Interim Results - Part 2

Barclays PLC 02 August 2007 PART 2 BARCLAYS PLC ANALYSIS OF AMOUNTS INCLUDED IN THE BALANCE SHEET Capital resources As at 30.06.07 31.12.06 30.06.06 £m £m £m Shareholders' equity excluding minority interests 20,973 19,799 17,988 -------- -------- -------- Preference shares 3,431 3,414 3,435 Reserve capital instruments 1,921 1,906 1,922 Upper tier 2 instruments 586 586 586 Absa minority interests 1,541 1,451 1,397 Other minority interests 269 234 211 -------- -------- -------- Minority interests 7,748 7,591 7,551 -------- -------- -------- Total shareholders' equity 28,721 27,390 25,539 Subordinated liabilities 15,067 13,786 13,629 -------- -------- -------- Total capital resources 43,788 41,176 39,168 -------- -------- -------- The authorised share capital of Barclays PLC was £2,500m (31st December 2006: £2,500m) comprising 9,996 million (31st December 2006: 9,996 million) ordinary shares of 25p each and 1 million (31st December 2006: 1 million) staff shares of £1 each. Called up share capital comprises 6,545 million (31st December 2006: 6,535 million) ordinary shares of 25p each and 1 million (31st December 2006: 1 million) staff shares of £1 each. Total capital resources increased £2,612m to £43,788m (31st December 2006: £41,176m). Shareholders' equity excluding minority interests increased £1,174m since 31st December 2006. The increase reflected profits attributable to equity holders of the parent of £2,634m, increases in share capital and share premium of £44m and increases in available for sale reserves of £106m. Offsetting these movements were dividends paid of £1,311m, decreases in the cash flow hedging reserves of £177m, a £43m decrease due to changes in treasury and Employee Share Ownership Plan shares, a £48m decrease in the currency translation reserve and other decreases in retained reserves of £31m. Subordinated liabilities have increased £1,281m to £15,067m (31st December 2006: £13,786m). This increase is driven by capital issuances of £2,400m, partially offset by redemptions of £670m, a decrease to the adjustment associated with fair value hedge arrangements of £344m, a decrease of £124m relating to movements in exchange rates. Minority interests increased £157m to £7,748m (31st December 2006: £7,591m). Capital ratios Risk weighted assets and capital resources, as defined for regulatory purposes by the FSA, comprised: As at Risk weighted assets: 30.06.07 31.12.06 30.06.06 Banking book £m £m £m On-balance sheet 202,835 197,979 190,979 Off-balance sheet 33,748 33,821 33,010 Associated undertakings and joint ventures(1) 1,075 2,072 6,351 -------- -------- -------- Total banking book 237,658 233,872 230,340 -------- -------- -------- Trading book Market risks 33,811 30,291 27,477 Counterparty and settlement risks 46,574 33,670 33,107 -------- -------- -------- Total trading book 80,385 63,961 60,584 -------- -------- -------- Total risk weighted assets 318,043 297,833 290,924 -------- -------- -------- Capital resources: Tier 1 Called up share capital 1,637 1,634 1,628 Eligible reserves 21,323 19,608 18,061 Minority interests(2) 8,405 7,899 7,629 Tier 1 notes(3) 887 909 941 Less: intangible assets (7,757) (7,045) (7,242) Less: deductions from Tier 1 capital(4) (26) - - -------- -------- -------- Total qualifying Tier 1 capital 24,469 23,005 21,017 -------- -------- -------- Tier 2 Revaluation reserves 24 25 25 Available for sale-equity gains 440 221 188 Collectively assessed impairment 2,527 2,556 2,593 allowances Minority Interests 441 451 479 Qualifying subordinated liabilities(5) Undated loan capital 3,174 3,180 3,200 Dated loan capital 8,626 7,603 8,157 Less: deductions from Tier 2 capital(4) (26) - - -------- -------- -------- Total qualifying Tier 2 capital 15,206 14,036 14,642 -------- -------- -------- Less: Regulatory deductions: Investments not consolidated for regulatory purposes (947) (982) (946) Other deductions (1,276) (1,348) (998) -------- -------- -------- (2,223) (2,330) (1,944) -------- -------- -------- Total net capital resources 37,452 34,711 33,715 -------- -------- -------- Equity Tier 1 ratio 5.3% 5.3% 4.9% Tier 1 ratio 7.7% 7.7% 7.2% Risk asset ratio 11.8% 11.7% 11.6% (1) From 1st January 2007, under the FSA's Prudential Sourcebook for Banks, Building Societies and Investment Firms, eligible associates are proportionally, rather than fully, consolidated for regulatory purposes. (2) Includes reserve capital instruments of £3,222m (31st December 2006: £2,765m; 30th June 2006: £2,158m). Of this amount, an issue of £500m was made during 2007. This issue is classified within subordinated liabilities on the consolidated balance sheet. (3) Tier 1 notes are included in subordinated liabilities in the consolidated balance sheet. (4) From 1st January 2007, under the FSA's General Prudential Sourcebook, certain deductions are made directly from Tiers 1 and 2 rather than being included in regulatory deductions. (5) Subordinated liabilities included in Tier 2 Capital are subject to limits laid down in the regulatory requirements. At 30th June 2007, the Tier 1 Capital ratio was 7.7% and the risk asset ratio was 11.8%. From 31st December 2006, total net capital resources rose £2.7bn and risk weighted assets increased £20.2bn. Tier 1 capital rose £1.5bn, including £1.3bn arising from profits attributable to equity holders net of dividends paid. Minority interests within Tier 1 capital increased £0.5bn primarily due to the issuance of reserve capital instruments. The deduction for goodwill and intangible assets increased by £0.7bn. Tier 2 capital increased £1.2bn mainly as a result of net issuance of £1.2bn of dated loan capital. Reconciliation of regulatory capital Capital is defined differently for accounting and regulatory purposes. A reconciliation of shareholders' equity for accounting purposes to called up share capital and eligible reserves for regulatory purposes, is set out below: As at 30.06.07 31.12.06 30.06.06 £m £m £m Shareholders' equity excluding minority interests 20,973 19,799 17,988 Available for sale reserve (238) (132) (9) Cash flow hedging reserve 407 230 172 Adjustments to retained earnings Defined benefit pension scheme 1,261 1,165 1,302 Additional companies in regulatory consolidation and non-consolidated companies (230) (498) (101) Foreign exchange on RCIs and upper Tier 2 loan stock 533 504 398 Other adjustments 254 174 (61) --------- --------- --------- Called up share capital and eligible reserves for regulatory purposes 22,960 21,242 19,689 --------- --------- --------- Total assets and risk weighted assets Total assets increased 16% to £1,158.3bn (2006: £996.8bn). Risk weighted assets increased 7% to £318.0bn (31st December 2006: £297.8bn). Loans and advances to customers that have been securitised increased £6.5bn to £30.9bn (31st December 2006: £24.4bn). The increase in risk weighted assets since 2006 reflected a rise of £3.8bn in the banking book and a rise of £16.4bn in the trading book. UK Retail Banking total assets increased 3% to £84.3bn (31st December 2006: £81.7bn). This was mainly attributable to growth in mortgage balances. Risk weighted assets fell 1% to £42.5bn (31st December 2006: £43.0bn) with growth in mortgages offset by an increase in securitised balances. UK Business Banking total assets grew 5% to £69.5bn (31st December 2006: £65.9bn) driven by good growth across lending products. Risk weighted assets increased 2% to £50.8bn (31st December 2006: £50.0bn), reflecting asset growth partially offset by increased regulatory netting and an increase in securitised balances. Barclaycard total assets increased 1% to £20.4bn (31st December 2006: £20.1bn). Risk weighted assets increased 1% to £17.1bn (31st December 2006: £17.0bn), primarily reflecting underlying net business growth, broadly offset by the redemption of a securitisation transaction, changes to the regulatory treatment of associates and the sale of part of the Monument portfolio. International Retail and Commercial Banking - excluding Absa total assets grew 11% to £42.4bn (31st December 2006: £38.2bn) driven by increases in mortgages and unsecured lending in the retail sectors in Western Europe. Risk weighted assets increased 17% to £23.5bn (31st December 2006: £20.1bn), reflecting the balance sheet growth. International Retail and Commercial Banking - Absa total assets increased 8% to £32.8bn (31st December 2006: £30.4bn), primarily driven by increases in mortgages and commercial lending. Risk weighted assets increased 5% to £21.8bn (31st December 2006: £20.7bn), reflecting the balance sheet growth. Barclays Capital total assets rose 21% to £796.4bn (31st December 2006: £657.9bn). This reflected the continued expansion of the business, with growth mainly attributable to increases in traded debt and equity securities and grossed-up derivative positions. Risk weighted assets increased 11% to £152.5bn (31st December 2006: £137.6bn) in line with risk, driven by the growth in trading portfolios and derivatives. Barclays Global Investors total assets increased 12% to £90.4bn (31st December 2006: £80.5bn), mainly attributable to growth in insurance products. The majority of total assets relates to asset management products with equal and offsetting balances reflected within liabilities to customers. Risk weighted assets increased 14% to £1.6bn (31st December 2006: £1.4bn). Barclays Wealth total assets increased 11% to £16.7bn (December 