate environment contributed to lower deposit margins. Net fees and commissions increased 7% (£61m) to £925m (2002: £864m), driven by lending related fees which rose strongly, reflecting the growth in the balance sheet. Foreign exchange commission income grew due to increased business volumes. Money transmission income fell as a result of the alternative offer made in response to the Competition Commission Inquiry transitional pricing remedy and the targeted migration of transactions to electronic channels. Operating expenses excluding goodwill increased 1% (£10m) to £1,071m (2002: £1,061m). Business as usual costs reduced, with cost savings from the back office more than offsetting the impact of the pension charge of £50m (2002: credit £26m). Headcount fell to 9,000 (2002: 9,700). Strategic investment spend increased, and was focused on improving direct channels, realising cost savings and enhancing the shared technology infrastructure. The cost:income ratio improved to 41% (2002: 42%). Provisions increased 10% (£23m) to £249m (2002: £226m). The increase was in line with lending growth. The lending portfolio remained well diversified by sector and the overall quality of the portfolio, as defined by risk grade, was maintained. Barclays Africa Barclays Africa provides banking services to personal and corporate customers in North Africa, sub-Saharan Africa and islands in the Indian Ocean. The portfolio comprises banking operations in Botswana, Egypt, Ghana, Kenya, Mauritius, Seychelles, South Africa, Tanzania, Uganda, Zambia and Zimbabwe. The integration of BNPI Mauritius, acquired in November 2002, was completed. Restructuring initiatives continued to reposition the businesses to take account of the economic prospects and situations in the African countries where we operate. Head office functions have largely been relocated from the United Kingdom to South Africa. 2003 2002 £m £m Net interest income 187 160 Net fees and commissions 133 114 Other operating income 5 1 -------- -------- Operating income 325 275 -------- -------- Operating expenses excluding goodwill and restructuring costs (164) (143) Restructuring costs (21) (16) -------- -------- Operating expenses excluding goodwill (185) (159) -------- -------- Operating profit before provisions excluding goodwill 140 116 Provisions for bad and doubtful debts (27) (27) -------- -------- Operating profit excluding goodwill 113 89 Profit from joint ventures - - -------- -------- Profit on ordinary activities before tax excluding goodwill and exceptional items 113 89 -------- -------- Barclays Africa operating profit excluding goodwill increased 27% (£24m) to £113m (2002: £89m) driven by strong customer lending. Operating income increased 18% (£50m) to £325m (2002: £275m). Net interest income increased 17% (£27m) to £187m (2002: £160m), the growth being largely attributable to the acquisition of BNPI Mauritius and expansion in selected markets. There was a 20% increase in customer lending to £1.8bn (2002: £1.5bn) and a 12% rise in customer deposits to £2.8bn (2002: £2.5bn). Net fees and commissions rose 17% (£19m) to £133m (2002: £114m), reflecting growth in fee based services, treasury profits and the impact of the acquisition of BNPI Mauritius in 2002. Operating expenses excluding goodwill increased 16% (£26m) to £185m (2002: £159m), due to increased infrastructure investment, further development of the business and the relocation of Head office functions. The cost:income ratio improved to 57% (2002: 58%). Provisions remained steady at £27m, notwithstanding strong lending growth, and reflected improved portfolio quality and recoveries. Barclays Capital Barclays Capital is the investment banking division of Barclays, providing corporate, institutional and government clients with solutions to their financing and risk management needs. The Barclays Capital business model is distinctive. It focuses on a broad span of financing and risk management services in the interest rate, foreign exchange, commodities and credit markets combined with certain capabilities in equities. Activities are split between two areas: Rates, which includes fixed income, foreign exchange, commodities, emerging markets, money markets sales, trading and research, prime brokerage and equity related activities; and Credit, which includes origination, sales, trading and research relating to loans, debt capital markets, structured capital markets, and private equity. Barclays Capital works increasingly with other Group businesses, including Barclays Private Clients, Business Banking and Barclays Global Investors, to provide a more integrated customer service and to develop business opportunities across the Group. Barclays Capital rose to 4th position (2002: 5th) in the global all debt league table as debt issuance for clients increased to US$199bn (2002: US$162bn). Barclays Capital maintained its lead position in Sterling bonds. 2003 2002 £m £m Net interest income 964 889 Dealing profits 1,042 827 Net fees and commissions 537 463 Other operating income 109 59 -------- -------- Operating income 2,652 2,238 -------- -------- Operating expenses excluding restructuring costs (1,606) (1,312) Restructuring costs (12) (12) -------- -------- Operating expenses (1,618) (1,324) -------- -------- Operating profit before provisions 1,034 914 Provisions for bad and doubtful debts (252) (334) -------- -------- Operating profit 782 580 Profit from associated undertakings 1 1 -------- -------- Profit on ordinary activities before tax 783 581 -------- -------- Barclays Capital operating profit increased 35% (£202m) to £782m (2002: £580m). This was due to very strong operating income growth and the improved credit environment. Revenue related costs increased with the strong performance. Operating income increased 18% (£414m) to a record £2,652m (2002: £2,238m) and reflected broadly based growth across most of the product areas in Rates and Credit. Average DVaR rose 13%, to £26m (2002: £23m). Net revenue (operating income less provisions) increased by 26% to £2,400m (2002: £1,904m). Secondary income, comprising dealing profits and net interest income, and which is primarily generated from providing client risk management and financing solutions, increased 17% (£290m) to £2,006m (2002: £1,716m). Dealing profits grew 26% (£215m) to £1,042m (2002: £827m), driven by significant growth in client transaction volumes, particularly in continental Europe. The strong performance in the Credit businesses, principally in corporate bonds, was due to credit spreads tightening in the secondary bond markets. The growth in Rates businesses reflected good results from equity related activities and money markets. Fixed income, foreign exchange and commodities continued to make good contributions. Net interest income grew 8% (£75m) to £964m (2002: £889m) due to balance sheet growth in higher quality assets, partially offset by margin compression. Corporate lending remained tightly managed and the credit portfolio continued to