Interim Results - Part 2

Barclays PLC 7 August 2003 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, 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 goal is to build broader and deeper customer relationships with the existing customer base as well as attracting new customers. This will be achieved by a focus on increasing customer value along with a continued commitment to improving customer service standards. Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Net interest income 977 917 917 Net fees and commissions 389 397 397 Other operating income 158 169 122 Operating income 1,524 1,483 1,436 Operating costs (829) (816) (789) Provisions for bad and doubtful debts (163) (161) (173) Profit from joint ventures 2 2 1 Operating profit 534 508 475 Restructuring costs (27) (21) (18) Woolwich Integration costs (22) (40) (30) Profit before tax and exceptional items 485 447 427 Personal Financial Services operating profit increased by 12% (£59m) to £534m (2002: £475m) reflecting income momentum, cost control and the benefits of improved credit management. Operating income was up 6% (£88m) to £1,524m (2002: £1,436m). The continued success in rolling out Openplan across the business has contributed to higher income. Net revenue (operating income less provisions) increased 8% to £1,361m (2002: £1,263m). Stronger volumes and active margin management helped drive improvements in income. This was broadly based, with revenue growth in evidence across the major business activities within Personal Financial Services. The increase in income was particularly strong within general insurance and consumer finance activities, 21% and 14% respectively. Income from the mortgage business increased by 12%. Income from current account and savings activities increased by 5%. Income from independent financial advice declined 40%. Net interest income increased by 7% (£60m) to £977m (2002: £917m) reflecting the positive impact of higher balances and improved asset margins. Consumer finance performance was driven by higher average balances, rising 6% to £6.7bn (2002: £6.3bn), and improved margins. In the key Barclayloan product, sales volumes were significantly higher than in the same period in 2002. A focus on credit management has reduced potential problem loans. Average savings balances increased 11% year on year to £31.5bn (2002: £28.4bn) with Barclays branded savings growing at 23%. The number of savings accounts increased by 13% to 10.7m (2002: 9.5m). Savings margins stabilised, reflecting active management of the product mix. Total Openplan saving balances exceeded £20bn, with the average balance per customer being significantly higher than outside Openplan. Average mortgage balances increased 11% year on year to £59.5bn (2002: £53.4bn). The margin on new business improved compared with the first half of 2002. This had an impact on mortgage volumes. UK mortgage gross advances were £8.8bn (2002: £11.1bn), a market share of 7%. Net lending of £1.1bn is lower than the first half of 2002 (2002: £3.9bn), a market share of 3% (2002: 11%), as a more cautious stance was adopted in specific areas of the mortgage market. UK mortgage balances ended the period at £59.8bn (31st December 2002: £58.7bn). Net fees and commissions fell 2% to £389m (2002: £397m), principally caused by a weaker performance in the independent financial advisor (IFA) business. Income from value-added, fee-based current accounts continued to rise. Other operating income increased 30% (£36m) to £158m (2002: £122m). Of the increase in other operating income, £18m resulted from a revision of the estimated amounts expected to be repaid on banking liabilities. There was also a significant increase in the contribution from general insurance activities, reflecting strong sales of personal protection insurance products, and a more favourable claims experience. The Openplan proposition now has 2.4m customers (31st December 2002: 2.0m). Openplan offers fully integrated banking and delivers tangible benefits to customers. It continued to be highly successful in attracting new customers and retaining existing customers. There is evidence that Openplan facilitates the development of a deeper and more enduring customer relationship through higher product penetration and lower attrition rates, leading to higher income per customer. As the proposition has matured, a greater percentage of new to Group customers have been recruited. Fully launched in April 2002, Openplan from Barclays had attracted 1.1m customers across the UK. Product penetration was 4.4 products per customer, well above the average of 2.6 outside Openplan. Annual customer revenue is £380 relative to £212 outside Openplan. Openplan from Woolwich customer numbers rose to 1.3m (2002: 1.1m) and product penetration increased to 3.3 (2002: 3.2). Annual customer revenue is £307 relative to £146 outside Openplan. Operating costs rose by 5% (£40m) to £829m (2002: £789m). The increase in costs was largely attributable to the impact of the pension charge, which was £20m (2002: credit £10m). The underlying costs of the business were tightly managed to improve operational efficiency and were broadly flat despite higher business volumes. Staff numbers declined in the period as the benefits of the new organisational design and other efficiency initiatives were realised. Cost savings are being re-invested in the franchise to deliver performance improvements. The cost:income ratio improved to 54% (2002: 55%). Provisions decreased by 6% (£10m) to £163m (2002: £173m), reflecting the improved quality of the lending portfolio and improvements to the collections and fraud processes. This reduction has been achieved prudently, coverage ratios were consistent with year end 2002. Latest loan to value ratios within the mortgage book averaged 40%. 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 development of an integrated business model, covering both banking and investment services, has continued in 2003, with a strong focus on improving operational efficiency and the provision of distinctive customer service. On 31st January 2003, the retail stockbroking business Charles Schwab Europe was acquired. On 8th May 2003, Barclays announced the acquisition of Banco Zaragozano in Spain which was completed on the 16th July 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. The line by line comparison with the first half of 2002 was impacted by the Caribbean businesses being accounted for as an associated undertaking following the formation of FirstCaribbean on 11th October 2002. Barclays Private Clients works closely with other Group businesses, particularly Barclays Global Investors, Personal Financial Services, Business Banking and Barclays Capital, in order to enhance product development and customer service. Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Net interest income 361 380 408 Net fees and commissions 240 269 325 Other operating income 13 4 15 Operating income 614 653 748 Operating costs (430) (460) (484) Provisions for bad and doubtful debts (16) (19) (18) Profit/(loss) from associated undertakings 9 (9) - Operating profit - ongoing business 177 165 246 Restructuring costs (9) (39) (5) Woolwich Integration costs - (7) (1) Profit before tax and exceptional items 168 119 240 - ongoing business Contribution from closed life assurance activities (46) (61) (26) Profit before tax and exceptional items 122 58 214 Barclays Private Clients operating profit for the ongoing business decreased 28% (£69m) to £177m (2002: £246m), primarily driven by a fall in net fees and commissions of £85m and also a decline in net interest income of £47m. Despite the recent recovery, the equity markets were significantly lower than in the first half of 2002 which impacted customer appetite globally for investment products. Performance in banking activities was at a similar level to the first half of 2002. Net interest income decreased 12% (£47m) to £361m (2002: £408m). The decrease was wholly attributable to the absence of the contribution of the Caribbean. The impact of increased income generated from underlying higher average customer deposits, up 4%, and average loans, up 31%, broadly compensated for the impact of margin compression, lower interest rates and changes in the product mix. Net fees and commissions decreased 26% (£85m) to £240m (2002: £325m). This reflected the impact of market conditions on sales of investment products, brokerage and fund management fees in Private Banking and the absence of the contribution of the Caribbean business. The average level of the FTSE 100 Index was 3844, 25% lower than in the prior year period (2002: 5126). Average daily deal volumes in UK retail stockbroking (excluding the impact of Charles Schwab Europe) were lower at 5,500 (2002: 6,400). The stockbroking business maintained its leading UK position with a 16% market share (excluding Charles Schwab Europe, 12%) (2002: 11%) of retail stockbroking, as measured by client orders. Operating costs decreased 11% (£54m) to £430m (2002: £484m) fully mitigating the additional pensions charge of £14m (2002: credit £7m). Costs reduced as a result of lower volume related costs, a direct consequence of reduced sales of investment products, the rigorous control of costs, the continuation of efficiency and business transformation initiatives and the absence of Caribbean operating costs. Strategic investment spend represented 8% of operating costs, a similar percentage to the first half of 2002. Provisions decreased by £2m to £16m (2002: £18m), 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 by £4bn to £89bn (31st December 2002: £85bn), primarily due to the impact of new business, favourable exchange rate movements and the limited stock market recovery since the year end. Customer deposits increased by £1bn to £39bn. The increase in customer loans, up £1bn in the half year to £11bn, primarily reflected the continued growth of Openplan mortgages in Spain. Openplan has continued to be an attractive product in Spain with 6,000 new customers recruited this half-year and an estimated market share of net new mortgage business of 4%. Income in Spain continued to grow significantly this year, increasing by 27% (£19m) to £90m. In the Premier Banking business in the UK, Openplan attracted £0.6bn of new mortgage balances together with £0.4bn of additional savings in the period. Sales of Legal & General life and pensions products have fallen in line with industry trends. Sales of funds and bonds have also been impacted by reduced customer demand for investment products. The contribution from the closed life assurance activities, a loss of £46m (2002: loss of £26m) comprises the embedded value of the closed Barclays Life and Woolwich Life funds together with related administration costs and also costs of redress for customers who have claimed in respect of endowment policies. Total costs of customer redress in respect of endowment policies was £50m (2002 first half: £nil; 2002 second half: £19m). Barclaycard Barclaycard is one of the leading credit card businesses in Europe. In addition to its operations in the United Kingdom, it is active outside the UK through Barclaycard International, in Germany, Spain, Greece, France and Italy. It also operates in Africa. Barclaycard offers a full range of credit card services to individual customers, together with card payment facilities to retailers and other businesses. Barclaycard continued the strategic development of its business through both organic and non organic activity. Providian UK, acquired in April 2002 and now re-branded as Monument, has been integrated within Barclaycard. Barclaycard has agreed with Littlewoods Limited to provide credit cards and other financial products to its customer base. On the 19th May 2003, Barclaycard acquired the Clydesdale Financial Services point of sale finance business. There has also been further development in Barclaycard International. Barclaycard already operates in Spain and there is an opportunity through the Banco Zaragozano acquisition to accelerate growth in this market. In April, Barclaycard purchased the global rights (excluding the UK and Singapore) to the Manchester United brand for world-wide co-branding and sub-licensing opportunities. Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Net interest income 498 455 431 Net fees and commissions 380 376 320 Operating income 878 831 751 Operating costs (292) (296) (256) Provisions for bad and doubtful debts (205) (221) (181) Loss from joint ventures - (2) (2) Operating profit 381 312 312 Restructuring costs (4) (9) (3) Woolwich Integration costs - (1) - Profit before tax and exceptional items 377 302 309 Barclaycard operating profit increased 22% (£69m) to £381m (2002: £312m). Operating income increased 17% (£127m) to £878m (2002: £751m). Net revenue (operating income less provisions) increased by 18% (£103m) to £673m (2002: £570m). Net interest income increased 16% (£67m) to £498m (2002: £431m). This was due to good growth in UK average extended credit balances, up 16% to £7.2bn (2002: £6.2bn), continued cardholder rate management, the benefits of falling interest rates, growth overseas and the benefit of the Monument business acquired in April 2002. Recruitment of UK customers remained strong, up 21%, with 651,000 (2002: 540,000) acquired in the period. Net fees and commissions increased 19% (£60m) to £380m (2002: £320m), largely driven by growth in the international business, UK account activity fees and higher merchant acquiring volumes. Operating costs increased 14% (£36m) to £292m (2002: £256m) due to the strong growth of the business and the inclusion of Monument. The cost:income ratio improved to 33% (2002: 34%). Provisions increased 13% (£24m) to £205m (2002: £181m), consistent with growth in lending. Barclaycard has had high levels of customer recruitment over the last few years and its effect on provisions has been mitigated by a number of new risk management initiatives, such as improved collection processes. Barclaycard International made a profit of £1m (2002: loss £15m) whilst maintaining significant ongoing investment. Income increased 45%, to £61m, and average extended credit balances rose by 41%. Barclaycard International cards in issue rose 3% to 1.32m (31st December 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 the United States and to the product suite 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 now being 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 SME customers interest on current accounts, or an alternative of discounted money transmission charges, with effect from 1st January 2003. Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Net interest income 813 828 798 Net fees and commissions 455 442 422 Other operating income 19 20 4 Operating income 1,287 1,290 1,224 Operating costs (504) (520) (498) Provisions for bad and doubtful debts (110) (146) (80) Profit/(loss) from associated undertakings 1 1 (3) Operating profit 674 625 643 Restructuring costs (19) (28) (14) Woolwich Integration costs - - (1) Profit before tax and exceptional items 655 597 628 Operating profit increased 5% (£31m) to £674m (2002: £643m), reflecting the combination of good income growth, strong cost management and well controlled risk. Operating income increased 5% (£63m) to £1,287m (2002: £1,224m). Net interest income increased 2% (£15m) to £813m (2002: £798m). Average lending balances increased by 11% to £46.1bn and average deposit balances increased by 4% to £45.3bn. Lending margins were maintained and lending growth remained concentrated towards higher quality large business customers. The impact of the Competition Commission Inquiry transitional pricing remedy and the lower interest rate environment contributed to a fall in deposit margins. Net fees and commissions increased 8% (£33m) to £455m (2002: £422m). Lending fees grew rapidly and reflected the growth in the balance sheet. Foreign exchange related commission grew due to increased business volumes. Money transmission income fell and was affected by the alternative offer to customers triggered by the Competition Commission Inquiry transitional pricing remedy. The migration to lower cost electronic payment methods continued. Operating costs increased 1% (£6m) to £504m (2002: £498m) with the impact of the pensions charge of £25m (2002: credit £13m) partially offset by significantly reduced costs in the middle and back office. The cost:income ratio improved to 39% (2002: 41%). Provisions increased 38% (£30m) to £110m (2002: £80m), the increase being substantially attributable to provisions in respect of a small number of larger companies, with no particular industry concentration. The overall quality of the portfolio, as defined by risk grade, was stable. 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, has been completed. Restructuring initiatives have continued to reposition the businesses to take account of the economic prospects and situations in the African countries where we operate. Some head office functions are being relocated from the United Kingdom to South Africa. Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Net interest income 89 84 76 Net fees and commissions 65 60 54 Other operating income - 1 - Operating income 154 145 130 Operating costs (79) (71) (72) Provisions for bad and doubtful debts (12) (17) (10) Operating profit 63 57 48 Restructuring costs (5) (11) (5) Profit before tax and exceptional items 58 46 43 Barclays Africa operating profit increased 31% (£15m) to £63m (2002: £48m). The increase was mainly attributable to business growth resulting in a strong income performance. Operating profit continued to be adversely affected by the situation in Zimbabwe. Net interest income increased 17% (£13m) to £89m (2002: £76m), the growth being largely attributable to the acquisition of BNPI Mauritius. There was a 7% increase in customer lending balances to £1.6bn (31st December 2002: £1.5bn) and a 4% rise in customer deposit balances to £2.6bn (31st December 2002: £2.5bn). Net fees and commissions increased 20% (£11m) to £65m (2002: £54m), due to stronger business activity in Kenya and the acquisition of BNPI Mauritius. Operating costs increased 10% (£7m) to £79m (2002: £72m), due to increased infrastructure investment and further development of the business. The cost: income ratio improved to 51% (2002: 55%). Provisions increased £2m to £12m (2002: £10m). 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, derivatives, commodities and money markets sales, trading and research, prime brokerage and equities; and, Credit, which includes origination, sales, trading and research relating to loans, debt capital markets and 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 continued progress in the global all debt league table rising to 4th position, from 6th in 2002, reflecting a strong performance in international bond issuance, particularly in the US and continental Europe. In the first half of 2003, Barclays Capital maintained its lead position in Sterling bonds. Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Net interest income 490 415 474 Dealing profits 526 320 507 Net fees and commissions 244 218 245 Other operating income 48 61 (2) Operating income 1,308 1,014 1,224 Operating costs (758) (611) (701) Provisions for bad and doubtful debts (131) (181) (153) Profit from associated undertakings 1 1 - Operating profit 420 223 370 Restructuring costs (6) (12) - Profit before tax and exceptional items 414 211 370 Operating profit increased 14% to £420m (2002: £370m), due to higher operating income, good cost control and an improvement in the credit environment. Growth in operating income of 7% to a record £1,308m (2002: £1,224m) was achieved whilst maintaining market risk at a similar level to the prior period with an average DVaR of £23m (2002: £22m). Net revenue (operating income less provisions) increased 10% to £1,177m (2002: £1,071m). Secondary income, comprising dealing profits and net interest income, is primarily generated by providing client risk management and financing solutions. Secondary income increased 4% to £1,016m (2002: £981m). Dealing profits grew 4% to £526m (2002: £507m) with strong performances in corporate bonds partially offset by a lower contribution from US interest rate derivatives. Net interest income grew 3% to £490m (2002: £474m) driven by overall balance sheet growth. Corporate lending continued to be tightly managed, with the credit portfolio continuing to decline, falling to £9bn (31st December 2002: £10bn). Primary income, comprising net fees and commissions, remained in line with the prior year period at £244m (2002: £245m). Net fees and commissions included £40m (2002: £53m) of internal fees for structured capital market activities arranged by Barclays Capital. Other operating income increased to £48m (2002: loss £2m), primarily due to realisations in the private equity business. Operating costs increased 8% to £758m (2002: £701m). Business as usual costs were flat on the comparable period. Headcount declined 4% to 5,300 (31st December 2002: 5,500) as reductions in support staff outweighed the continued addition of front office staff. Revenue related costs increased as a result of strong performance. Staff costs remained at 51% of net revenues. Strategic investment continued in product and distribution capabilities. Provisions decreased 14% to £131m (2002: £153m) reflecting improvement in the credit environment, particularly in the US. 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 index, enhanced index and active strategies as well as 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. Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Net interest income 5 6 6 Net fees and commissions 306 255 283 Operating income 311 261 289 Operating costs (220) (210) (229) Loss from joint ventures - (1) - Operating profit before tax and exceptional items 91 50 60 Barclays Global Investors operating profit increased 52% (£31m) to £91m (2002: £60m), reflecting good income growth as a result of new asset growth, and lower costs. Fees and commissions increased by 8% (£23m) to £306m (2002: £283m), with the increase constrained by foreign exchange translation movements of £37m and lower average market levels. Strong net new asset growth and investment performance and sales of higher margin products drove growth in investment management fees. Actively managed assets now generate over 60% of management fees and over 50% of total income. The Global iShares (Exchange Traded Funds) business continued to grow assets. Global iShares assets have grown to £28bn, an increase of 27% (31st December 2002: £22bn). Operating costs decreased 4% (£9m) to £220m (2002: £229m). Higher performance compensation costs were offset by the impact of foreign exchange translation movements of £26m. Total assets under management increased 18% (£81bn) to £543bn (31st December 2002: £462bn). This was the net result of £34bn attributable to net new assets and £60bn attributable to market movements offset by £13bn of adverse exchange rate movements. Assets under management comprise £385bn (71%) indexed assets, £109bn (20%) active assets and £49bn (9%) managed cash assets. Other operations Property costs include the costs of Barclays Group Property Services, which is responsible for the management of the Group's operational premises and property related services. Central services includes certain activities which support the operating business and provide central information technology services. Transition Businesses comprising discontinued South American and Middle Eastern corporate banking businesses and the centrally managed Transition Businesses previously reported in Management of Group capital. These non-core relationships are now being managed separately with the objective of maximising the recovery from the assets concerned. Management of Group capital encompasses certain central items, including internal fees charged by Barclays Capital for structured capital market activities. Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Property costs (1) 7 5 Central services (8) (7) (10) Transition Businesses (18) (38) (83) Management of Group capital (19) (14) (29) Operating loss (46) (52) (117) Restructuring costs 1 (4) (6) Loss before tax and exceptional items (45) (56) (123) The improvement in the performance of Transition Businesses to a loss of £18m (2002: loss £83m) primarily relates to a significantly reduced provisions charge for various South American exposures. Management of Group capital reflects £40m (2002: £53m) of internal fees charged by Barclays Capital for structured capital market activities. Head office functions Head office functions comprise all the Group's central costs, including Group Executive, Group Finance, Corporate Communications, Human Resources, Group Strategy & Planning, Internal Audit, Marketing, Legal, Corporate Secretariat, Tax, Compliance and Risk. Costs incurred wholly on behalf of the business units are recharged to them. Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Operating cost (60) (70) (39) Restructuring costs (5) (8) (4) Total (65) (78) (43) The increase in operating costs of £21m included a pension charge of £4m (2002: credit £2m). Restructuring charge Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Staff costs 66 86 38 Administrative expenses - other 8 46 17 74 132 55 The total restructuring charge is £74m, with the main elements relating to Personal Financial Services (£27m), Business Banking (£19m) and Barclays Private Clients (£9m). Accrued provisions at 30th June 2003 for restructuring and closure costs amounted to £73m (31st December 2002: £117m). Expenditure of £66m was incurred during the year against provisions raised as at 31st December 2002 and £52m in respect of the 2003 programme. Woolwich integration costs Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Staff costs - 1 1 Administration expenses - other 22 47 31 22 48 32 Woolwich integration synergies Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Synergies achieved in the six months ended 30th June 2003 were as follows: Gross revenue synergies 99 61 70 Attributable operating costs (44) (36) (23) Net revenue synergies 55 25 47 Cost savings 75 65 39 Avoided costs(*) 29 40 15 Ongoing integration synergies 159 130 101 One-off benefits 26 54 18 Tax savings 4 4 5 Total synergy benefits 189 188 124 * Avoided costs are primarily strategic investment costs which are not required due to the acquisition and integration of Woolwich plc. Total benefits of £189m were achieved by the programme in the half-year ending 30th June 2003. This comprises ongoing cost and revenue synergies totalling £159m, tax savings of £4m and gains totalling £26m which were of a one-off nature. The Group is broadly on track to achieve £330m in cost and revenue synergies for the full year to 31st December 2003. The Group expects to realise synergies of at least £400m per annum from 2004. This target is represented by annual cost savings of £150m per annum and revenue synergies, net of attributable costs, of £250m. Economic Capital Barclays assesses capital adequacy by measuring risk using internal risk assessment methodologies. The Group assigns economic capital primarily within six risk categories. The categories are summarised below: Credit Risk - Using statistical techniques, estimates are made of potential unexpected losses for each segment of the portfolio, relative to the expected level of losses. This unexpected loss level is used to estimate the amount of credit risk economic capital required. Within wholesale and retail businesses, capital allocation is differentiated by segment and customer grade. Off-balance sheet exposures are converted to loan equivalent amounts based on their probability of being drawn, before applying capital factors. Market Risk - Economic capital is primarily estimated using Daily Value at Risk (DVaR) measurements. Where risks are not measured using DVaR, economic capital is estimated based on stress test analysis. Business and Operational Risk - A combined economic capital allocation for operational risk and business risk is derived through an equation including variables such as cost base, historic profit volatility and comparable external benchmarks. Insurance Risk - Economic capital is estimated through benchmark analysis. Fixed Assets - Economic capital is estimated through benchmark analysis. Private Equity - Economic capital is allocated using an equation based on the amount of equity investment and comparable benchmark capitalisation. Barclays estimates the correlation between risk types and calculates a diversification benefit which results in a reduction in allocated economic capital for the Group. The total economic capital required by Barclays, 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. The Group's practice is to maintain an appropriate level of excess capital held at Group centre, which is not allocated to business units. In light of the Basel II proposals, the Group is currently engaged in a project to review and enhance the economic capital allocation methodologies. Average economic capital by business is set out below: Average economic capital Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Personal Financial Services 2,450 2,000 2,200 Barclays Private Clients - ongoing businesses 550 550 550 - closed 250 300 300 life assurance activities Barclaycard 1,650 1,650 1,350 Business Banking 2,800 