2006: £15.0bn) reflecting strong growth in lending to high net worth, affluent and intermediary clients. Risk weighted assets increased 13% to £6.9bn (31st December 2006: £6.1bn) reflecting the increase in lending. Head office functions and other operations total assets decreased 24% to £5.4bn (31st December 2006: £7.1bn). Risk weighted assets decreased 21% to £1.5bn (31st December 2006: £1.9bn). PERFORMANCE MANAGEMENT Economic capital Barclays assesses capital requirements by measuring the Group risk profile using both internally and externally developed models. The Group assigns economic capital primarily within seven risk categories: Credit Risk, Market Risk, Business Risk, Operational Risk, Insurance Risk, Fixed Assets and Private Equity. The Group regularly enhances its economic capital methodology and benchmarks outputs to external reference points. The framework uses default probabilities during average credit conditions, rather than those prevailing at the balance sheet date, thus seeking to remove cyclicality from the economic capital calculation. The framework also adjusts economic capital to reflect time horizon, correlation of risks and risk concentrations. Economic capital is allocated on a consistent basis across all of Barclays businesses and risk activities with allocations reflecting varying levels of risk. A single cost of equity is applied to calculate the cost of risk. The total average economic capital required by the Group, as determined by risk assessment models and after considering the Group's estimated portfolio effects, is compared with the supply of economic capital to evaluate economic capital utilisation. Supply of economic capital is calculated as the average available shareholders' equity after adjustment and including preference shares. The economic capital methodology formed the basis of the Group's submission for the Basel II Internal Capital Adequacy Assessment Process (ICAAP). Economic capital demand(1) As at 30.06.07 31.12.06 30.06.06 £m £m £m UK Banking 6,550 6,050 5,850 -------- -------- -------- UK Retail Banking 3,400 3,250 3,250 UK Business Banking 3,150 2,800 2,600 -------- -------- -------- Barclaycard 2,050 1,850 2,150 International Retail and Commercial Banking 2,250 2,000 1,850 -------- -------- -------- International Retail and Commercial Banking-ex Absa 1,300 1,200 1,150 International Retail and Commercial Banking-Absa 950 800 700 -------- -------- -------- Barclays Capital 4,400 3,950 3,600 Barclays Global Investors 200 200 150 Barclays Wealth 500 450 400 Head office functions and other operations(2) 250 250 250 -------- -------- -------- Economic Capital requirement (excluding goodwill) 16,200 14,750 14,250 Average historic goodwill and intangible assets(3) 8,100 7,700 7,900 -------- -------- -------- Total economic capital requirement(4) 24,300 22,450 22,150 -------- -------- -------- (1) Calculated using a five point average over the year and rounded to the nearest £50m for presentation purposes. (2) Includes Transition Businesses and capital for central functional risks. (3) Average goodwill relates to purchased goodwill and intangible assets from business acquisitions. (4) Total period end economic capital requirement (including core available funds) as at 30th June 2007 stood at £26,800m (31st December 2006: £25,150m; 30th June 2006: £24,100m). UK Retail Banking economic capital allocation increased £150m to £3,400m (31st December 2006: £3,250m), reflecting exposure growth in the portfolio and implementation of the updated Operational Risk Model. UK Business Banking economic capital allocation increased £350m to £3,150m (31st December 2006: £2,800m) as a consequence of asset growth and implementation of updated Credit and Operational Risk Models. Barclaycard economic capital allocation increased £200m to £2,050m (31st December 2006: £1,850m), as a consequence of exposure growth, primarily in the international cards and secured loans portfolio, partially offset by risk transfer activity. International Retail and Commercial Banking - excluding Absa economic capital allocation increased £100m to £1,300m (31st December 2006: £1,200m). This was due to lending growth primarily in Spain. International Retail and Commercial Banking - Absa economic capital allocation (excluding the risk borne by the minority interest) increased £150m to £950m (31st December 2006: £800m), reflecting exposure growth in the portfolio. Barclays Capital economic capital increased £450m to £4,400m (31st December 2006: £3,950m) due to growth in equity investments, operational and market risk. Barclays Wealth economic capital allocation increased £50m to £500m (31st December 2006: £450m) reflecting exposure growth in the portfolio. The Group's practice is to maintain an appropriate level of excess capital, which is not allocated to the business units. This excess arises as a result of capital management timing and includes capital held to cover pension contribution risk. Available funds for economic capital exceeds demand by £1,900m (31st December 2006: £2,050m). Economic capital supply The capital resources to support economic capital comprise adjusted shareholders' equity including preference shares but excluding other minority interests. Preference shares have been issued to optimise the long-term capital base of the Group. The capital resources to support economic capital are impacted by a number of factors arising from the application of IFRS and are modified in calculating available funds for economic capital. This applies specifically to: • Cash flow hedging reserve - to the extent that the Group undertakes the hedging of future cash flows, shareholders' equity will include gains and losses which will be offset against the gain or loss on the hedged item when it is recognised in the income statement at the conclusion of the future hedged transaction. Given the future offset of such gains and losses, they are excluded from shareholders' equity when calculating economic capital. • Available for sale reserve - unrealised gains and losses on such securities are included in shareholders' equity until disposal or impairment. Such gains and losses are excluded from shareholders' equity for the purposes of calculating economic capital. Realised gains and losses, foreign exchange translation differences and any impairment charges recorded in the income statement will impact economic profit. • Retirement benefits liability - the Group has recorded a deficit with a consequent reduction in shareholders' equity. This represents a non-cash reduction in shareholders' equity. For the purposes of calculating economic capital, the Group does not deduct the pension deficit from shareholders' equity. The average supply of capital to support the economic capital framework is set out below(1): Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £m Shareholders' equity excluding minority 13,250 12,100 10,750 interests less goodwill(2) Retirement benefits liability 1,250 1,300 1,300 Cashflow hedging reserve 350 150 50 Available for sale reserve (150) (100) (50) Preference shares 3,400 3,350 3,100 --------- --------- -------- Available funds for economic capital excluding goodwill 18,100 16,800 15,150 Average historic goodwill and intangible assets(2) 8,100 7,700 7,900 --------- --------- -------- Available funds for economic capital including goodwill(3) 26,200 24,500 23,050 --------- --------- -------- (1) Averages for the period will not correspond to period-end balances disclosed in the balance sheet. Numbers are rounded to the nearest £50m for presentational purposes only. (2) Average goodwill relates to purchased goodwill and intangible assets from business acquisitions. (3) Available funds for economic capital (including other Tier 1 instruments) as at 30th June 2007 stood at £30,950m (31st December 2006: £28,800m; 30th June 2006: £27,200m). In addition, the Group holds other Tier 1 Instruments of £4,109m as at 30th June 2007 (31st December 2006: £3,674m; 30th June 2006: £3,099m) consisting of Tier 1 notes of £887m and reserve capital instruments of £3,222m. Economic profit Economic profit comprises: • Profit after tax and minority interests; less • Capital charge (average shareholders' equity excluding minority interests multiplied by the Group cost of capital). The Group cost of capital has been applied at a uniform rate of 9.5%(1). The costs of servicing preference shares are included in minority interests, and so preference shares are excluded from average shareholders' equity for economic profit purposes. The economic profit performance in 2007 and 2006 is shown below: Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £m Profit after tax and minority interests 2,634 2,264 2,307 Addback of amortisation charged on acquired intangible assets(2) 59 60 23 -------- -------- -------- Profit for economic profit purposes 2,693 2,324 2,330 -------- -------- -------- Average shareholders' equity excluding minority interests (3),(4) 13,250 12,100 10,750 Adjust for unrealised loss/(gains) on cashflow hedge reserve(4) 350 150 50 Adjust for unrealised gains on available for sale financial instruments (4) (150) (100) (50) Add: retirements benefits liability 1,250 1,300 1,300 Goodwill and intangible assets arising on acquisitions (4) 8,100 7,700 7,900 -------- -------- -------- Average shareholders' equity for economic profit purposes (3),(4) 22,800 21,150 19,950 -------- -------- -------- Capital charge at 9.5% (1,084) (1,005) (945) -------- -------- -------- Economic profit 1,609 1,319 1,385 -------- -------- -------- (1) The Board determined the Group's cost of capital is to be unchanged for 2007 at 9.5%. (2) Amortisation charged for purchased intangibles, adjusted for tax and minority interests. (3) Average ordinary shareholders' equity for Group economic profit calculation is the sum of adjusted equity and reserves plus goodwill and intangible assets arising on acquisition, but excludes preference shares. (4) Averages for the period will not correspond exactly to period end balances disclosed in the balance sheet. Numbers are rounded to the nearest £50m for presentation purposes only. Economic profit generated by business 30.06.07 31.12.06 30.06.06 £m £m £m UK Banking 654 734 593 --------- -------- -------- UK Retail Banking 315 323 266 UK Business Banking 339 411 327 --------- --------- --------- Barclaycard 101 22 115 International Retail and Commercial Banking 85 324 169 --------- --------- --------- International Retail and Commercial Banking-ex Absa 31 233 76 International Retail and Commercial Banking-Absa 54 91 93 --------- --------- --------- Barclays Capital 969 510 671 Barclays Global Investors 210 181 195 Barclays Wealth 114 43 87 Head office functions and other operations (185) (172) (143) --------- --------- --------- 1,948 1,642 1,687 Historic goodwill and intangibles arising on acquisition (387) (363) (376) Variance to average shareholders' funds (excluding minority interest) 48 40 74 --------- --------- --------- Economic profit 1,609 1,319 1,385 --------- --------- --------- Economic profit for the Group increased 16% (£224m) to £1,609m (2006: £1,385m). The rise in economic profit was greater than the increase in both profit before tax and earnings per share. This was due to the more efficient use of capital across the Group partially offset by the increased share of minority interests. UK Retail Banking economic profit increased 18% (£49m) to £315m (2006: £266m) due to a 9% increase in profit before tax and a 5% increase in the economic capital charge reflecting exposure growth in the portfolio and implementation of the updated Operational Risk Model. UK Business Banking economic profit increased 4% (£12m) to £339m (2006: £327m) due to a 9% increase in profit before tax partially offset by a 22% increase in the economic capital charge arising from the impact of asset growth and implementation of the updated Credit and Operational Risk Models. Barclaycard economic profit decreased 12% (£14m) to £101m (2006: £115m), primarily due to the 17% decrease in profit before tax and a 5% decrease in the economic capital charge arising from the decline in UK card balances and improvement in default probability methodology. International Retail and Commercial Banking - excluding Absa economic profit decreased 59% (£45m) to £31m (2006: £76m), due to a 27% decrease in profit before tax, and an increase in the economic capital charge of 14%. The increase in economic capital charge reflects the impact of lending growth in Spain and a revised methodology. International Retail and Commercial Banking - Absa economic profit decreased 42% (£39m) reflecting a higher economic capital charge due to exposure growth in the portfolio. Barclays Capital economic profit increased 44% (£298m) to £969m (2006: £671m), due to a 33% increase in profit before tax and a 22% increase in the economic capital charge. The increased economic capital charge is due to growth in equity investments and operational and market risk. Barclays Wealth economic profit increased 31% (£27m) to £114m (2006: £87m), due to a 34% increase in profit before tax and an increase in the economic capital charge of 18%, reflecting exposure growth in the Wealth lending portfolio. Performance relative to the 2004 to 2007 goal period Barclays will continue to use goals to drive performance. At the end of 2003, Barclays established a set of four year performance goals for the period 2004 to 2007 inclusive. The primary goal is to achieve top quartile total shareholder return (TSR) relative to a peer group(1) of financial services companies. TSR is defined as the value created for shareholders through share price appreciation, plus reinvested dividend payments. The peer group is regularly reviewed to ensure that it remains aligned to our business mix and the direction and scale of our ambition. In terms of progress towards the Group's goal, Barclays delivered Total Shareholder Return (TSR) of 63% and was positioned 6th within its peer group (second quartile) for the goal period commencing 1st January 2004. At the time of setting the TSR goal, we estimated that achieving top quartile TSR would require the achievement of compound annual growth in economic profit(2) in the range of 10% to 13% per annum (£6.5bn to £7.0bn of cumulative economic profit) (3) over the 2004 to 2007 goal period. Economic profit for the first half of 2007 was £1.6bn, which, added to the £6.0bn generated in 2004, 2005 and 2006, delivered a cumulative total of £7.6bn for the goal period to date. Therefore Barclays has delivered 117% of the minimum range and 109% of the upper range of the cumulative economic profit goal after expiry of only 88% of the goal period. (1) Peer group for 2007 remained unchanged from 2006: ABN Amro, BBVA, BNP Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan Chase, Lloyds TSB, Royal Bank of Scotland and UBS. (2) Economic profit is defined on page 64. (3) Restated for the implementation of IFRS in 2005. Risk Tendency As part of its credit risk management system, the Group uses a model-based methodology to assess the point-in-time expected loss of credit portfolios across different customer categories. The approach is termed Risk Tendency and applies to credit exposures in both wholesale and retail sectors. Risk Tendency models provide statistical estimates of loss levels within a rolling 12 month period based on averages in the ranges of possible losses expected from each of the current portfolios. This contrasts with impairment allowances required under accounting standards, which are based on objective evidence of actual impairment as at the balance sheet date. Since Risk Tendency and impairment allowances are calculated for different purposes and on different bases, Risk Tendency does not predict loan impairment. Risk Tendency is provided to present a view of the evolution of the quality and scale of the credit portfolios. 30.06.07 31.12.06 30.06.06 £m £m £m UK Banking 870 790 705 --------- -------- -------- UK Retail Banking 580 500 430 UK Business Banking 290 290 275 --------- -------- -------- Barclaycard 1,000 1,135 1,105 International Retail and Commercial Banking 315 220 195 --------- -------- -------- International Retail and Commercial Banking-ex Absa 105 75 70 International Retail and Commercial Banking-Absa 210 145 125 --------- -------- -------- Barclays Capital 110 95 125 Barclays Wealth 10 10 10 Transition Businesses(1) 5 10 25 --------- -------- -------- 2,310 2,260 2,165 --------- -------- -------- (1) Included within Head office functions and other operations. Risk Tendency increased £50m (2%) to £2,310m (31st December 2006: £2,260m) reflecting the broadly stable risk profile of the loan book. Factors influencing Risk Tendency included the very strong growth (16%) of the Group loans and advances balances, particularly in Barclays Capital where the Risk Tendency component is very low, methodology enhancements in UK Retail Banking, and the maturation in the credit risk profile in the international card portfolios. These were partially offset by a portfolio sale, methodology refinements in Barclaycard and improvements in the credit risk profile in the wholesale and corporate portfolios. UK Retail Banking Risk Tendency increased £80m to £580m (31st December 2006: £500m). This reflects £120m methodology enhancements in unsecured loans to bring them more in line with UK cards. Excluding these enhancements Risk Tendency decreased by £40m reflecting an improvement in the credit risk profile in the UK unsecured personal loan portfolios offset by some growth in loan balances. Barclaycard Risk Tendency decreased £135m to £1,000m (31st December 2006: £1,135m) reflecting the sale of part of the Monument portfolio and a methodology enhancement in the UK cards portfolio. Excluding these factors, Risk Tendency increased by £20m reflecting balance sheet growth in the international portfolios offset by some improvement in the credit risk profile of UK cards. Risk Tendency at International Retail and Commercial Banking - excluding Absa increased £30m to £105m (31st December 2006: £75m) reflecting a change to the risk profile in Emerging Markets and balance sheet growth in Emerging Markets and Western Europe. International Retail and Commercial Banking - Absa Risk Tendency increased £65m to £210m (31st December 2006: £145m) caused by a weakening of retail credit conditions in South Africa after a series of interest rate rises in 2006 and 2007 and balance sheet growth. ADDITIONAL INFORMATION Group reporting changes in 2007 Barclays announced on19th June 2007 the impact of certain changes in Group Structure and reporting on the 2006 results. There was no impact on the Group income statement or balance sheet. UK Retail Banking. The unsecured lending business, previously managed and reported