decline, with drawn credit balances falling to £7bn (31st December 2002: £10bn). Primary income, comprising net fees and commissions, increased 16% (£74m) to £537m (2002: £463m), with good performances across the Credit businesses. Net fees and commissions included £89m (2002: £87m) of internal fees for structured capital markets activities arranged by Barclays Capital. Other operating income increased to £109m (2002: £59m) as a result of a number of private equity and structured capital markets investment realisations. Operating expenses increased 22% (£294m) to £1,618m (2002: £1,324m). Business as usual costs grew as a result of higher business volumes and increased front office headcount. Revenue related costs increased due to the strong financial performance. Strategic investment spend increased as product and distribution development accelerated, particularly in the second half of 2003. The ratio of staff costs to net revenue improved to 53% (2002: 54%). The cost:income ratio rose to 61% (2002: 59%). Provisions fell 25% (£82m) to £252m (2002: £334m). This reflected the ongoing improvement in the quality of the loan book and continued recovery in the large corporate credit environment. Barclays Global Investors Barclays Global Investors is one of the world's largest asset managers and a leading global provider of investment management products and services. Barclays Global Investors offers structured investment strategies such as indexing, tactical asset allocation and risk controlled active products such as hedge funds. The firm also provides related investment services such as securities lending, cash management and portfolio transition services. Barclays Global Investors investment philosophy focuses on managing all dimensions of performance: return, risk and cost. Several important milestones were achieved by 31st December 2003: total assets under management exceeded US$1 trillion, of which more than US$200bn were in actively managed assets; Exchange Traded Funds (ETFs) totalled US$69bn (31st December 2002: US$35bn); and for the first time total revenues exceeded US$1 billion. Barclays Global Investors leading position in ETFs was extended with the launch of eight new funds and it became the largest ETF manager in the world. 2003 2002 £m £m Net interest income 9 12 Net fees and commissions 662 538 Other operating income 1 - -------- -------- Operating income 672 550 -------- -------- Operating expenses excluding goodwill and restructuring costs (473) (439) Restructuring costs (7) - -------- -------- Operating expenses excluding goodwill (480) (439) -------- -------- Operating profit excluding goodwill 192 111 Loss from joint ventures (1) (1) -------- -------- Profit on ordinary activities before tax excluding goodwill 191 110 -------- -------- Barclays Global Investors operating profit excluding goodwill increased 73% (£81m) to £192m (2002: £111m) and reflected very strong top line income growth and good control of costs. Net fees and commissions increased 23% (£124m) to £662m (2002: £538m), reflecting good income generation across a diverse range of products, distribution channels and geographies. The increase was largely driven by growth of investment management fees. These resulted from strong net new sales, growth in the sales of higher margin products, good investment performance and the recovery in equity markets towards the year-end, which more than compensated for the adverse impact of foreign exchange translation movements. Actively managed assets now generate over 60% of management fees and over 50% of total income. Securities lending income growth was good, benefiting from higher volumes. Operating expenses excluding goodwill increased by 9% (£41m) to £480m (2002: £439m), due to higher revenue related costs, partly offset by the impact of foreign exchange translation movements. The cost:income ratio improved to 71% (2002: 80%). Growth in income and costs was constrained by foreign exchange translation movements. Approximately 56% of Barclays Global Investors income was in US Dollars and 31% in Sterling. Total assets under management increased 29% (£136bn) to £598bn (31st December 2002: £462bn). This growth came from £67bn of net new assets and £134bn attributable to market movements, offset by £65bn of adverse exchange rate movements. Assets under management comprise: £410bn (69%) indexed assets; £125bn (21%) active assets; and £63bn (10%) managed cash assets. Head office functions and other operations Head office functions comprise all the Group's central costs, including Group Executive, Group Finance, Marketing and Communications, Human Resources, Group Strategy and Planning, Internal Audit, Marketing, Legal, Corporate Secretariat, Tax, Compliance and Risk. Costs incurred wholly on behalf of the business units are recharged to them. Transition Businesses comprise discontinued South American and Middle Eastern corporate banking businesses and other centrally managed Transition Businesses. These non-core relationships are now being managed separately with the objective of maximising the recovery from the assets concerned. Central items include internal fees charged by Barclays Capital for structured capital markets activities, income from the management of the Group's operational premises, property related services and other central items including activities which support the operating business and provide central information technology services. 2003 2002 1 £m £m Head office functions (136) (109) Transition businesses (25) (121) Central items (78) (48) Restructuring costs (17) (22) -------- -------- Loss on ordinary activities before tax excluding goodwill and exceptional items (256) (300) -------- -------- 1 Comparative figures have been restated to reflect the aggregation of Head office functions and other operations, which were formerly reported separately. Head office functions increased 25% (£27m) to £136m (2002: £109m). This increase included a pension charge of £5m (2002: credit £4m). The improved performance of Transition Businesses, from a loss of £121m to a loss of £25m, primarily reflected a reduced provisions charge of £7m (2002: £132m) in respect of various South American Corporate Banking exposures. Central items include internal fees charged by Barclays Capital for structured capital markets activities of £89m (2002: £87m). Central items increased from £48m to £78m, primarily reflecting a £16m increase in the centrally held information technology services costs. Woolwich integration synergies 2003 2002 £m £m Synergies achieved in the year ending 31st December 2003 were as follows: Gross revenue synergies 244 131 Attributable operating costs (83) (59) -------- -------- Net revenue synergies 161 72 Cost savings 160 104 Avoided costs 1 54 55 -------- -------- Ongoing integration synergies 375 231 One-off benefits 51 72 Tax savings 8 9 -------- -------- Total synergy benefits 434 312 -------- -------- 1 Avoided costs are primarily strategic investment costs which are not