2,750 2,750 Barclays Africa 200 200 200 Barclays Capital 2,150 2,150 1,950 Barclays Global Investors 150 200 200 Other operations * 500 500 600 Average economic capital 10,700 10,300 10,100 Goodwill 4,900 4,700 4,700 Capital held at Group centre ** 1,000 900 900 Total average shareholders' funds 16,600 15,900 15,700 * Includes Transition Businesses. ** The capital held at Group centre represents the variance between average economic capital by business and average shareholders' funds. Total average shareholders' funds increased by £700m to £16,600m in the first half of 2003. Goodwill increased £200m following the creation of FirstCaribbean and the purchase of Charles Schwab Europe. Personal Financial Services economic capital allocation increased £450m due to improved quantification of credit risk capital requirements for long maturity assets, previously carried at Group centre. Risk Tendency As part of its credit risk measurement system, the Group uses a model-based methodology to assess the quality of credits across different customer categories. The approach is termed Risk Tendency and applies to all performing credit exposures in both wholesale and retail sectors. Looking one year ahead, it provides a statistical estimate that is the average in the range of possible losses expected from the current performing portfolio. The actual outcome in any one year is likely to be different. Thus it is not a prediction of specific provisions but it gives management a clear view of the evolution of the quality of the credit portfolio. The provisions in any particular period may be substantially affected by provision movements on loans that are already impaired at the start of the period (and which are not included in Risk Tendency). As more information becomes available, the provisions on such loans may be either increased or decreased. Risk Tendency reflects the results of a set of model-based calculations, the models having been created using historical data. The models are designed to estimate the loss for the current performing loan portfolio, given the current composition and current risk characteristics of the portfolio. Significant variation around this value can occur, due to changes in the economic environment, the credit cycle or in the business conditions in specific sectors or countries that occur during the year. This applies especially in wholesale portfolios where the default of a small number of large exposures can have a significant impact on the outcome. However, for retail portfolios consisting of a very large number of small exposures, the variation from Risk Tendency is usually much smaller. In addition to enhancing the understanding of the average credit quality of the portfolio, Risk Tendency is one of the measures used by the Group to inform a wider range of decisions, for example pricing, provisioning and portfolio management. The models assess the probability of customer default, the probable customer exposure at the time of default and the probable level of loss if default occurs. A consistent approach is used across the organisation. Decision support model outputs are a way of assessing what might happen in the future based on past experience. An increase in the size of the portfolio and/ or a decrease in the credit quality will be highlighted by an increase in Risk Tendency. A number of different models are used in the Risk Tendency calculation reflecting the diversity of the portfolio. They are being improved regularly as the Group collects more data and deploys more sophisticated techniques. The Group believes that each change will have a minor impact on the total result but should lead to better estimates over time. Since Risk Tendency is a point in time calculation looking one-year ahead, it does not make allowance for growth or change in the composition of the loan book after the reporting date nor take account of write-backs and recoveries from specific provisions taken in previous years. In contrast, the provisions process is dynamic where provisions are assessed and allocated throughout the year. Risk Tendency is used when allocating general provisions for the existing portfolio of fully performing credits as at the calculation date. Excluded from this portfolio is the subset of credit exposures relating to non-performing loans against which specific provisions are held. Based upon the composition of the current performing loan portfolio as at 30th June 2003, Risk Tendency is £1,390m (31st December 2002: £1,375m; 30th June 2002: £1,300m). Increases in Risk Tendency occurred in Barclaycard due to rapid organic growth in the portfolio and in the Transition Businesses due to the transfer of credit exposures into that portfolio. Reductions occurred in Personal Financial Services as the benefits of enhanced risk management flowed through. Risk Tendency also fell in Barclays Capital, as credit exposures declined slightly and conditions improved in the large corporate market and also due to the transfer of credit exposures into the Transition Businesses portfolio. Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Personal Financial Services 340 370 370 Barclays Private Clients 45 45 50 Barclaycard 490 435 415 Business Banking 280 280 260 Barclays Africa 30 30 30 Barclays Capital 185 210 170 Transition Businesses 20 5 5 1,390 1,375 1,300 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 has identified certain non-strategic operations in the Middle East which have previously been reported within Barclays Capital. These are now being 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 that were previously included within Management of Group capital, are now separately reported as Transition Businesses within Other operations. Acquisitions and disposals On 31st January 2003, Barclays Bank PLC acquired the retail stockbroking business Charles Schwab Europe. On 19th May 2003, Barclays Bank PLC completed the acquisition of Clydesdale Financial Services Limited and its holding company Carnegie Holdings Limited, a retailer point of sale finance business, with a value of £61m. Accounting policies There have been no significant changes to the accounting policies described in the 2002 Annual Report. Changes in accounting presentation The prior period presentation has, where appropriate, been restated to conform with current year classification, and changes in accounting policies as described in the 2002 Annual Report. Share capital The Group manages both its debt and equity capital actively. The Group's authority to buy back ordinary shares was renewed at the 2003 Annual General Meeting to provide additional flexibility in the management of the Group's capital resources. The Group expects to continue its share buyback programme following the publication of these results. Group share schemes The independent trustees of the Group's share schemes may make purchases of Barclays PLC ordinary shares in the market at any time or times following this announcement of the Group's results for the purposes of those schemes' current and future requirements. The total number of ordinary shares purchased would not be material in relation to the issued share capital of Barclays PLC. Filings with the SEC The results will be furnished as a Form 6-K to the US Securities and Exchange Commission as soon as practicable following the publication of these results. Other