within Barclaycard and the Barclays Financial Planning business, previously managed and reported within Barclays Wealth are now managed and reported within UK Retail Banking. The changes combine these products with related products already offered by UK Retail Banking. In the UK certain UK Premier customers are now managed and reported within Barclays Wealth. Barclaycard. The unsecured lending portfolio, previously managed and reported within Barclaycard, has been transferred and is now managed and reported within UK Retail Banking. International Retail and Commercial Banking - excluding Absa. A number of high net worth customers are now managed and reported within Barclays Wealth in order to better match client profiles to wealth services. Barclays Wealth. In the UK and Western Europe certain Premier and high net worth customers are now managed and reported within Barclays Wealth having been previously reported within UK Retail Banking and International Retail and Commercial Banking - excluding Absa. The Barclays Financial Planning business previously managed and reported within Barclays Wealth, has become a fully integrated part of and is managed and reported within UK Retail Banking. Finally with effect from 1st January 2007 Barclays Wealth - closed life assurance activities continues to be managed within Barclays Wealth and for reporting purposes has been combined rather than being reported separately. The structure and reporting remains unchanged for UK Business Banking, International Retail and Commercial Banking- Absa, Barclays Capital, Barclays Global Investors and Head Office Functions and Other Operations. Basis of Preparation There have been no significant changes to the accounting policies described in the 2006 Annual report. Therefore the information in this announcement has been prepared using the accounting policies and presentation applied in 2006. Changes to the UK Financial Services Authority Listing, Prospectus, Disclosure and Transparency Rules to implement the European Union Transparency Directive, including the requirement for the half-yearly report to be prepared in accordance with IAS 34 'Interim Financial Reporting,' first apply to financial years beginning on or after 20th January 2007. Therefore the revised Listing, Prospectus and Disclosure Rules will first be applied to the June 2008 Interim Results Announcement. Future accounting developments IFRS 7 ('Financial Instruments Disclosures') and an amendment to IAS 1 ('Presentation of Financial Statements') on capital disclosures were issued by the IASB in August 2005 for application in accounting periods beginning on or after 1st January 2007 and have been adopted by the European Commission. The new or revised disclosures will be included in the financial statements for the year ended 31st December 2007. Consideration will be given during the second half of 2007 to the implications, if any, of the following IFRIC interpretations issued during 2006 and 2007 which would first apply to the Group accounting period beginning on 1st January 2008: • IFRIC 11 IFRS 2 - Group and Treasury Share Transactions • IFRIC 12 Service Concession Arrangements • IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction IFRS 8 ('Operating Segments') was issued in November 2006 and would first be required to be applied to the Group accounting period beginning on 1st January 2009. The standard replaces IAS 14 Segmental Reporting and would align operating segmental reporting with segments reported to senior management as well as requiring amendments and additions to the existing segmental reporting disclosures. The standard has not been endorsed for use in the European Union. Once it has been endorsed, the Group will consider the enhancements that permitted early adoption in 2008 may make to the transparency of the segmental disclosures. IFRIC 13 Customer Loyalty Programs was issued in June 2007 and would first apply to the Group accounting period beginning on 1st January 2009. The Interpretation addresses accounting by entities that grant loyalty award credits (such as 'points' or travel miles) to customers who buy other goods or services. It requires entities to allocate some of the proceeds of the initial sale to the award credits and recognise these proceeds as revenue only when they have fulfilled their obligations. The implications of this IFRIC interpretation are being considered and any resulting change in accounting policy would be accounted for in accordance with IAS 8 in 2009. Share capital The Group manages its debt and equity capital actively. The Group's authority to buy back ordinary shares (up to 980.8 million ordinary shares) was renewed at the 2007 Annual General Meeting. As per the announcement made on 23rd July 2007, Barclays intends to minimise the dilutive effect on its existing shareholders of the issuance of Barclays shares to Temasek and China Development Bank by commencing a share buyback programme for up to €3.6 billion (£2.4 billion). The earliest date the buyback would start is shortly after the publication of these interim results and the latest is after conclusion of its offer for ABN AMRO. Group share schemes The independent trustees of the Group's share schemes may make purchases of Barclays PLC ordinary shares in the market at any time or times following this announcement of the Group's results for the purposes of those schemes' current and future requirements. The total number of ordinary shares purchased would not be material in relation to the issued share capital of Barclays PLC. Filings with the SEC The results will be furnished as a Form 6-K to the US Securities and Exchange Commission as soon as practicable following the publication of these results. Competition and regulatory matters The scale of regulatory change remains challenging, arising in part from the implementation of some key European Union (EU) directives. Many changes to financial services legislation and regulation have come into force in recent years and further changes will take place in the near future. Concurrently, there is continuing political and regulatory scrutiny of the operation of the retail banking and consumer credit industries in the UK and elsewhere. The nature and impact of future changes in policies and regulatory action are not predictable and are beyond the Group's control but could have an impact on the Group's businesses and earnings. In the EU as a whole, these regulatory actions included an enquiry into retail banking in all of the then 25 member states by the European Commission's Directorate General for Competition. The enquiry looked at retail banking in Europe generally and Barclays has fully co-operated with the enquiry. On 31st January 2007 the European Commission announced that the enquiry had identified barriers to competition in certain areas of retail banking, payment cards and payment systems in the EU. The Commission indicated it will use its powers to address these barriers, and will encourage national competition authorities to enforce European and national competition laws where appropriate. Any action taken by the Commission and national competition authorities could have an impact on the payment cards and payment systems businesses of Barclays and on its retail banking activities in the EU countries in which it operates. In September 2005 the UK Office of Fair Trading (OFT) received a super-complaint from the Citizens Advice Bureau relating to payment protection insurance (PPI). As a result, the OFT commenced a market study on PPI in April 2006. In October 2006, the OFT announced the outcome of the market study and, following a period of consultation, the OFT referred the PPI market to the UK Competition Commission for an in-depth enquiry in February 2007. This enquiry could last for up to two years. Also in October 2006, the UK Financial Services Authority (FSA) published the outcome of its broad industry thematic review of PPI sales practices in which it concluded that some firms fail to treat customers fairly. Barclays has cooperated fully with these investigations and will continue to do so. In April 2006, the OFT commenced a review of the undertakings given following the conclusion of the Competition Commission Enquiry in 2002 into the supply of banking services to small and medium enterprises. Barclays is cooperating fully with that review. The OFT has carried out investigations into Visa and MasterCard credit card interchange rates. The decision by the OFT in the MasterCard interchange case was set aside by the Competition Appeals Tribunal in June 2006. The OFT's investigation in the Visa interchange case and a second MasterCard interchange case are ongoing. The outcome is not known but these investigations may have an impact on the consumer credit industry in general and therefore on Barclays business in this sector. In February 2007 the OFT announced that it was expanding its investigation into interchange rates to include debit cards. On 1st April 2007, the UK consumer interest association known as Which? submitted a super-complaint to the OFT pursuant to the Enterprise Act 2002. The super-complaint criticises the various ways in which credit card companies calculate interest charges on credit card accounts. On 26th June 2007, the OFT announced a new programme of work with the credit card industry and consumer bodies in order to make the costs of credit cards easier