required due to the acquisition and integration of Woolwich plc. Total benefits of £434m were achieved by the programme in 2003. These comprise ongoing cost and revenue synergies totalling £375m, significantly ahead of the target of £330m, tax savings of £8m and other gains totalling £51m which were of a one-off nature. The Group expects to realise ongoing synergies of at least £400m per annum from the end of 2004. The 2003 costs of integrating Woolwich plc were £50m (2002: £80m). Economic Capital The Group assesses internal capital requirements using its own risk-based methodologies. These are used in performance assessment and for risk management decision making. The Group computes and assigns this 'economic' capital to all operating units. This enables the Group to apply a common and consistent metric to ensure that returns throughout the Group are commensurate with the associated risks. The total economic capital required by the Group, as determined by its internal risk assessment models and after considering the Group's estimated diversification benefits, is compared with available common shareholders' funds to evaluate overall capital utilisation. Average economic capital by business is set out below: 2003 2002 £m £m Personal Financial Services 2,400 2,100 Barclays Private Clients - ongoing 700 550 - closed life assurance activities 200 300 Barclaycard 1,800 1,500 Business Banking 2,850 2,750 Barclays Africa 200 200 Barclays Capital 2,100 2,050 Barclays Global Investors 150 200 Other operations 1 500 550 -------- -------- Average economic capital 10,900 10,200 Average historical goodwill 5,100 4,700 Capital held at Group centre 2 1,100 900 -------- -------- Total average shareholders' funds including average historical goodwill 17,100 15,800 -------- -------- 1 Includes Transition Businesses. 2 The capital held at Group centre represents the variance between average economic capital by business and average shareholders' funds. Personal Financial Services economic capital allocation has increased by £300m to £2,400m largely due to continued improvements in methodologies for quantification of credit risk for long maturity assets, previously carried at the Group centre. Barclays Private Clients economic capital allocation has increased by £150m to £700m due to the acquisitions of Banco Zaragozano and Charles Schwab Europe. The closed life assurance activities economic capital allocation has reduced by £100m to £200m due to the continued run off of the portfolio and a series of hedges implemented to reduce exposure to equity markets. Barclaycard economic capital allocation has increased by £300m to £1,800m due to continued growth in the loan book and the acquisition of Clydesdale Financial Services. Goodwill has increased with the acquisitions of Charles Schwab Europe, Clydesdale Financial Services, Banco Zaragozano and Gerrard. The Group regularly reviews and updates its economic capital allocation methodologies. A number of enhancements developed during 2003 will be incorporated in 2004. ECONOMIC PROFIT The table below shows the economic profit generated by each business area. 2003 2002 £m £m Personal Financial Services 460 395 Barclays Private Clients - ongoing business 218 202 - closed life assurance activities (51) (80) - Caribbean sale (4) 206 Barclaycard 319 267 Business Banking 623 574 Barclays Africa 36 22 Barclays Capital 320 178 Barclays Global Investors 112 56 Head office functions and other operations 1 (98) (126) -------- -------- 1,935 1,694 Goodwill 2 (442) (398) Variance to average shareholders' funds (73) (59) -------- -------- Economic profit 1,420 1,237 -------- -------- Risk Tendency As shown in the table below, Risk Tendency is £1,390m based on the composition of the lending portfolio as at 31st December 2003 (31st December 2002: £1,375m). Risk Tendency fell in Personal Financial Services by 8% (£30m) to £340m (2002: £370m) as a result of enhanced risk and fraud management strategies. Barclaycard Risk Tendency increased by 21% (£90m) to £525m (2002: £435m), commensurate with the growth in the portfolio and the impact of the acquisition of Clydesdale Financial Services. Risk Tendency has increased in Barclays Private Clients by 44% (£20m) to £65m (2002: £45m) following the acquisition of Banco Zaragozano. Risk Tendency fell in Barclays Capital by 38% (£80m) to £130m (2002: £210m) following the recovery in wholesale credit markets and improvement in the quality of the portfolio. 2003 2002 £m £m Personal Financial Services 340 370 Barclays Private Clients 65 45 Barclaycard 525 435 Business Banking 280 280 Barclays Africa 30 30 Barclays Capital 130 210 Transition businesses 20 5 -------- -------- 1,390 1,375 -------- -------- 1 Includes Transition Business, see page 49. 2 Cost of equity charge on purchased goodwill. ADDITIONAL INFORMATION Group structure changes from 2002 Within Barclays Private Clients, the contribution recognised from the closed life assurance activities is reported separately to provide increased transparency. The Group identified certain non-strategic operations in the Middle East which were previously reported within Barclays Capital. These are now separately managed with the objective of maximising the recovery from the assets concerned. These operations, together with South American Corporate Banking which was separately identified in 2002, and residual balances from other Transition Businesses, are collectively reported as Transition Businesses within Head office functions and other operations. The structural changes in the Group's organisation announced on 9th October 2003 took effect from 1st January 2004. Acquisitions and disposals On 31st January 2003, Barclays acquired the retail stockbroking business Charles Schwab Europe. On 19th May 2003, Barclays completed the acquisition of Clydesdale Financial Services Limited and its holding company Carnegie Holdings Limited, a retailer point of sale finance business. On 16th July 2003, Barclays completed the acquisition of Banco Zaragozano, a Spanish private sector banking group. On 17th December 2003, Barclays acquired Gerrard Management Services Limited ('Gerrard'), a private client discretionary and advisory asset management business. Accounting policies A change in accounting policy arose from the adoption in 2003 of UITF Abstract 37, 'Purchases and sales of own shares', which was issued in October 2003. Group holdings of Barclays PLC shares (excluding shares held in Employee Share Ownership Plan (ESOP) trusts) are accounted for as a deduction in arriving at shareholders' funds, rather than as assets. Purchases and sales of Barclays PLC shares are shown as changes in shareholders' funds. No profits or losses are recognised in respect of dealings in Barclays PLC shares. Comparatives have been restated accordingly. As a result, equity shares and shareholders' funds have been reduced by £4m at 31st December 2002 and by £12m at 31st December 2003. There was no impact on the 2002 or 2003 profit and loss account. The