Final Results - Part 1 of 2
Barclays PLC
14 February 2002
PART 1 OF 2
BARCLAYS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR 2001
The statutory consolidated Profit and Loss account and consolidated Balance
Sheet are set out on pages 10 and 11 in the format they will be presented in the
Group's Annual Report. In order to provide a more comparable view of the prior
year results, pro forma results are set out on pages 1 and 12. An explanation
of the calculation of the pro forma results is set out on page 13. Elsewhere,
unless indicated otherwise, comparisons are to the actual results for 2000.
PAGE
Financial summary 1
Financial highlights 3
Chairman's statement 4
Chief Executive's Statement 5
Key facts 8
Summary of results 9
Consolidated profit and loss account 10
Consolidated balance sheet 11
Further analysis of profit and loss account and pro forma disclosure 12
Financial review including business group details 14
Additional information 51
Notes 54
Consolidated statement of changes in shareholders' funds 64
Statement of total recognised gains and losses 64
Average balance sheet 65
Summary consolidated cashflow statement 67
Other information 69
Index 73
The information in this announcement, which was approved by the Board of
Directors on 13th February 2002, does not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985. Statutory accounts, which are
combined with the Group's annual report on Form 20-F to the U.S. Securities and
Exchange Commission and which contain an unqualified audit report, will be
delivered to the Registrar of Companies in accordance with section 242 of the
Companies Act 1985. The 2001 Annual Review and Summary Financial Statement will
be posted to shareholders in the third week of March together with the Group's
annual report for those shareholders who have requested it.
This document contains certain forward-looking statements within the meaning of
Section 21E of the U.S. Securities Exchange Act of 1934, as amended, with
respect to certain of the Group's plans and its current goals and expectations
relating to its future financial condition and performance. These
forward-looking statements can be identified by the fact that they do not relate
only to historical or current facts. Forward-looking statements sometimes use
words such as 'anticipate,' 'target,' 'expect,' 'estimate,' 'intend,' 'plan,'
'goal,' 'believe,' or other words of similar meaning. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
future events and circumstances, including UK domestic and global economic and
business conditions, market related risks such as changes in interest rates and
exchange rates, the policies and actions of governmental and regulatory
authorities, changes in legislation and the impact of competition, a number of
which are beyond the Group's control. As a result, the Group's actual future
results may differ materially from the plans, goals, and expectations set forth
in the Group's forward-looking statements. Any forward-looking statements made
by or on behalf of Barclays speak only as of the date they are made. Barclays
does not undertake to update forward-looking statements to reflect any changes
in Barclays expectations with regard thereto or any changes in events,
conditions or circumstances on which any such statement is based.
BARCLAYS PLC. REGISTERED IN ENGLAND. REGISTERED NO: 48839.
REGISTERED OFFICE: 54 LOMBARD STREET, LONDON EC3P 3AH
BARCLAYS PLC - FINANCIAL SUMMARY
RESULTS FOR YEAR TO 31ST DECEMBER 2001
Pro forma operating results*
2001 2000 % Change
Operating income £11,360m £10,248m 11
Operating expenses £6,067m £5,618m 8
Provisions for bad and doubtful debts £1,149m £850m 35
Operating profit £4,134m £3,771m 10
Profit before tax £3,608m £3,307m 9
Earnings per share 174.1p 158.1p 10
Dividend per share 66.5p 58.0p 15
Post-tax return on average shareholders' funds 20.2% 21.2% (5)
SUMMARY
- Operating profit rose 10% to £4,134 million (2000: £3,771 million).
- Operating income increased by 11% to £11,360 million (2000: £10,248
million).
- Operating expenses rose by 8% to £6,067 million (2000: £5,618 million).
Operating expenses include £31 million of costs relating to the UK
regulated sales force and field sales managers, which prior to the
implementation of the strategic alliance with Legal & General Group PLC
(Legal & General) were reported within the long term assurance fund.
- Provisions for bad and doubtful debts rose 35% to £1,149 million (2000:
£850 million). Risk tendency increased by 21% to £1,245 million (2000:
£1,030 million).
- Earnings per share increased 10% to 174.1p (pro forma 2000: 158.1p).
- Post tax return on average shareholders' funds was 20.2% (pro forma 2000:
21.2%).
- The total dividend for the year increased by 15% to 66.5p (2000: 58.0p).
- Economic profit was £1,243 million.
- Pre-tax Woolwich integration synergies amounting to £111 million were
achieved in 2001.