information The interim report for the six months to 30th June 2003, including extracts from this announcement and the independent review report by the auditors, will be advertised in The Daily Telegraph and the Daily Mail on 8th August 2003. Copies will be available to the public at Barclays registered office and at its website www.investorrelations.barclays.co.uk Recent developments On 8th May 2003, Barclays Bank PLC announced its proposed acquisition of Banco Zaragozano, a Spanish private sector banking group. This acquisition was completed on 16th July 2003. NOTES (UNAUDITED) 1. Loans and advances to banks 30.06.03 31.12.02 30.06.02 Banking business: £m £m £m United Kingdom 11,347 11,510 12,058 Other European Union 1,594 2,154 2,093 United States 377 256 730 Rest of the World 1,640 1,531 2,167 14,958 15,451 17,048 Less - provisions (21) (82) (159) 14,937 15,369 16,889 Trading business 52,534 42,805 40,951 Total loans and advances to banks 67,471 58,174 57,840 Of the total loans and advances to banks, placings with banks were £57.1bn at 30th June 2003 (31st December 2002: £48.1bn; 30th June 2002: £48.3bn). Placings with banks include reverse repos of £43.3bn (31st December 2002: £41.0bn; 30th June 2002: £34.9bn). The majority of the placings have a residual maturity of less than one year. 2. Loans and advances to customers 30.06.03 31.12.02 30.06.02 Banking business: £m £m £m United Kingdom 141,420 135,900 127,219 Other European Union 15,255 12,579 12,326 United States 4,764 6,138 6,694 Rest of the World 6,540 5,599 8,341 167,979 160,216 154,580 Less - provisions (2,992) (2,916) (2,682) Less - interest in suspense (75) (78) (83) 164,912 157,222 151,815 Trading business 59,447 45,176 47,211 Total loans and advances to customers 224,359 202,398 199,026 Of the total loans and advances to customers, reverse repos were £39.8bn (31st December 2002: £42.5bn; 30th June 2002: £38.5bn). 3. Provisions for bad and doubtful debts Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Provisions at beginning of period 2,998 2,841 2,716 Acquisitions and disposals 14 (40) 29 Exchange and other adjustments 2 (30) (47) Amounts written off United Kingdom (560) (506) (444) Other European Union (15) (15) (16) United States (133) (82) (133) Rest of the World (7) (6) (18) (715) (609) (611) Recoveries (analysed below) 62 65 41 Sub-total 2,361 2,227 2,128 Provisions charged against profit: New and increased specific provisions United Kingdom 622 660 550 Other European Union 30 16 17 United States 71 147 257 Rest of the World 48 38 34 771 861 858 Less: Releases of specific provisions United Kingdom (50) (43) (38) Other European Union (6) (6) (6) United States (4) (7) (3) Rest of the World (10) (11) (13) (70) (67) (60) Less: Recoveries United Kingdom (51) (57) (31) Other European Union (5) (5) (2) United States (6) (2) (7) Rest of the World - (1) (1) (62) (65) (41) Net specific provisions charge 639 729 757 General provision - charge/(release) 13 42 (44) Net credit risk charge to profit 652 771 713 Provisions at end of period 3,013 2,998 2,841 Total provision for bad and doubtful debts at end of period comprise: Specific United Kingdom 1,817 1,790 1,686 Other European Union 99 84 88 United States 187 257 199 Rest of the World 158 130 166 Total specific provisions 2,261 2,261 2,139 General provisions 752 737 702 3,013 2,998 2,841 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 exposures booked in the US. 4. Other assets 30.06.03 31.12.02 30.06.02 £m £m £m Own shares 100 55 4 Balances arising from off-balance sheet financial instruments (see note 11) 16,039 13,454 13,383 Shareholders' interest in long term 799 867 844 assurance fund London Metal Exchange warrants and other metals trading positions 472 829 701 Sundry debtors 2,545 1,634 2,687 Prepayments and accrued income 3,411 2,982 2,705 23,366 19,821 20,324 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 30.06.03 31.12.02 30.06.02 £m £m £m Obligations under finance leases payable 129 140 155 Balances arising from off-balance 12,900 11,538 12,449 sheet financial instruments (see note 11) Short positions in securities 44,337 39,940 28,765 Current tax 731 641 786 Cash receipts from securitisation 241 318 491 Sundry creditors 4,700 3,987 4,597 Accruals and deferred income 4,476 4,352 3,772 Provisions for liabilities and charges 899 947 1,178 Dividend 456 788 422 68,869 62,651 52,615 Cash receipts from securitisation are in respect of the securitisation of a portfolio of investment debt securities which did not qualify for linked presentation under Financial Reporting Standard 5. 6. Potential credit risk lendings The following table presents an analysis of potential credit risk lendings. 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 lendings 30.06.03 31.12.02 30.06.02 £m £m £m Non-accrual lendings: United Kingdom 1,638 1,557 1,471 Other European Union 116 108 113 United States 569 744 610 Rest of the World 132 133 202 Accruing lendings where interest is being suspended: United Kingdom 428 472 640 Other European Union 44 44 39 United States - - - Rest of the World 91 95 132 Other accruing lendings against which provisions have been made: United Kingdom 570 606 676 Other European Union 38 27 46 United States - - 8 Rest of the World 15 44 57 Sub-totals: United Kingdom 2,636 2,635 2,787 Other European Union 198 179 198 United States 569 744 618 Rest of the World 238 272 391 Accruing lendings 90 days overdue, against which no provisions have been made: United Kingdom 757 687 743 Other European Union 8 3 - United States - - - Rest of the World - - 25 Reduced rate lendings: United Kingdom 6 4 4 Other European Union - - - United States - - - Rest of the World 2 2 4 Total non-performing lendings United Kingdom 3,399 3,326 3,534 Other European Union 206 182 198 United States 569 744 618 Rest of the World 240 274 420 4,414 4,526 4,770 30.06.03 31.12.02 30.06.02 £m £m £m Potential problem lendings United Kingdom 1,040 993 878 Other European Union 6 2 1 United States 203 241 224 Rest of the World 66 68 115 1,315 1,304 1,218 30.06.03 31.12.02 30.06.02 % % % Provision coverage of non-performing lendings United Kingdom 73.4 73.5 64.4 Other European Union 72.8 71.4 63.1 United States 43.2 43.7 48.2 Rest of the World 82.1 65.0 53.3 Total 70.0 68.0 61.3 Provision coverage of total potential credit % % % risk lendings United Kingdom 56.2 56.6 51.6 Other European Union 70.8 70.7 62.8 United States 31.9 33.0 35.4 Rest of the World 64.4 52.0 41.9 Total 53.9 52.8 48.8 The geographical coverage ratios included an allocation of general provisions. Since the year end, UK non-performing loans increased by £73m to £3,399m reflecting increases in both personal and corporate lending balances. US non-performing loans decreased by £175m to £569m 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. Other European Union non-performing loans increased from £182m to £206m. However, in the Rest of the World they fell to £240m, a decrease of £34m. The coverage of non-performing loans by the Group's stock of provisions increased from 68.0% at 31st December 2002 to 70.0% at 30th June 2003. The coverage of total potential credit risk lendings at 53.9% also increased from 52.8%. 