Group is currently considering the implications of UITF Abstract 38, 'Accounting for ESOP trusts', which was issued in December 2003. UITF Abstract 38 requires shares held in ESOP trusts to be accounted for as a deduction in arriving at shareholders' funds, rather than as assets. The charge to the profit and loss account in respect of such shares is based on the intrinsic value of such shares, rather than the book value. UITF Abstract 38 will be implemented by the Group in 2004. There have been no other significant changes to the accounting policies as described in the 2002 Annual Report. Changes in accounting presentation In 2003, the SEC adopted regulations relating to the presentation of financial data which is not based on the Generally Accepted Accounting Principles (GAAP) applied by SEC reporting companies. These regulations are commonly referred to as Regulation G. Barclays has in the past published both Group statutory financial statements, as well as Group and business further analyses which were designed to assist the understanding of underlying operating trends. Commencing with the 2003 year-end results, Barclays will present its Group financial results solely on a GAAP basis, in response to this regulation. As a consequence, goodwill amortisation, restructuring costs and costs directly associated with the integration of Woolwich plc are included in all presentations of Group operating expenses and operating profit, while the profit /(loss) from joint ventures and associates is taken into account below operating profit. In the detailed presentation of business group results, restructuring costs and Woolwich integration costs are included in the calculation of operating expenses and operating profit. Restructuring costs are disclosed separately to provide further transparency. Goodwill amortisation (which is now identified separately in the Group profit and loss account) is not allocated to business groups in the detailed presentation. Goodwill amortisation is reflected in the reconciliation of business group profit before tax on page 66. The prior period presentation has, where appropriate, been restated to conform with current year classification, and the change in accountancy policies discussed above. Share capital The Group manages both its debt and equity capital actively. The Group will seek to renew its authority to buy back ordinary shares at the forthcoming 2004 Annual General Meeting to provide additional flexibility in the management of the Group's capital resources. Group share schemes The independent trustees of the Group's share schemes may make purchases of Barclays PLC ordinary shares in the market at any time or times following this announcement of the Group's results for the purposes of those schemes' current and future requirements. The total number of ordinary shares purchased would not be material in relation to the issued share capital of Barclays PLC. NOTES 1. Loans and advances to banks 2003 2002 Banking business: £m £m United Kingdom 14,315 11,510 Other European Union 1,702 2,154 United States 110 256 Rest of the World 1,143 1,531 -------- -------- 17,270 15,451 Less - provisions (16) (82) -------- -------- 17,254 15,369 Trading business 44,670 42,805 -------- -------- Total loans and advances to banks 61,924 58,174 -------- -------- Of the total loans and advances to banks, placings with banks were £56.5bn at 31st December 2003 (2002: £48.1bn). Placings with banks include reverse repos of £50.4bn (2002: £41.0bn). The majority of the placings have a residual maturity of less than one year. 2. Loans and advances to customers 2003 2002 Banking business - United Kingdom: £m £m Financial institutions 7,721 6,158 Agriculture, forestry and fishing 1,766 1,747 Manufacturing 5,967 6,435 Construction 1,883 1,825 Property 6,341 5,695 Energy and water 1,286 1,290 Wholesale and retail distribution and leisure 8,886 7,858 Transport 2,579 2,366 Postal and communication 476 694 Business and other services 12,030 11,693 Home loans 1 61,905 58,436 Other personal 21,905 21,357 Overseas customers 5,477 6,201 Finance lease receivables 5,587 4,145 -------- -------- Total United Kingdom 143,809 135,900 -------- -------- Banking Business - Overseas: Other European Union 19,027 12,579 United States 3,573 6,138 Rest of the World 4,510 5,599 -------- -------- 27,110 24,316 -------- -------- Total banking loans and advances to customers 170,919 160,216 Less provisions (3,012) (2,916) Less interest in suspense (49) (78) -------- -------- 167,858 157,222 Trading business 58,961 45,176 -------- -------- Total loans and advances to customers 226,819 202,398 -------- -------- 1 Excludes commercial property mortgages Of the total loans and advances to customers, reverse repos were £50.0bn (2002: £42.5bn). The geographic presentation above is based on the office recording the transaction. The UK industry classifications have been prepared at the level of the borrowing entity. This means that a loan to the subsidiary of a major corporation is classified by the industry in which the subsidiary operates even though the parent's predominant business may be in a different industry. 3. Provisions for bad and doubtful debts 2003 2002 £m £m Provisions balance at beginning of year 2,998 2,716 Acquisitions and disposals 62 (11) Exchange and other adjustments (18) (77) Amounts written off (see below) (1,474) (1,220) Recoveries (see below) 113 106 Provisions charged against profit (see below) 1,347 1,484 -------- -------- Provisions balance at end of year 3,028 2,998 -------- -------- Amounts written off United Kingdom (1,175) (950) Other European Union (54) (31) United States (215) (215) Rest of the World (30) (24) -------- -------- Total (1,474) (1,220) -------- -------- Recoveries United Kingdom (95) (88) Other European Union (7) (7) United States (10) (9) Rest of the World (1) (2) -------- -------- Total (113) (106) -------- -------- Provisions charged against profit New and increased specific provisions United Kingdom 1,373 1,210 Other European Union 57 33 United States 118 404 Rest of the World 80 72 -------- -------- Total 1,628 1,719 -------- -------- Releases of specific provisions United Kingdom (146) (81) Other European Union (13) (12) United States (24) (10) Rest of the World (12) (24) -------- -------- Total (195) (127) Recoveries (113) (106) -------- -------- Net specific provisions charge 1,320 1,486 General provision - charge / (release) 27 (2) -------- -------- Net charge to profit 1,347 1,484 -------- -------- Total provisions for bad and doubtful debts at end of year comprise: 2003 2002 £m £m Specific provisions United Kingdom 1,856 1,790 Other European Union 97 84 United States 121 257 Rest of the World 159 130 -------- -------- Total specific provisions 2,233 2,261 General provisions 795 737 -------- -------- 3,028 2,998 -------- -------- The geographic analysis of provisions shown above is based on the location of the office recording the transaction. Provisions raised in the US include amounts in respect of South American Corporate Banking exposures booked in the US. 4. Other assets 2003 2002 £m £m Own shares 99 55 Balances arising from off-balance sheet financial 15,812 13,454 instruments (see note 9) Shareholders' interest in long term assurance fund 478 867 London Metal Exchange warrants and other metals trading 1,290 829 positions Sundry debtors 2,156 1,634 Prepayments and accrued income 3,921 2,982 -------- -------- 23,756 19,821 -------- -------- Own shares represent Barclays PLC shares held in employee benefit trusts where the Group retains the risks and rewards related to those shares. 