for consumers to understand. This OFT decision follows the receipt by the OFT of the super-complaint from Which?. This new work will explore the issues surrounding the costs of credit for credit cards including purchases, cash advances, introductory offers and payment allocation. The OFT's programme of work is expected to take six months. The OFT announced the findings of its investigation into the level of late and over-limit fees on credit cards in April 2006, requiring a response from credit card companies by 31st May 2006. Barclaycard responded by confirming that it would reduce its late and over-limit fees on credit cards from 1st August 2006. In September 2006, the OFT announced that it had decided to undertake a fact find on the application of its statement on credit card fees to current account unauthorised overdraft fees. The fact find was completed in March 2007. On 29th March 2007, the OFT announced its decision to conduct a formal investigation into the fairness of bank current account charges. The OFT announced a market study into personal current accounts (PCAs) in the UK on 26th April 2007. The market study will look at: (i) whether the provision of ''free if in credit'' PCAs delivers sufficiently high levels of transparency and value for customers; (ii) the implications for competition and consumers if there were to be a shift away from ''free if in credit'' PCAs; (iii) the fairness and impact on consumers generally of the incidence, level and consequences of account charges; and (iv) what steps could be taken to improve customers' ability to secure better value for money, in particular to help customers make more informed current account choices and drive competition. The study will focus on PCAs but will include an examination of other retail banking products, in particular savings accounts, credit cards, personal loans and mortgages in order to take into account the competitive dynamics of UK retail banking. On 27th July 2007, the OFT commenced High Court proceedings by agreement with Barclays and seven other banks and building societies in which both the OFT and the banks and building societies seek declarations on legal issues arising from the banks' terms and conditions relating to overdraft charges. Specifically, those declarations will address key aspects of the applicability of the Unfair Terms in Consumer Contracts Regulations to those terms and conditions and the question of whether such terms are capable of amounting to unlawful penalty charges. The proceedings will run in parallel with the ongoing OFT dual inquiry into unauthorised overdraft charges and PCAs. As the purpose of the proceedings is to seek to clarify the legitimacy of the banks' overdraft charging provisions, the banks are seeking a stay of all pending county court litigation in relation to such matters. The Financial Ombudsman Service has agreed to suspend reviews of such cases and the FSA has granted complaints handling waivers in respect of all complaints on the same issues pending conclusion of the test case. In January 2007, the FSA issued a Statement of Good Practice relating to Mortgage Exit Administration fees. Barclays will charge the fee applicable at the time the customer took out the mortgage, which is one of the options recommended by the FSA. Acquisitions On 8th February 2007 Barclays completed the acquisition of Indexchange Investment AG. Indexchange is based in Munich offering exchange traded fund products. On 28th February 2007 Barclays completed the acquisition Nile Bank Limited. Nile Bank is based in Uganda with 18 branches and 228 employees. On 30th March 2007 Barclays completed the acquisition of EquiFirst. EquiFirst is a non-prime wholesale mortgage originator in the United States. On 18th May 2007 Barclays completed the acquisition of Walbrook Group Limited. Walbrook is based in Jersey, Guernsey, Isle of Man and Hong Kong where it serves high net worth private clients and corporate customers. Disposals On 4th April 2007 Barclays completed the sale of part of Monument, a credit card portfolio. Recent developments On 16th April 2007 Barclays announced the sale of Barclays Global Investors Japan Trust & Banking Co., Ltd, a Japanese trust administration and custody operation. On 18th June 2007 Barclays announced it had entered into an agreement to sell a 50% shareholding in Intelenet Global Services Pvt Ltd. Completion is subject to the receipt of applicable regulatory approval and is expected in the second half of 2007. On 23rd April 2007, the supervisory and management boards of ABN AMRO Holding N.V. (ABN AMRO) and the board of Barclays jointly announced that agreement had been reached on the terms of a merger of ABN AMRO and Barclays. Revised terms of the offer being made by Barclays for ABN AMRO were announced by Barclays on 23rd July 2007. On 23rd July 2007, Barclays also announced an unconditional subscription of £2.4 billion of Barclays shares by China Development Bank and Temasek Holdings, as well as a conditional subscription by them of £6.6 billion of Barclays shares which was subject to a partial clawback in favour of certain Barclays shareholders. The proceeds of this conditional investment will be used to fund part of the cash consideration to be payable to ABN AMRO shareholders under the revised offer. Barclays also announced that it intends to minimise the dilutive effect of the unconditional subscription on existing shareholders by commencing a share buyback programme for up to £2.4 billion. Barclays will make a separate announcement describing the timing and terms on which such buybacks will be made. The merger is subject to, among other things, the satisfaction or waiver of certain conditions, including approval by Barclays shareholders. It is currently anticipated that the merger will be completed in the fourth quarter of 2007. NOTES ----- 1. Assets held in respect of linked liabilities to customers under investment contracts/liabilities to customers under investment contracts As at 30.06.07 31.12.06 30.06.06 Non-trading financial instruments fair £m £m £m valued through profit and loss held in respect of linked liabilities 92,194 82,798 79,334 Cash and bank balances within the funds 1,541 1,839 2,046 --------- --------- --------- Assets held in respect of linked liabilities to customers under investment contracts 93,735 84,637 81,380 --------- --------- --------- Liabilities arising from investment contracts (93,735) (84,637) (81,380) --------- --------- --------- 2. Derivative financial instruments The tables set out below analyse the contract or underlying principal and the fair value of derivative financial instruments held for trading purposes and for the purposes of managing the Group's structural exposures. Derivatives are measured at fair value and the resultant profits and losses from derivatives held for trading purposes are included in net trading income. Where derivatives are held for risk management purposes and when transactions meet the criteria specified in IAS 39, the Group applies hedge accounting as appropriate to the risks being hedged. Contract 30.06.07 notional Fair value amount Assets Liabilities Derivatives designated as held for £m £m £m trading Foreign exchange derivatives 2,113,080 23,852 (22,325) Interest rate derivatives 21,671,954 102,959 (103,722) Credit derivatives 1,755,840 13,430 (12,916) Equity and stock index and commodity derivatives 620,500 32,254 (37,814) ---------- -------- --------- Total derivative assets/(liabilities) held for trading 26,161,374 172,495 (176,777) ---------- -------- --------- Derivatives designated in hedge accounting relationships Derivatives designated as cash flow hedges 42,193 162 (433) Derivatives designated as fair value hedges 22,246 324 (483) Derivatives designated as hedges of 16,094 1,244 (81) net investments ---------- -------- --------- Total derivative assets/(liabilities) designated in hedge accounting relationships 80,533 1,730 (997) ---------- -------- --------- Total recognised derivative assets/ (liabilities) 26,241,907 174,225 (177,774) ---------- -------- --------- Contract 31.12.06 notional Fair value amount Assets Liabilities Derivatives designated as held fo £m £m £m trading Foreign exchange derivatives 1,500,774 22,026 (21,745) Interest rate derivatives 17,666,353 76,010 (75,854) Credit derivatives 1,224,548 9,275 (8,894) Equity and stock index and commodity derivatives 495,080 29,962 (33,253) ---------- -------- -------- Total derivative assets/(liabilities) held for trading 20,886,755 137,273 (139,746) ---------- -------- -------- Derivatives designated in hedge accounting relationships Derivatives designated as cash flow hedges 63,895 132 (401) Derivatives designated as fair value hedges 19,489 298 (441) Derivatives designated as hedges of net investments 12,050 650 (109) ---------- -------- -------- Total derivative assets/(liabilities) designated in hedge accounting relationships 95,434 1,080 (951) ---------- -------- -------- Total recognised derivative assets/ (liabilities) 20,982,189 138,353 (140,697) ---------- -------- -------- Contract 30.06.06 notional Fair value amount Assets Liabilities Derivatives designated as held for £m £m £m trading Foreign exchange derivatives 1,407,480 20,865 (20,885) Interest rate derivatives 17,863,507 80,471 (80,625) Credit derivatives 897,769 5,473 (5,075) Equity and stock index and commodity derivatives 587,142 29,099 (31,721) ----------- --------- --------- Total derivative assets/(liabilities) held for trading 20,755,898 135,908 (138,306) ----------- --------- --------- Derivatives designated in hedge accounting relationships Derivatives designated as cash flow 31,724 135 (351) hedges Derivatives designated as fair value hedges 15,982 267 (313) Derivatives designated as hedges of net investments 12,292 591 (12) ----------- --------- --------- Total derivative assets/(liabilities) designated in hedge accounting relationships 59,998 993 (676) ----------- --------- --------- Total recognised derivative assets/ (liabilities) 20,815,896 136,901 (138,982) ----------- --------- --------- Total derivative notionals have grown over the period primarily due to increases in the volume of fixed income derivatives, reflecting the continued growth in client based activity and increased use of electronic trading platforms in Europe and the US. Internet rate and credit derivative values have also increased significantly, largely due to growth in the market for these products. 