7. Loans and advances to borrowers in currencies other than the local currency of the borrower At 30th June 2003, the countries where these outstandings exceeded 1% of total Group assets were United States, Germany, Switzerland and France. In this context, assets comprise total assets as presented in the consolidated balance sheet and include acceptances. Loans and advances to borrowers in currencies other than the local currency of the borrower for countries where borrowing exceeds 1% of total Group assets As % of Total assets £m At 30th June 2003 United States 3.7 16,739 Germany 2.1 9,430 Switzerland 1.2 5,383 France 1.0 4,590 At 31st December 2002 United States 4.2 17,140 Germany 2.5 10,094 France 1.2 4,871 As at 30th June 2003, Netherlands and the Republic of Ireland had such outstandings between 0.75% and 1% of total Group assets, amounting to £7,721m (31st December 2002: £7,552m). 8. 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. The US Courts have ordered that the proceedings be brought to a non-binding mediation, scheduled to commence in late September 2003. Barclays considers that the claims against it are without merit and is defending them vigorously. Barclays is engaged in various other litigation proceedings both in the UK and a number of overseas jurisdictions, including the US, 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. 9. Geographical analysis Half-year ended 30.06.03 31.12.02 30.06.02 Profit before tax £m £m £m United Kingdom 1,533 1,293 1,605 Other European Union 235 178 173 United States 67 (93) (125) Rest of the World 128 72 102 1,963 1,450 1,755 30.06.03 31.12.02 30.06.02 Total assets £m £m £m United Kingdom 342,329 302,386 286,080 Other European Union 28,421 26,126 23,523 United States 54,803 51,919 47,708 Rest of the World 21,178 22,635 32,397 446,731 403,066 389,708 The geographic presentation above is generally based on the office recording the transaction. 10. Contingent liabilities and commitments 30.06.03 31.12.02 30.06.02 Contingent liabilities £m £m £m Acceptances and endorsements 2,259 2,589 2,391 Guarantees and assets pledged as collateral security 22,655 16,043 15,818 Other contingent liabilities 7,964 7,914 7,461 32,878 26,546 25,670 Commitments Standby facilities, credit lines and other commitments 106,472 101,378 104,822 11. 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 30.06.03 31.12.02 30.06.02 Contract or underlying principal amount £m £m £m Forward foreign exchange 336,079 271,646 275,692 Currency swaps 175,115 159,132 146,619 Other exchange rate related contracts 130,864 64,399 89,268 642,058 495,177 511,579 Interest rate derivatives Contract or underlying principal amount Interest rate swaps 2,471,207 2,164,312 1,837,304 Forward rate agreements 245,529 180,043 172,351 OTC options bought and sold 707,160 592,137 549,058 Other interest rate related contracts 1,341,117 788,878 647,727 4,765,013 3,725,370 3,206,440 Credit derivatives 29,621 18,401 15,381 Equity, stock index and commodity derivatives Contract or underlying principal amount 151,054 110,205 99,254 Other exchange rate related contracts are primarily over the counter (OTC) options. Other interest rate related contracts are primarily exchange traded options and futures. 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. 30.06.03 31.12.02 30.06.02 £m £m £m Positive fair values Foreign exchange derivatives 12,071 10,639 11,282 Interest rate derivatives 73,905 62,942 36,851 Credit derivatives 828 660 568 Equity, stock index and commodity 3,716 2,750 2,295 derivatives Effect of netting (70,106) (60,327) (37,027) Cash collateral meeting offset criteria (4,375) (3,210) (586) 16,039 13,454 13,383 Negative fair values Foreign exchange derivatives 12,335 11,281 12,348 Interest rate derivatives 70,990 61,332 35,815 Credit derivatives 476 106 236 Equity, stock index and commodity 4,215 2,778 2,694 derivatives Effect of netting (70,106) (60,327) (37,027) Cash collateral meeting offset criteria (5,010) (3,632) (1,617) 12,900 11,538 12,449 12. Market risk Market Risk is the risk that the Group's earnings or capital, or its ability to meet business objectives, will be adversely affected by changes in the level or volatility of market rates or prices such as interest rates including credit spreads, foreign exchange rates, equity prices and commodity prices. It is incurred as a result of both trading and asset/liability management activities. The market risk management policies of the Group are determined by the Group Risk Oversight Committee, which also recommends overall market risk appetite to the Board Risk Committee. The Group's policy is that exposure to market risk arising from trading activities is concentrated in Barclays Capital. The Group's banking businesses are also subject to market risk, which arises in relation to non-trading positions, such as capital balances, demand deposits and customer originated transactions and flows. 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, only 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. Market risk - Barclays Capital In Barclays Capital, the Head of Market Risk is responsible for the market risk governance and control framework. Day-to-day responsibility for managing exposure to market risk lies with the senior management of Barclays Capital, supported by the Global Market Risk Management Unit that operates independently of the trading areas. DVaR is the main tool used for controlling market risk. In addition to DVaR, there are a number of complementary techniques used to control market risk. These include revenue loss triggers and fortnightly firm wide stress tests which are also subject to trigger limits. Barclays Capital calculates DVaR using the historical simulation method with a historical sample of two years. The DVaR methodology allows the interest rate risk (due to changes in the benchmark government bond rates) to be measured separately from credit spread risk (due to changes in credit spreads). The credit spread is the premium for holding non-government paper, and is simply the difference between the total interest rate and the appropriate government interest rate. The DVaR numbers shown in the table below are all based on the above methodology. Overall market risk exposure for the first half of 2003 remained broadly unchanged compared to 2002. Total DVaR for the first half of 2003 averaged £23.0m compared to £22.4m for the first half of 2002 and £23.9m for the second half of 2002. Total DVaR as at 30th June 2003 was £24.6m. Analysis of market risk exposures DVaR Half-year ended 30.06.03 Average High* Low * £m £m £m Interest rate risk 20.7 27.7 13.7 Credit spread risk 11.7 16.0 8.9 Foreign exchange risk 2.9 5.0 1.3 Equities risk 2.5 3.8 1.7 Commodities risk 4.6 6.2 2.2 Diversification effect (19.4) n/a n/a Total DVaR 23.0 29.5 17.6 Half-year ended 31.12.02 Average High* Low* £m £m £m Interest rate risk 22.5 34.5 10.0 Credit spread risk 9.9 12.1 7.7 Foreign exchange risk 3.0 4.3 1.9 Equities risk 3.8 5.4 2.1 Commodities risk 1.9 2.8 0.9 Diversification effect (17.2) n/a n/a Total DVaR 23.9 35.7 13.4 Half-year ended 30.06.02 Average High* Low* £m £m £m Interest rate risk 20.8 29.9 13.1 Credit spread risk 8.8 12.5 6.0 Foreign exchange risk 2.9 4.4 2.0 Equities risk 3.4 4.3 2.7 Commodities risk 1.6 3.3 0.8 Diversification effect (15.1) n/a n/a Total DVaR 22.4 30.5 14.4 * 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. A corresponding diversification effect cannot be calculated and is therefore omitted from the above table. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS (UNAUDITED) Half-year ended 30.06.03 31.12.02 30.06.02 Share capital £m £m £m At beginning of period 1,645 1,661 1,668 Shares issued 1 5 2 Repurchase of shares (8) (21) (9) At end of period 1,638 1,645 1,661 Share premium account At beginning of period 5,277 5,176 5,149 Premium arising on shares issued 15 101 27 At end of period 5,292 5,277 5,176 Revaluation reserve At beginning of period 24 30 30 Released on disposal (2) (6) - At end of period 22 24 30 Capital redemption reserve At beginning of period 262 241 232 Repurchase of ordinary shares 8 21 9 270 262 241 Other capital reserve At beginning and end of period 617 617 617 Profit retained At beginning of period 7,380 7,366 6,789 Profit retained 926 206 818 Exchange rate translation differences 36 (19) (42) Repurchase of ordinary shares (8) (21) (9) Premium and legal costs on repurchase of ordinary shares (111) (326) (190) Shares issued to Quest in relation to share option schemes for staff - (38) (10) Goodwill written back on disposals - - 10 Realisation of revaluation reserve 2 6 - Other items - 206 - At end of period 8,225 7,380 7,366 Total reserves 14,426 13,560 13,430 Total shareholders' funds 16,064 15,205 15,091 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (UNAUDITED) Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Profit attributable to the members 1,383 993 1,237 of Barclays PLC Exchange rate translation differences 34 (19) (42) Gains arising from transactions with third parties - 206 - Other items (16) (2) 10 Joint ventures and associated undertakings 18 - 2 Total recognised gains and losses relating 1,419 1,178 1,207 to the period Prior period adjustment - (37) 14 Total gains and losses recognised in the period 1,419 1,141 1,221 AVERAGE BALANCE SHEET AND NET INTEREST INCOME (UNAUDITED) Half-year ended 30.06.03 30.06.03 30.06.03 30.06.02 30.06.02 30.06.02 Average Interest Average Average Interest Average Balance Rate Balance Rate Assets £m £m % £m £m % Treasury bills and other eligible bills: In offices in the UK 4,772 65 2.7 4,611 88 3.8 In offices outside the UK 1,152 31 5.4 944 37 7.8 Loans and advances to banks: In offices in the UK 11,715 281 4.8 13,273 254 3.8 In offices outside the UK 4,871 61 2.5 5,855 87 3.0 Loans and advances to customers: In offices in the UK 133,980 3,886 5.8 122,677 3,785 6.2 In offices outside the UK 25,463 544 4.3 24,893 571 4.6 Lease receivables: In offices in the UK 4,167 96 4.6 4,240 103 4.9 In offices outside the UK 263 9 6.8 219 8 7.3 Debt securities: In offices in the UK 53,078 1,009 3.8 38,141 955 5.0 In offices outside the UK 4,207 111 5.3 5,470 149 5.4 Average assets of banking business 243,668 6,093 5.0 220,323 6,037 5.5 Average assets of trading business 189,544 3,439 3.6 151,781 2,233 2.9 Total average interest earning assets 433,212 9,532 4.4 372,104 8,270 4.4 Provisions (2,800) (2,667) Non-interest earning assets 55,735 47,588 Total average assets and Interest income 486,147 9,532 3.9 417,025 8,270 4.0 Percentage of total average assets in offices outside the UK 27.1% 29.4% Average interest earning assets and net interest income: Banking business 243,668 3,237 2.7 220,323 3,134 2.8 Trading business 189,544 141 0.1 151,781 144 0.2 Non margin interest - (1) - - (1) - Total average interest earning 1.6 372,104 3,277 1.8 Assets and net interest income 433,212 3,377 Total average interest earning Assets related to: Interest income 9,532 4.4 8,270 4.4 Interest expense (6,154) (2.8) (4,992) (2.7) Adjustment for non margin interest (1) - (1) - 3,377 1.6 3,277 1.8 * 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. ** Average balances are based upon daily averages for most UK banking operations and monthly averages elsewhere. *** The average balance sheet does not include the retail life-fund assets attributable to policyholders nor the related liabilities. Half-year ended 30.06.03 30.06.03 30.06.03 30.06.02 30.06.02 30.06.02 Average Interest Average Average Interest Average Balance Rate Balance Rate Liabilities and shareholders' funds £m £m % £m £m % Deposits by banks: In offices in the UK 40,867 486 2.4 32,279 487 3.0 In offices outside the UK 8,028 95 2.4 9,531 115 2.4 Customer accounts - demand accounts: In offices in the UK 17,517 93 1.1 16,187 76 0.9 In offices outside the UK 2,055 14 1.4 1,662 13 1.6 Customer accounts - savings accounts: In offices in the UK 44,849 508 2.3 41,020 473 2.3 In offices outside the UK 767 13 3.4 1,272 22 3.4 Customer accounts - Other time deposits - retail: In offices in the UK 33,271 568 3.4 37,768 670 3.5 In offices outside the UK 3,617 51 2.8 5,494 76 2.8 Customer accounts - Other time deposits - wholesale: In offices in the UK 55,263 830 3.0 34,429 512 3.0 In offices outside the UK 8,412 134 3.2 6,470 107 3.3 Debt securities in issue: In offices in the UK 33,067 489 3.0 29,468 611 4.1 In offices outside the UK 12,650 124 2.0 12,132 157 2.6 Dated and undated loan capital and other subordinated liabilities Principally in offices in the UK 12,159 345 5.7 10,467 308 5.9 Internal funding of trading business (55,815) (894) 3.2 (42,120) (724) 3.4 Average liabilities of banking business 216,707 2,856 2.6 196,059 2,903 3.0 Average liabilities of trading business 190,567 3,298 3.5 152,125 2,089 2.7 Total average interest bearing liabilities 407,274 6,154 3.0 348,184 4,992 2.9 Interest free customer deposits: In offices in the UK 12,807 10,926 In offices outside the UK 1,170 2,265 Other non-interest bearing liabilities 49,020 40,511 Minority interests and shareholders' funds 15,876 15,139 Total average liabilities, shareholders' Funds and interest expense 486,147 6,154 2.5 417,025 4,992 2.4 Percentage of total average non-capital liabilities in offices outside the UK 24.0% 27.2% SUMMARY CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED) Half-year ended 30.06.03 31.12.02 30.06.02 £m £m £m Net cash inflow from operating activities 1,400 5,040 2,351 Dividends received from joint ventures 1 1 - and associated undertakings Net cash outflow from returns on (294) (380) (250) investment and servicing of finance Tax paid (378) (557) (271) Net cash inflow /(outflow) from capital 771 (6,285) (471) expenditure and financial investment Net cash outflow from acquisitions and disposals (17) (186) (426) Equity dividend paid (787) (421) (725) Net cash inflow/(outflow) before financing 696 (2,788) 208 Net cash inflow from financing 891 519 854 Increase/(decrease) in cash 1,587 (2,269) 1,062 OTHER INFORMATION 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, PO Box 82, The Pavilions, Bridgwater Road, Bristol, BS99 7NH. Tel: 0870 702 0196. 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 2002, which also include 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. Copies of the Form 20-F are also available from the SEC's website: http: //www.sec.gov Results timetable Ex dividend date: Wednesday 13th August 2003 Dividend record date: Friday 15th August 2003 Dividend payment date: Wednesday 1st October 2003 2003 Full year pre close date: Tuesday 2nd December 2003 2003 preliminary results announcement: Thursday 12th February 2004 2004 Annual General Meeting: Thursday 29th April 2004 For further information, please contact: John Varley 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 these 2003 interim 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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