5. Other liabilities 2003 2002 £m £m Obligations under finance leases payable 110 140 Balances arising from off-balance sheet financial instruments (see note 9) 14,797 11,538 Short positions in securities 49,934 39,940 Current tax 497 641 Sundry creditors 4,159 4,305 Accruals and deferred income 4,983 4,352 Provisions for liabilities and charges 1,015 947 Dividend 879 788 -------- -------- 76,374 62,651 -------- -------- 6. Potential credit risk loans The following table presents an analysis of potential credit risk loans. The geographical presentation is based on the location of the office recording the transaction, and the amounts are stated before deduction of the value of security held, specific provisions carried or interest suspended. Non-performing loans 2003 2002 Summary £m £m Non-accrual loans 2,261 2,542 Accruing loans where interest is being suspended with or without provisions 646 611 Other accruing loans against which provisions have been made 669 677 -------- -------- 3,576 3,830 Accruing loans 90 days overdue, against which no provisions have been made 575 690 Reduced rate loans 4 6 -------- -------- Total non-performing loans 4,155 4,526 -------- -------- Geographical split: Non-accrual loans United Kingdom 1,572 1,557 Other European Union 143 108 United States 383 744 Rest of the World 163 133 -------- -------- Total 2,261 2,542 -------- -------- Accruing loans where interest is being suspended with or without provisions: United Kingdom 559 480 Other European Union 46 35 United States - - Rest of the World 41 96 -------- -------- Total 646 611 -------- -------- Other accruing loans against which provisions have been made: United Kingdom 610 609 Other European Union 33 27 United States - - Rest of the World 26 41 -------- -------- Total 669 677 -------- -------- Sub totals: United Kingdom 2,741 2,646 Other European Union 222 170 United States 383 744 Rest of the World 230 270 -------- -------- Total 3,576 3,830 -------- -------- Accruing loans 90 days overdue, against which no provisions have been made: United Kingdom 566 687 Other European Union 9 3 United States - - Rest of the World - - -------- -------- Total 575 690 -------- -------- £m £m Reduced rate loans: United Kingdom 4 4 Other European Union - - United States - - Rest of the World - 2 ------- -------- Total 4 6 ------- -------- Total non-performing loans: United Kingdom 3,311 3,337 Other European Union 231 173 United States 383 744 Rest of the World 230 272 -------- -------- Total 4,155 4,526 -------- -------- Potential problem loans: United Kingdom 1,139 994 Other European Union 23 - United States 259 241 Rest of the World 56 69 -------- -------- Total 1,477 1,304 -------- -------- 2003 2002 Provision coverage of non-performing loans : % % United Kingdom 77.6 74.2 Other European Union 71.4 61.8 United States 39.2 43.7 Rest of the World 83.9 61.8 Total 74.1 68.0 Provision coverage of total potential credit risk loans: United Kingdom 57.7 57.2 Other European Union 65.0 61.8 United States 23.4 33.0 Rest of the World 67.5 49.3 Total 54.6 52.8 2003 2002 Interest forgone on non-performing loans: £m £m Interest income that would have been recognised under original contractual terms 312 275 Interest income included in profit (47) (22) -------- -------- Interest forgone 265 253 -------- -------- The geographical coverage ratios include an allocation of general provisions. UK non-performing loans decreased by 1% (£26m) to £3,311m (31st December 2002: £3,337m). Other European Union non-performing loans increased by 34% (£58m) to £231m (31st December 2002: £173m) reflecting growth in the portfolio including from acquisitions. US non-performing loans decreased by 49% (£361m) to £383m (31st December 2002: £744m) as the exposures in this category were written off, restructured, upgraded, sold or otherwise worked out at a faster rate than new non-performing loans arose. In the Rest of the World non-performing loans decreased by 15% (£42m) to £230m (31st December 2002: £272m). The coverage of non-performing loans by the Group's stock of provisions and interest in suspense increased to 74.1% (31st December 2002: 68.0%). The coverage of total potential credit risk lendings increased to 54.6% (31st December 2002: 52.8%). 7. Legal proceedings Proceedings have been brought in the United States against a number of defendants including Barclays following the collapse of Enron. In each case the claims are against groups of defendants and it is not possible to estimate Barclays possible loss, if any, in relation to them. Barclays considers that the claims against it are without merit and is defending them vigorously. A court ordered mediation commenced in September 2003 but no material progress has been made towards a resolution of the litigation. Barclays is engaged in various other litigation proceedings both in the United Kingdom and a number of overseas jurisdictions, including the United States, involving claims by and against it, which arise in the ordinary course of business. Barclays does not expect the ultimate resolution of any of the proceedings to which Barclays is party to have a significant adverse effect on the financial position or profitability of the Group. 8. Contingent liabilities and commitments 2003 2002 Contingent liabilities £m £m Acceptances and endorsements 671 2,589 Guarantees and assets pledged as collateral security 24,596 16,043 Other contingent liabilities 8,427 7,914 -------- -------- 33,694 26,546 -------- -------- Commitments Standby facilities, credit lines and other commitments 114,847 101,378 -------- -------- 9. Derivatives The tables set out below analyse the contract or underlying principal amounts of derivative financial instruments held for trading purposes and for the purposes of managing the Group's structural exposures. Foreign exchange derivatives 2003 2002 Contract or underlying principal amount £m £m Forward foreign exchange 310,319 271,646 Currency swaps 207,364 159,132 Other exchange rate related contracts 167,643 64,399 --------- --------- 685,326 495,177 --------- --------- Interest rate derivatives Contract or underlying principal amount Interest rate swaps 2,944,310 2,164,312 Forward rate agreements 381,511 180,043 OTC options bought and sold 842,630 592,137 Other interest rate related contracts 2,051,161 788,878 --------- --------- 6,219,612 3,725,370 --------- --------- Credit derivatives 47,450 18,401 --------- --------- Equity, stock index and commodity derivatives Contract or underlying principal amount 171,939 110,205 --------- --------- Other exchange rate related contracts are primarily over the counter (OTC) options. Other interest rate related contracts are primarily exchange traded options, futures and swaps. Derivatives entered into as trading transactions, together with any associated hedging thereof, are measured at fair value and the resultant profits and losses are included in dealing profits. The tables below summarise the positive and negative fair values of such derivatives, including an adjustment for netting where the Group has the ability to insist on net settlement which is assured beyond doubt, based on a legal right that would survive the insolvency of the counterparty. 