3. Loans and advances to banks As at 30.06.07 31.12.06 30.06.06 By geographical area £m £m £m United Kingdom 8,933 6,229 7,848 Other European Union 13,538 8,513 10,209 United States 12,351 9,056 10,888 Africa 2,252 2,219 1,375 Rest of the World 6,120 4,913 5,014 -------- -------- -------- 43,194 30,930 35,334 Less: Allowance for impairment (3) (4) (4) -------- -------- -------- Total loans and advances to banks 43,191 30,926 35,330 -------- -------- -------- 4. Loans and advances to customers As at 30.06.07 31.12.06 30.06.06 £m £m £m Retail business 147,730 139,350 134,534 Wholesale and corporate business 176,787 146,281 150,963 --------- -------- -------- 324,517 285,631 285,497 Less: Allowances for impairment (3,274) (3,331) (3,400) --------- -------- -------- Total loans and advances to customers 321,243 282,300 282,097 --------- -------- -------- By geographical area United Kingdom 183,756 170,518 164,417 Other European Union 52,178 43,430 43,528 United States 33,767 25,677 26,523 Africa 34,175 31,691 29,694 Rest of the World 20,641 14,315 21,335 --------- -------- -------- 324,517 285,631 285,497 Less: Allowance for impairment (3,274) (3,331) (3,400) --------- -------- -------- Total loans and advances to customers 321,243 282,300 282,097 --------- -------- -------- By industry Financial institutions 67,125 45,954 56,616 Agriculture, forestry and fishing 3,144 3,997 3,449 Manufacturing 14,086 15,451 13,951 Construction 4,764 4,056 4,430 Property 17,489 16,528 16,929 Energy and water 8,000 6,810 5,527 Wholesale and retail distribution and leisure 17,209 15,490 16,902 Transport 6,012 5,586 5,252 Postal and communication 3,793 2,180 1,394 Business and other services 36,533 29,425 29,453 Home loans(1) 104,319 98,172 89,001 Other personal 31,713 31,840 31,865 Finance lease receivables 10,330 10,142 10,728 --------- -------- -------- 324,517 285,631 285,497 Less: Allowance for impairment (3,274) (3,331) (3,400) --------- -------- -------- Total loans and advances to customers 321,243 282,300 282,097 --------- -------- -------- (1) Excludes commercial property mortgages. The industry classifications have been prepared at the level of the borrowing entity. This means that a loan to the subsidiary of a major corporation is classified by the industry in which that subsidiary operates even though the parent's predominant business may be a different industry. 5. Allowance for impairment on loans and advances Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £m At beginning of period 3,335 3,404 3,450 Acquisitions and disposals (75) (20) (3) Exchange and other adjustments (6) (48) (105) Unwind of discount (53) (50) (48) Amounts written off (see below) (1,011) (1,178) (996) Recoveries (see below) 124 134 125 Amounts charged against profit (see below) 963 1,093 981 --------- -------- -------- At end of period 3,277 3,335 3,404 --------- -------- -------- Amounts written off United Kingdom (820) (995) (751) Other European Union (46) (20) (54) United States (87) (28) (18) Africa (58) (97) (167) Rest of the World - (38) (6) --------- -------- -------- (1,011) (1,178) (996) --------- -------- -------- Recoveries United Kingdom 93 98 80 Other European Union 7 8 10 United States 8 9 13 Africa 15 16 17 Rest of the World 1 3 5 --------- -------- -------- 124 134 125 --------- -------- -------- Impairment charged against profit: New and increased impairment allowances United Kingdom 941 1,211 1,042 Other European Union 85 126 56 United States 82 16 44 Africa 111 107 102 Rest of the World 4 5 13 --------- -------- -------- 1,223 1,465 1,257 --------- -------- -------- Less: Releases of impairment allowance United Kingdom (82) (111) (84) Other European Union (11) (47) (25) United States (21) (10) (16) Africa (9) (18) (15) Rest of the World (13) (52) (11) --------- -------- -------- (136) (238) (151) --------- -------- -------- Recoveries (124) (134) (125) --------- -------- -------- Total impairment charges on loans and advances(1) 963 1,093 981 --------- -------- -------- (1) This excludes other credit provisions and impairment on available for sale assets detailed on page 50. Allowance £m £m £m United Kingdom 2,396 2,477 2,428 Other European Union 334 311 259 United States 72 100 128 Africa 452 417 474 Rest of the World 23 30 115 -------- -------- -------- Total allowance for impairment 3,277 3,335 3,404 -------- -------- -------- 6. Potential credit risk loans The following tables present an analysis of potential credit risk loans (non-performing and potential problem loans). As at 30.06.07 31.12.06 30.06.06 Potential credit risk loans £m £m £m Summary Impaired loans(1) 4,693 4,444 4,630 Accruing loans which are contractually overdue 90 days or more as to principal or interest 598 598 618 --------- -------- -------- 5,291 5,042 5,248 Restructured loans 61 46 46 --------- -------- -------- Total non-performing loans 5,352 5,088 5,294 Potential problem loans 735 761 935 --------- -------- -------- Total potential credit risk loans 6,087 5,849 6,229 --------- -------- -------- Geographical split Impaired loans(1): United Kingdom 3,548 3,340 3,164 Other European Union 456 410 461 United States 76 129 172 Africa 589 535 657 Rest of the World 24 30 176 --------- -------- -------- Total 4,693 4,444 4,630 --------- -------- -------- Accruing loans which are contractually overdue 90 days or more as to principal or interest United Kingdom 508 516 528 Other European Union 61 58 67 United States 4 3 2 Africa 25 21 21 Rest of the World - - - --------- -------- -------- Total 598 598 618 --------- -------- -------- (1) Impaired loans are non-performing loans where, in general, an impairment allowance has been raised. This classification may also include non-performing loans which are fully collateralised or where the indebtedness has already been written down to the expected realisable value. As at 30.06.07 31.12.06 30.06.06 £m £m £m Restructured loans United Kingdom 3 - 2 Other European Union 12 10 10 United States 28 22 17 Africa 18 14 17 Rest of the World - - - -------- -------- -------- Total 61 46 46 -------- -------- -------- Total non-performing loans United Kingdom 4,059 3,856 3,694 Other European Union 529 478 538 United States 108 154 191 Africa 632 570 695 Rest of the World 24 30 176 -------- -------- -------- Total 5,352 5,088 5,294 -------- -------- -------- Potential problem loans United Kingdom 409 465 599 Other European Union 23 32 51 United States 9 21 35 Africa 271 240 248 Rest of the World 23 3 2 -------- -------- -------- Total 735 761 935 -------- -------- -------- Total potential credit risk loans United Kingdom 4,468 4,321 4,293 Other European Union 552 510 589 United States 117 175 226 Africa 903 810 943 Rest of the World 47 33 178 -------- -------- -------- Total 6,087 5,849 6,229 -------- -------- -------- Allowance coverage of non-performing % % % loans United Kingdom 59.0 64.2 65.7 Other European Union 63.1 65.1 48.1 United States 66.7 64.9 67.0 Africa 71.5 73.2 68.2 Rest of the World 95.8 100.0 65.3 -------- -------- -------- Total 61.2 65.6 64.3 -------- -------- -------- Allowance coverage of total potential % % % credit risk loans United Kingdom 53.6 57.3 56.6 Other European Union 60.5 61.0 44.0 United States 61.5 57.1 56.6 Africa 50.0 51.5 50.3 Rest of the World 48.9 91.0 64.6 -------- -------- -------- Total 53.8 57.0 54.6 -------- -------- -------- As at 30.06.07 31.12.06 30.06.06 Allowance coverage of non-performing % % % loans: Retail 61.4 65.6 63.2 Wholesale and corporate 60.9 65.5 66.8 --------- -------- -------- Total 61.2 65.6 64.3 --------- -------- -------- Allowance coverage of total potential credit risk loans: Retail 55.6 59.8 56.9 Wholesale and corporate 49.7 50.6 50.4 --------- -------- -------- Total 53.8 57.0 54.6 --------- -------- -------- Allowance coverage of non-performance loans decreased to 61.2% from 65.6% at 31st December 2006 principally owing to a number of larger names where the recovery outlook is relatively high. 7. Available for sale financial investments As at 30.06.07 31.12.06 30.06.06 £m £m £m Debt securities 42,727 47,910 49,908 Equity securities 1,652 1,379 1,400 Treasury bills and other eligible bills 3,387 2,420 2,498 --------- -------- --------- 47,766 51,709 53,806 Less: Allowance for impairment (2) (6) (90) --------- -------- --------- Available for sale financial investments 47,764 51,703 53,716 --------- -------- --------- 8. Other assets As at 30.06.07 31.12.06 30.06.06 £m £m £m Sundry debtors 4,401 4,298 3,980 Prepayments 583 658 962 Accrued income 1,159 722 834 Insurance assets, including unit linked assets 146 172 90 -------- -------- -------- Other assets 6,289 5,850 5,866 -------- -------- -------- 9. Other liabilities As at 30.06.07 31.12.06 30.06.06 £m £m £m Obligations under finance leases payable 86 92 102 Sundry creditors 5,075 4,118 5,772 Accruals and deferred income 5,747 6,127 4,893 -------- -------- -------- Other liabilities 10,908 10,337 10,767 -------- -------- -------- 10. Provisions 30.06.07 31.12.06 30.06.06 Redundancy and restructuring 104 102 90 Undrawn contractually committed facilities and guarantees 38 46 50 Onerous contracts 68 71 44 Sundry provisions 317 243 290 -------- -------- -------- Provisions 527 462 474 -------- -------- -------- 11. Other reserves As at 30.06.07 31.12.06 30.06.06 £m £m £m Available for sale reserve 238 132 9 Cash flow hedging reserve (407) (230) (172) Capital redemption reserve 309 309 309 Other capital reserve 617 617 617 Currency translation reserve (486) (438) (176) -------- -------- -------- Other reserves 271 390 587 -------- -------- -------- Movements in other reserves reflect the relevant amounts recorded in the consolidated statement of recognised income and expense on page 90. 