2003 2002 £m £m Positive fair values Foreign exchange derivatives 17,129 10,639 Interest rate derivatives 51,776 62,942 Credit derivatives 797 660 Equity, stock index and commodity derivatives 4,722 2,750 Effect of netting (55,030) (60,327) Cash collateral meeting offset criteria (3,582) (3,210) -------- -------- 15,812 13,454 -------- -------- Negative fair values Foreign exchange derivatives 18,393 11,281 Interest rate derivatives 49,735 61,332 Credit derivatives 584 106 Equity, stock index and commodity derivatives 5,733 2,778 Effect of netting (55,030) (60,327) Cash collateral meeting offset criteria (4,618) (3,632) -------- -------- 14,797 11,538 -------- -------- 10. Market risk The Group's policy is that the market risks associated with the Group's business activities are clearly identified, assessed and controlled within agreed limits and that the market risks arising from trading activities are concentrated in Barclays Capital. The Group uses a 'value at risk' measure as the primary mechanism for controlling market risk. Daily Value at Risk (DVaR) is an estimate, with a confidence level of 98%, of the potential loss which might arise if the current positions were to be held unchanged for one business day. Daily losses exceeding the DVaR figure are likely to occur, on average, twice in every one hundred business days. Actual outcomes are monitored regularly to test the validity of the assumptions made in the calculation of DVaR. Analysis of Barclays Capital's market risk exposures Barclays Capital's market risk exposure increased in 2003. The credit businesses incurred additional credit spread risk, primarily due to growing client business in corporate bonds and credit derivatives. The daily average, maximum and minimum values of DVaR were estimated as below: Twelve months to 31st December 2003 Average High 1 Low 1 £m £m £m Interest rate risk 21.0 34.1 13.6 Credit spread risk 16.2 29.2 8.9 Foreign exchange risk 2.3 5.0 1.0 Equities risk 2.6 4.9 1.5 Commodities risk 4.4 7.0 2.2 Diversification effect (20.6) n/a n/a -------- -------- -------- Total DVaR 2 25.9 38.6 17.6 -------- -------- -------- Twelve months to 31st December 2002 Average High 1 Low 1 £m £m £m Interest rate risk 21.7 34.5 10.0 Credit spread risk 9.4 12.5 6.0 Foreign exchange risk 2.9 4.4 1.9 Equities risk 3.6 5.4 2.1 Commodities risk 1.8 3.3 0.8 Diversification effect (16.2) n/a n/a -------- -------- -------- Total DVaR 2 23.2 35.7 13.4 -------- -------- -------- 1 The high (and low) DVaR figures reported for each category did not necessarily occur on the same day as the high (and low) DVaR reported as a whole. Consequently a diversification effect number for the high (and low) DVaR figures would not be meaningful and it is therefore omitted from the above table. 2 The year-end Total DVaR for 2003 was £37.2m (2002: £25.8m). CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS 2003 2002 restated £m £m At beginning of year 15,201 14,485 Proceeds of shares issued (net of expenses) 149 135 Exchange rate translation differences (29) (61) Repurchase of ordinary shares * (204) (546) Goodwill written back on disposals - 10 Shares issued to the QUEST in relation to share option schemes for staff (36) (48) (Loss)/gain arising from transactions with third parties (4) 206 Increase in Treasury shares (8) (4) Profit retained 1,404 1,024 -------- -------- At end of year 16,473 15,201 -------- -------- *Including nominal amount of £12m (2002: £30m) STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2003 2002 £m £m Profit attributable to the members of Barclays PLC 2,744 2,230 Exchange rate translation differences (4) (61) (Loss)/gains arising from transactions with third parties (4) 206 Joint ventures and associated undertakings (22) 2 Other items (3) 8 -------- -------- Total recognised gains and losses relating to the year 2,711 2,385 Prior year adjustment - (23) -------- -------- Total gains and losses recognised in the year 2,711 2,362 -------- -------- SUMMARY CONSOLIDATED CASH FLOW STATEMENT 2003 2002 £m £m Net cash (outflow)/inflow from operating activities (2,290) 6,747 Dividends received from joint ventures and associated undertakings 7 1 Net cash outflow from returns on investment and servicing of finance (620) (630) Tax paid (910) (828) Net cash inflow / (outflow) from capital expenditure and financial investment 1,432 (6,756) Net cash outflow from acquisitions and disposals (930) (612) Equity dividend paid (1,249) (1,146) -------- -------- Net cash outflow before financing (4,560) (3,224) Net cash inflow from financing 4,188 2,017 -------- -------- Decrease in cash (372) (1,207) -------- -------- AVERAGE BALANCE SHEET AND NET INTEREST INCOME 2003 2002 Average Average Average Average Balance Interest Rate Balance Interest Rate Assets £m £m % £m £m % Treasury bills and other eligible bills: In offices in the UK 4,048 121 3.0 4,496 158 3.5 In offices outside the UK 1,222 66 5.4 960 66 6.9 Loans and advances to banks: In offices in the UK 14,012 574 4.1 12,560 561 4.5 In offices outside the UK 4,272 108 2.5 5,535 161 2.9 Loans and advances to customers: In offices in the UK 135,373 7,804 5.8 126,306 7,712 6.1 In offices outside the UK 26,323 1,136 4.3 25,896 1,132 4.4 Lease receivables: In offices in the UK 4,520 215 4.8 4,245 209 4.9 In offices outside the UK 265 19 7.2 222 15 6.8 Debt securities: In offices in the UK 58,435 2,174 3.7 40,115 1,790 4.5 In offices outside the UK 4,267 210 4.9 4,843 240 5.0 ------------------ ------- ------- ------- ------- ------- ------- Average assets of banking business 252,737 12,427 4.9 225,178 12,044 5.3 Average assets of trading business 189,446 5,001 2.6 160,647 4,372 2.7 ------------------ ------- ------- ------- ------- ------- ------- Total average interest earning assets 442,183 17,428 3.9 385,825 16,416 4.2 Provisions (2,796) (2,808) Non-interest earning assets 53,428 46,753 ------------------ ------- ------- ------- ------- ------- ------- Total average assets and Interest income 492,815 17,428 3.5 429,770 16,416 3.8 ------------------ ------- ------- ------- ------- ------- ------- Percentage of total average assets in offices outside the UK 26.6% 27.2% ------------------ ------- ------- ------- ------- ------- ------- Average interest earning assets and net interest income: Banking business 252,737 6,606 2.6 225,178 6,188 2.7 Trading business 189,446 68 0.0 160,647 75 0.0 Non margin interest (2) - 17 - ------------------ ------- ------- ------- ------- ------- ------- Total average interest earning assets and net interest income 442,183 6,672 1.5 385,825 6,280 1.6 ------------------ ------- ------- ------- ------- ------- ------- Total average interest earning assets related to: Interest income 17,428 3.9 16,416 4.2 Interest expense (10,754) (2.4) (10,153) (2.6) Non margin interest (2) 17 - ------------------ ------- ------- ------- ------- ------- ------- 6,672 1.5 6,280 1.6 ------------------ ------- ------- ------- ------- ------- ------- 1 Loans and advances to customers and banks include all doubtful lendings, including non-accrual lendings. Interest receivable on such lendings has been included to the extent to which either cash payments have been received or interest has been accrued in accordance with the income recognition policy of the Group. 2 Average balances are based upon daily averages for most UK banking operations and monthly averages elsewhere. 3 The average balance sheet does not include the retail life-fund assets attributable to policyholders nor the related liabilities. 2003 2002 Average Average Rate Average Average Balance Interest Balance Interest Rate Liabilities and £m £m % £m £m % shareholders' funds Deposits by banks: In offices in the UK 40,959 993 2.4 31,880 987 3.1 In offices outside the UK 10,100 184 1.8 8,908 200 2.2 Customer accounts - demand accounts: In offices in the UK 18,788 170 0.9 16,260 164 1.0 In offices outside the UK 3,497 48 1.4 1,846 27 1.5 Customer accounts - savings accounts: In offices in the UK 45,565 999 2.2 41,722 982 2.4 In offices outside the UK 813 26 3.2 1,262 32 2.5 Customer accounts - Other time deposits - retail: In offices in the UK 35,228 1,171 3.3 40,075 1,303 3.3 In offices outside the UK 3,678 103 2.8 5,479 139 2.5 Customer accounts - Other time deposits - wholesale: In offices in the UK 57,364 1,634 2.8 35,607 1,175 3.3 In offices outside the UK 8,193 247 3.0 7,959 231 2.9 Debt securities in issue: In offices in the UK 34,811 949 2.7 28,596 1,061 3.7 In offices outside the UK 11,906 244 2.0 11,728 339 2.9 Dated and undated loan capital and other subordinated liabilities Principally in offices in the UK 12,312 684 5.6 11,012 645 5.9 Internal funding of trading business (58,436) (1,631) (2.8) (42,626) (1,429) (3.4) -------------------- ------- ------- ------- ------- ------- ------- Average liabilities of banking business 224,778 5,821 2.6 199,708 5,856 2.9 Average liabilities of trading business 191,240 4,933 2.6 162,858 4,297 2.6 -------------------- ------- ------- ------- ------- ------- ------- Total average interest bearing liabilities 416,018 10,754 2.6 362,566 10,153 2.8 Interest free customer deposits: In offices in the UK 13,819 11,614 In offices outside the UK 1,260 2,132 Other non-interest bearing liabilities 45,276 38,172 Minority interests and shareholders' funds 16,442 15,286 -------------------- ------- ------- ------- ------- ------- ------- Total average liabilities, shareholders' funds and interest expense 492,815 10,754 2.2 429,770 10,153 2.4 -------------------- ------- ------- ------- ------- ------- ------- Percentage of total average non-capital liabilities in offices outside the UK 23.1% 25.5% -------------------- ------- ------- ------- ------- ------- ------- OTHER INFORMATION Financial Summary 2003 2002 2001 2000 1999 restated £m £m £m £m £m Profit before tax 3,845 3,205 3,425 3,392 2,478 Profit after tax 2,769 2,250 2,482 2,491 1,823 Total capital resources 29,095 26,894 24,606 21,153 13,442 p p p p p Earnings per ordinary share 42.3 33.7 36.8 40.4 29.6 Fully diluted earnings per share issue 42.1 33.4 36.4 40.0 29.2 Dividends per ordinary share 20.5 18.35 16.625 14.5 12.5 Net asset value per ordinary share 251 231 217 198 142 Dividend cover (times) 2.1 1.8 2.2 2.8 2.4 Capital ratios: % % % % % Equity Tier 1 ratio 6.5 6.6 6.6 6.2 7.5 Tier 1 ratio 7.9 8.2 7.8 7.2 7.5 Risk asset ratio 12.8 12.8 12.5 11.0 11.3 Performance ratios Return on average shareholders' % % % % % funds: Pre-tax 23.5 21.0 23.9 33.8 29.2 Post-tax 16.9 14.7 17.4 24.8 21.5 Return on average total assets: Pre-tax 0.8 0.7 0.9 1.1 1.0 Post-tax 0.6 0.5 0.6 0.8 0.7 Return on average weighted risk assets: Pre-tax 2.1 1.9 2.2 2.6 2.2 Post-tax 1.5 1.4 1.6 1.9 1.6 Non interest income/total income: 46.8 45.2 46.5 46.2 44.9 Operating expenses/total income: 58.4 58.5 58.9 57.8 61.3 PROFIT BEFORE TAX EXCLUDING GOODWILL AMORTISATION AND EXCEPTIONAL ITEMS Half-year 31.12.03 30.06.03 31.12.02 30.06.02 £m £m £m £m Personal Financial Services 488 485 447 427 Barclays Private Clients - ongoing 183 168 120 240 - closed life assurance activities (31) (46) (61) (26) Barclaycard 347 377 302 309 Business Banking 656 655 597 628 Barclays Africa 55 58 46 43 Barclays Capital 369 414 211 370 Barclays Global Investors 100 91 50 60 Head office functions and other operations (146) (110) (134) (166) -------- -------- -------- -------- Profit before tax excluding goodwill amortisation and exceptional items 2,021 2,092 1,578 1,885 Exceptional items 5 (1) (3) - -------- -------- -------- -------- Profit before tax excluding goodwill amortisation 2,026 2,091 1,575 1,885 Goodwill relating to associated undertakings (4) (3) (1) - Goodwill amortisation (140) (125) (124) (130) -------- -------- -------- -------- Profit before tax 1,882 1,963 1,450 1,755 -------- -------- -------- -------- 31.12.03 30.06.03 31.12.02 30.06.02 TOTAL ASSETS restated restated -------------- Personal Financial Services 74,786 73,584 71,871 67,877 Barclays Private Clients - ongoing 20,529 15,392 13,087 13,859 - closed life assurance activities 528 862 929 950 Barclaycard 12,278 11,412 10,669 10,278 Business Banking 52,112 51,182 47,315 44,509 Barclays Africa 3,051 2,776 2,632 2,366 Barclays Capital 263,169 274,559 236,468 230,511 Barclays Global Investors 533 607 494 389 Head office functions and other operations 3,892 4,841 8,379 7,035 Goodwill 4,406 3,867 3,934 4,055 Retail life-fund assets 8,077 7,642 7,284 7,879 -------- -------- -------- -------- 443,361 446,724 403,062 389,708 -------- -------- -------- -------- WEIGHTED RISK ASSETS ---------------------- Personal Financial Services 42,426 41,879 41,100 38,673 Barclays Private Clients 15,129 12,668 11,713 9,856 Barclaycard 9,806 9,584 10,005 9,756 Business Banking 54,964 53,640 50,449 47,159 Barclays Africa 2,225 1,980 1,892 1,672 Barclays Capital 61,285 58,067 53,496 53,974 Barclays Global Investors 1,137 1,083 666 636 Head office functions and other operations 2,025 2,513 3,427 3,442 -------- -------- -------- -------- 188,997 181,414 172,748 165,168 -------- -------- -------- -------- RECONCILIATION OF PROFIT BEFORE TAX AND TOTAL ASSETS The presentation in this document of the results of individual businesses excludes goodwill amortisation and exceptional items. Barclays believes that this is a better measurement of the day to day performance of its businesses, and it is the basis upon which business performance is managed internally. The tables below reconcile certain of the non GAAP numbers in the presentation of the results of the businesses to the relevant UK GAAP numbers, which will be reported in the Annual Report for 2003. PROFIT BEFORE TAX 2003 2002 ---------------------------------------------------------------------------- Excluding Goodwill Profit Excluding Goodwill Profit goodwill and before goodwill and before and exceptional tax and exceptional tax exceptional Items exceptional Items items items £m £m £m £m £m £m Personal Financial Services 973 (152) 821 874 (162) 712 Barclays Private Clients - ongoing business 351 (58) 293 360 (47) 313 - closed life assurance activities (77) - (77) (87) - (87) Barclaycard 724 (33) 691 611 (20) 591 Business Banking 1,311 (10) 1,301 1,225 (15) 1,210 Barclays Africa 113 (1) 112 89 (1) 88 Barclays Capital 783 - 783 581 (2) 579 Barclays Global Investors 191 (12) 179 110 (13) 97 Head office functions and other operations (256) (2) (258) (300) 2 (298) Exceptional items 4 (4) - (3) 3 - Goodwill relating to associated undertakings (7) 7 - (1) 1 - Goodwill amortisation (265) 265 - (254) 254 - -------- -------- -------- -------- -------- -------- Profit before tax 3,845 - 3,845 3,205 - 3,205 -------- -------- -------- -------- -------- -------- TOTAL ASSETS 2003 2002 ---------------------------------------------------------------------------- Excluding Goodwill Total Excluding Goodwill Total goodwill assets goodwill assets £m £m £m £m £m £m Personal Financial Services 74,786 2,543 77,329 71,871 2,697 74,568 Barclays Private Clients - ongoing 20,529 1,429 21,958 13,087 807 13,894 - closed life assurance activities 528 - 528 929 - 929 Barclaycard 12,278 207 12,485 10,669 200 10,869 Business Banking 52,112 49 52,161 47,315 54 47,369 Barclays Africa 3,051 11 3,062 2,632 9 2,641 Barclays Capital 263,169 - 263,169 236,468 - 236,468 Barclays Global Investors 533 162 695 494 162 656 Head office functions and other operations 3,892 5 3,897 8,379 5 8,384 Goodwill 4,406 (4,406) - 3,934 (3,934) - Retail life-fund assets 8,077 - 8,077 7,284 - 7,284 -------- -------- -------- -------- -------- -------- 443,361 - 443,361 403,062 - 403,062 -------- -------- -------- -------- -------- -------- CONSOLIDATED PROFIT AND LOSS ACCOUNT Half-year 31.12.03 30.06.03 31.12.02 30.06.02 £m £m £m £m Interest receivable 6,334 6,093 6,007 6,037 Interest payable (2,966) (2,857) (2,935) (2,904) -------- -------- -------- -------- Net interest income 3,368 3,236 3,072 3,133 -------- -------- -------- -------- Net fees and commissions receivable 2,233 2,030 1,961 1,964 Dealing profits 524 530 320 513 Other operating income 293 197 240 124 -------- -------- -------- -------- Total non-interest income 3,050 2,757 2,521 2,601 -------- -------- -------- -------- Operating income 6,418 5,993 5,593 5,734 -------- -------- -------- -------- Administration expenses - staff costs (2,269) (2,026) (1,877) (1,878) Administration expenses - other (1,312) (1,092) (1,213) (1,099) Depreciation (145) (144) (147) (156) Goodwill amortisation (140) (125) (124) (130) -------- -------- -------- -------- Operating expenses (3,866) (3,387) (3,361) (3,263) -------- -------- -------- -------- Operating profit before provisions 2,552 2,606 2,232 2,471 -------- -------- -------- -------- Provisions for bad and doubtful debts (695) (652) (771) (713) Provisions for contingent liabilities 1 - (2) 1 -------- -------- -------- -------- Operating profit 1,858 1,954 1,459 1,759 Income / (loss) from joint ventures and associated undertakings 19 10 (6) (4) Exceptional items 5 (1) (3) - -------- -------- -------- -------- Profit on ordinary activities before tax 1,882 1,963 1,450 1,755 Tax on profit on ordinary activities (509) (567) (446) (509) -------- -------- -------- -------- Profit on ordinary activities after tax 1,373 1,396 1,004 1,246 Minority interests (equity and non-equity) (12) (13) (11) (9) -------- -------- -------- -------- Profit attributable to the members of Barclays PLC 1,361 1,383 993 1,237 Dividends (883) (457) (787) (419) -------- -------- -------- -------- Profit retained for the financial period 478 926 206 818 -------- -------- -------- -------- Earnings per ordinary share 21.0p 21.3p 15.1p 18.6p Dividend per ordinary share Interim: - 7.05p - 6.35p Final: 13.45p - 12.00p - Registered office 54 Lombard Street, London, EC3P 3AH, England, United Kingdom. Tel: 020 7699 5000. Company number: 48839. Website www.barclays.com Registrar The Registrar to Barclays PLC, The Causeway, Worthing BN99 6DA. Tel: 0870 609 4535. Listing The principal trading market for Barclays PLC ordinary shares is the London Stock Exchange. Ordinary shares are also listed on the New York Stock Exchange and the Tokyo Stock Exchange. Trading on the New York Stock Exchange is in the form of ADSs under the ticker symbol 'BCS'. Each ADS represents four ordinary shares of 25p each and is evidenced by an ADR. The ADR depositary is The Bank of New York whose international telephone number is +1-610-312-5315, whose domestic telephone number is +1-888-269-2377 and whose address is 22nd Floor, 101 Barclay Street, New York, NY 10286. Filings with the SEC Statutory accounts for the year ended 31st December 2003, which also include certain information required for the joint Annual Report on Form 20-F of Barclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission (SEC), can be obtained from Corporate Communications, Barclays Bank PLC, 200 Park Avenue, New York, NY 10166 or from the Head of Investor Relations at Barclays registered office address, shown above, once they have been published in mid-March. Once filed with the SEC, copies of the Form 20-F will also be available from the SEC's website (www.sec.gov). Results timetable Ex dividend date: Wednesday 25th February 2004 Dividend record date: Friday 27th February 2004 2004 Annual General Meeting: Thursday 29th April 2004 Dividend payment date: Friday 30th April 2004 2004 Interim pre close date: Thursday 27th May 2004 2004 Interim results announcement: Thursday 5th August 2004 For further information, please contact: Naguib Kheraj Group Finance Director +44 (0)20 7699 5000 - Switchboard Cathy Turner Head of Investor Relations +44 (0)20 7699 3638 - Direct Line James S. Johnson Senior Manager, Investor Relations +44 (0)20 7699 4525 - Direct Line Leigh Bruce Corporate Communications Director +44 (0)20 7699 2658 - Direct Line Chris Tucker Public Relations Director +44 (0)20 7699 3161 - Direct Line More information on Barclays, including the 2003 results, can be found on our website at the following address: http://www.investorrelations.barclays.co.uk -------------------------- This information is provided by RNS The company news service from the London Stock Exchange

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