12. Retirement benefit liabilities The Group's IAS 19 pension surplus across all schemes as at 30th June 2007 was £540m (31st December 2006: deficit of £817m). The surplus comprised net recognised liabilities of £1,804m (31st December 2006: £1,719m) and unrecognised actuarial gains of £2,344m (31st December 2006: £902m). The net recognised liabilities comprised retirement benefit liabilities of £1,840m (31st December 2006: £1,807m) and assets of £36m (31st December 2006: £88m). The Group's IAS 19 pension surplus in respect of the main UK scheme as at 30th June 2007 was £867m (31st December 2006: deficit of £475m). The primary reason for the movement of £1,342m was an increase in AA long-term corporate bond yields which resulted in a higher discount rate of 5.82% (31st December 2006: 5.12%), partially offset by an increase in the inflation assumption to 3.35% (31st December 2006: 3.08%) and lower than expected returns on the assets. Mortality assumptions remain unchanged from those in force at 31st December 2006. The actuarial funding position of the main UK pension scheme as at 30th June 2007, estimated based on assumptions relating to the formal triennial valuation in 2004, was a surplus of £1,100m (31st December 2006: surplus of £1,300m), representing a funding ratio of 107%. The Pensions Protection Fund (PPF) solvency ratio(1) for the main UK scheme as at 30th June 2007 was estimated to be 131% (31st December 2006: 121%). The next formal triennial valuation is due as at 30th September 2007. Assumptions will be reviewed and updated as part of that valuation. (1) The PPF solvency ratio represents the funds assets as a percentage of pension liabilities calculated using a section 179 valuation model. 13. Legal proceedings Barclays has for some time been party to proceedings, including a class action, in the United States against a number of defendants following the collapse of Enron; the class action claim is commonly known as the Newby litigation. On 20th July 2006 Barclays received an Order from the United States District Court for the Southern District of Texas Houston Division which dismissed the claims against Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. in the Newby litigation. On 4th December 2006 the Court stayed Barclays dismissal from the proceedings and allowed the plaintiffs to file a supplemental complaint. On 19th March 2007 the United States Court of Appeals for the Fifth Circuit issued its decision on an appeal by Barclays and two other financial institutions contesting a ruling by the District Court allowing the Newby litigation to proceed as a class action. The Court of Appeals held that because no proper claim against Barclays and the other financial institutions had been alleged by the plaintiffs, the case could not proceed against them. The plaintiffs have applied to the United States Supreme Court for a review of this decision. Pending the outcome of further appellate proceedings, the District Court has stayed the Newby litigation. Barclays considers that the Enron related claims against it are without merit and is defending them vigorously. It is not possible to estimate Barclays possible loss in relation to these matters, nor the effect that they might have upon operating results in any particular financial period. Barclays has been in negotiations with the staff of the US Securities and Exchange Commission with respect to a settlement of the Commission's investigations of transactions between Barclays and Enron. Barclays does not expect that the amount of any settlement with the Commission would have a significant adverse effect on its financial position or operating results. Barclays is engaged in various other litigation proceedings both in the United Kingdom and a number of overseas jurisdictions, including the United States, involving claims by and against it which arise in the ordinary course of business. Barclays does not expect the ultimate resolution of any of the proceedings to which Barclays is party to have a significant adverse effect on the financial position of the Group and Barclays has not disclosed the contingent liabilities associated with these claims either because they cannot reasonably be estimated or because such disclosure could be prejudicial to the conduct of the claims. 14. Contingent liabilities and commitments As at 30.06.07 31.12.06 30.06.06 £m £m £m Acceptances and endorsements 295 287 248 Guarantees and assets pledged as collateral for security 33,445 31,252 33,417 Other contingent liabilities 7,757 7,880 8,354 -------- -------- -------- Contingent liabilities 41,497 39,419 42,019 -------- -------- -------- Commitments 194,810 205,504 204,860 -------- -------- -------- 15. Market risk Market risk is the risk that Barclays earnings or capital, or its ability to meet business objectives, will be adversely affected by changes in the level or volatility of market rates or prices such as interest rates, credit spreads, commodity prices, equity prices and foreign exchange rates. Barclays Capital's market risk exposure, as measured by average total Daily Value at Risk (DVaR), was £39.3m in the first half of 2007. This is 9% (£3.1m) more than the corresponding period of 2006 and 3% (£1.3m) up on the second half of 2006. The growth in Commodity DVaR is consistent with Barclays Capital's business plan. Total DVaR as at 30th June 2007 was £41.6m (31st December 2006: £41.9m). Analysis of Barclays Capital's market risk exposures The daily average, maximum and minimum values of DVaR were calculated as below: DVaR Half-year ended 30th June 2007 ------------------- Average High(1) Low(1) £m £m £m Interest rate risk 19.7 27.2 13.0 Credit spread risk 20.4 28.1 14.6 Commodity risk 19.5 27.2 14.8 Equity risk 10.1 15.3 7.3 Foreign exchange risk 4.3 6.7 2.9 Diversification effect (34.7) n/a n/a ------- -------- ------- Total DVaR 39.3 47.1 33.1 ------- -------- ------- Half-year ended 31st December 2006 ------------------- Average High(1) Low(1) £m £m £m Interest rate risk 19.7 28.8 12.3 Credit spread risk 24.4 33.1 17.9 Commodity risk 14.2 21.6 9.0 Equity risk 7.9 11.6 5.8 Foreign exchange risk 3.6 6.3 1.8 Diversification effect (31.8) n/a n/a ------- -------- ------- Total DVaR 38.0 43.2 34.0 ------- -------- ------- Half-year ended 30th June 2006 ------------------- Average High(1) Low(1) £m £m £m Interest rate risk 20.5 25.2 14.6 Credit spread risk 24.2 27.5 20.9 Commodity risk 8.4 13.9 5.7 Equity risk 7.7 10.0 6.0 Foreign exchange risk 4.5 7.7 2.0 Diversification effect (29.1) n/a n/a ------- -------- ------- Total DVaR 36.2 43.0 31.3 ------- -------- ------- (1) The high (and low) DVaR figures reported for each category did not necessarily occur on the same day as the high (and low) DVaR reported as a whole. Consequently a diversification effect number for the high (and low) DVaR figures would not be meaningful and it is therefore omitted from the above table. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED) Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £m Net movements in available for sale reserve 95 173 (313) Net movements in cash flow hedging reserve (280) (68) (419) Net movements in currency translation reserve (48) (186) (595) Tax 37 (14) 267 Other movements 23 (5) 30 -------- -------- -------- Amounts included directly in equity (173) (100) (1,030) Profit after tax 2,943 2,594 2,601 -------- -------- -------- Total recognised income and expense 2,770 2,494 1,571 -------- -------- -------- Attributable to: Equity holders of the parent 2,502 2,121 1,561 Minority interests 268 373 10 -------- -------- -------- 2,770 2,494 1,571 -------- -------- -------- The consolidated statement of recognised income and expense reflects all items of income and expense for the period, including items taken directly to equity. Movements in individual reserves are shown including amounts which relate to minority interests; the impact of such amounts is then reflected in the amount attributable to such interests. Movements in individual reserves are also shown on a pre-tax basis with any related tax recorded on the separate tax line. The available for sale reserve reflects gains or losses arising from the change in fair value of available for sale financial assets except for items recorded in the income statement which are: impairment losses; gains or losses transferred to the income statement due to fair value hedge accounting; and foreign exchange gains or losses on monetary items such as debt securities. When an available for sale asset is impaired or derecognised, the cumulative gain or loss previously recognised in the available for sale reserve is transferred to the income statement. The movement in the first half of 2007 primarily reflects the recognition of net unrealised gains from changes in fair value partially offset by the transfer of net realised gains. Cash flow hedging aims to minimise exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss. The portion of the gain or loss on the hedging instrument that is deemed to be an effective hedge is recognised in the cash flow hedging reserve. The gains and losses deferred in this reserve will be transferred to the income statement in the same period or periods during which the hedged item is recognised in the income statement. The movement in the first half of 2007 primarily reflects net unrealised losses from changes in the fair value of the hedging instruments partially offset by the transfer of net losses to the income statement. Exchange differences arising on the net investments in foreign operations and effective hedges of net investments are recognised in the currency translation reserve and transferred to the income statement on the disposal of the net investment. The movement in the first half of 2007 primarily reflects changes in the value of the US Dollar on net investments and the impact of changes in the value of the Rand on the minority interest in Absa Group Limited partially offset by the impact of other currency movements on net investments which are hedged on a post-tax basis. The US Dollar net investments are economically hedged through US Dollar-denominated preference share capital, which is not revalued for accounting purposes. SUMMARY CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED) Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £m Net cash flow from operating activities 2,729 1,017 9,030 Net cash flow from investing activities 3,990 184 (1,338) Net cash flow from financing activities 410 (574) 1,266 Effects of exchange rate on cash and (196) 948 (386) cash equivalents -------- -------- -------- Net increase in cash and cash equivalents 6,933 1,575 8,572 Cash and cash equivalents at beginning of period 30,952 29,377 20,805 -------- -------- -------- Cash and cash equivalents at end of period 37,885 30,952 29,377 -------- -------- -------- In order to provide more relevance to users and to enhance the comparability of its financial statement presentation, the Group has changed certain classification within the cash flow statement in 2006. Certain activities which were categorised as operating activities have been reclassified as financing activities and investing activities. OTHER INFORMATION Registered office 1 Churchill Place, London, E14 5HP, England, United Kingdom. Tel: +44 (0) 20 7116 1000. Company number: 48839. Website www.barclays.com Registrar The Registrar to Barclays PLC, The Causeway, Worthing, West Sussex, BN99 6DA, England, United Kingdom. Tel: 0870 609 4535 or +44 1214 157 004 from overseas. Listing The principal trading market for Barclays PLC ordinary shares is the London Stock Exchange. Ordinary shares are also listed on the Tokyo Stock Exchange. Trading on the New York Stock Exchange is in the form of ADSs under the ticker symbol 'BCS'. Each ADS represents four ordinary shares of 25p each and is evidenced by an ADR. The ADR depositary is The Bank of New York whose international telephone number is +1-212-815-3700, whose domestic telephone number is 1-888-BNY-ADRS and whose address is The Bank of New York, Investor Relations, PO Box 11258, Church Street Station, New York, NY 10286-1258. Filings with the SEC Statutory accounts for the year ended 31st December 2006, which also include certain information required for the joint Annual Report on Form 20-F of Barclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission (SEC), can be obtained from Corporate Communications, Barclays Bank PLC, 200 Park Avenue, New York, NY 10166, United States of America or from the Director, Investor Relations at Barclays registered office address. Copies of the Form 20-F are available from the Barclays Investor Relations website (details below) and from the SEC's website (www.sec.gov). Results timetable Ex dividend Date Wednesday, 15th August 2007 Dividend Record Date Friday, 17th August 2007 Dividend Payment Date Monday, 1st October 2007 Full Year Trading Update* Tuesday, 27th November 2007 2007 Preliminary Results Announcement* Tuesday, 19th February 2008 *Note that these announcement dates are provisional and subject to change. Economic data 30.06.07 31.12.06 30.06.06 Period end - US$/£ 2.01 1.96 1.85 Average - US$/£ 1.97 1.84 1.79 Period end - €/£ 1.49 1.49 1.45 Average - €/£ 1.48 1.47 1.46 Period end - ZAR/£ 14.12 13.71 13.19 Average - ZAR/£ 14.11 12.47 11.31 For further information please contact: Investor Relations Media Relations -------------------- ----------------- Mark Merson/James S Johnson Alistair Smith/Robin Tozer +44 (0) 20 7116 5752/2927 +44 (0) 20 7116 6132/6586 More information on Barclays can be found on our website at the following address: www.investorrelations.barclays.com APPENDIX 1 ABSA Half Year ended 30.06.07 31.12.06 30.06.06 Rm Rm Rm -------- -------- -------- Interest and similar income 24,185 20,269 17,331 Interest expense and similar charges (15,608) (12,263) (10,440) -------- -------- -------- Net interest income 8,577 8,006 6,891 Impairment losses on loans and advances (985) (979) (594) -------- -------- -------- 7,592 7,027 6,297 -------- -------- -------- Fee and commission income 6,020 5,874 5,077 Fee and commission expense (394) (305) (272) -------- -------- -------- Net fee and commission income 5,626 5,569 4,805 -------- -------- -------- Insurance premium revenue 1,795 1,720 1,549 Premiums ceded to reinsurers (142) (134) (141) -------- -------- -------- Net insurance premium income 1,653 1,586 1,408 -------- -------- -------- Gross claims and benefits paid on insurance contracts (836) (754) (622) Reinsurance recoveries 58 42 15 -------- -------- -------- Net claims and benefits paid (778) (712) (607) Changes in insurance and investment liabilities (573) (454) (294) Gains and losses from banking and trading activities 930 806 610 Gains and losses from investment activities 1,084 1,303 588 Other operating income 469 579 359 -------- -------- -------- Net operating income 16,003 15,704 13,166 Operating expenses (9,113) (8,685) (7,935) Impairments (28) (75) - Indirect taxation (449) (450) (421) Share of profit of associated and joint venture companies 16 44 69 -------- -------- -------- Operating profit before income tax 6,429 6,538 4,879 -------- -------- -------- This appendix summarises the Rand results of Absa Group Limited for the six months to 30th June 2007 as reported to JSE Limited. Absa Group Limited results Absa Group Limited's operating profit before income tax increased 32% (R1,550m) to R6,429m (2006 R4,879m) reflecting very good performances from Retail Banking, Absa Capital, Bancassurance and Corporate and Business Banking. Absa Group Limited delivered a return on equity of 26.8% (2006: 24.7%). Key factors impacting the results included very strong asset and income growth, increased transaction volumes, a strong investment performance, an increased retail credit impairment charge, and the realisation of synergies from leveraging Barclays expertise and economies of scale. Net operating income has grown R2,837m to R16,003m (2006: R13,166m). Net interest income grew 25% (R1,686m) to R8,577m (2006: R6,891m). Loans and advances to customers increased 20% from 30th June 2006 driven by growth of 25% in mortgages, 53% in credit cards and 32% in commercial property finance. Deposits increased 13%. Non-interest income increased 22% reflecting higher transaction volumes, a strong performance in insurance related earnings and higher investment income from bancassurance operations. As expected the impairment charge on loans and advances increased R391m to R985m (2006: R594m) from the cyclically low levels of recent years. Arrears in retail portfolios increased driven by interest rate increases in 2006 and 2007 and pressure on collections. Action has been taken to reduce some of the higher risk customer balances. Operating expenses increased 15% resulting from increased investment in the business in order to support continued growth in volumes and customers. Excellent progress was made with the realisation of synergy benefits resulting from the majority ownership of Absa Group Limited by Barclays. In the first six months of 2007, synergies of R650m were delivered relative to a full year 2007 target of R750m. On an annualised basis, synergies delivered to date are close to delivery of the 2009 target of R1.4bn. Integration costs were in line with the target of R300m. This information is provided by RNS The company news service from the London Stock Exchange

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