- Total Shareholder Return for the two years ended 31st December 2001 was
37%, placing Barclays in the top quartile relative to our peer group
(details on page 47). £100 invested in Barclays at the beginning of 2000
was worth £137 at the end of 2001.
- Shareholders' funds at the year end were £14.5 billion (2000: £13.2
billion) and the tier 1 ratio was 7.8% (2000: 7.2%). The average
economic capital (excluding goodwill) to support the Group's current
business requirements was approximately £9.2 billion (2000: £8.1 billion).
- During 2001, the Group returned a total of £1,116 million of capital to
shareholders. This comprised the second interim dividend for 2000 of
38p per share, the first interim dividend of 2001 of 23p per share and
share buybacks totalling £101 million.
- Personal Financial Services achieved an 18% increase in operating profit
to £498 million (2000: £423 million). Total income increased by 6%.
Costs were held flat. Net interest income increased by 5% to £1,142
million (2000: £1,092 million) driven by strong growth in deposit
balances and continued growth in consumer lending balances.
- Operating profit on a statutory basis for the Woolwich business increased
from £230 million to £505 million. On a pro forma basis operating profit
reduced by 9% to £505 million (2000: £552 million) primarily as a result
of a reduced contribution from Barclays Mortgages, which was £62 million
lower than the previous year.
- Barclays Private Clients operating profit decreased by 4% to £620 million
(2000: £645 million) due to significant strategic investment (which grew
£62m year on year). Operating income was held at 2000 levels, despite
difficult market conditions, due to the diversity of product, geography
and client mix.
- Barclaycard operating profit increased by 20% to £555 million (2000: £464
million), benefiting from increased customer recruitment and the
application of Information Based Customer Management techniques, which
enable pricing and proposition features to be responsive to customers
needs. Recruitment of UK customers reached 763,000 (2000: 740,000),
aided by the Barclaycard Premiership sponsorship and despite lower
balance consolidation activity.
- Business Banking operating profit increased 5% to £1,152 million (2000:
£1,102 million) reflecting good growth in balances. Business Banking
maintained its highly targeted approach to new lending. Net fees and
commissions increased 6%, while operating costs were held flat.
- Barclays Africa operating profit increased 21% to £133 million (2000:
£110 million), primarily reflecting lower provisions. Costs were held
flat.
- Barclays Capital operating profit increased 19% to £685 million (2000:
£575 million) with both the Rates and Credit businesses performing well.
Total income growth of 26% reflected increased business activity in most
areas. Net interest income increased 33% and dealing profits 48%,
underpinned by a 77% increase in client transaction volumes.
- Barclays Global Investors operating profit increased 20% to £71 million
(2000: £59 million) despite significantly lower stock market levels.
Fees and commissions totalled £505 million (2000: £435 million), up 16%,
assisted by strong growth in performance fees.
* Pro forma results for 2000 assume that the acquisition of Woolwich plc took
place on 1st January 2000. Other acquisitions and disposals in 2000 have
also been reflected on a similar basis. Details of the basis of
calculating pro forma results, including earnings per share and post-tax
return on average shareholders' funds, are set out on page 13. Elsewhere
in this document, unless indicated otherwise, comparatives are to the
actual results for 2000.
FINANCIAL HIGHLIGHTS
2001 2000
RESULTS (Note 1) £m £m
Net interest income 6,139 5,162
Non-interest income 5,221 4,443
Operating income 11,360 9,605
Operating expenses (6,067) (5,203)
Provisions for bad and doubtful debts (1,149) (817)
Provisions for contingent liabilities and commitments (1) 1
Loss from joint ventures and associated undertakings (9) (8)
Operating profit 4,134 3,578
Restructuring charge (171) (232)
Woolwich integration costs (89) (7)
Woolwich fair value adjustments (33) (6)
Goodwill amortisation (229) (51)
Exceptional items (4) 214
Profit before tax 3,608 3,496
Profit attributable to shareholders 2,465 2,473
Economic profit 1,243 1,429
BALANCE SHEET
Shareholders' funds 14,508 13,187
Loan capital 8,115 6,370
Total capital resources 24,629 21,157
Total assets 356,649 316,190
Weighted risk assets 158,873 147,040
PER ORDINARY SHARE p p
Earnings 148.2 163.3
Earnings (based on operating profit above) 174.1 164.0
Dividend 66.5 58.0
Net asset value 870 794
PERFORMANCE RATIOS % %
Post-tax return on average shareholders' funds 17.5 25.1
Post-tax return on average shareholders' funds
(based on operating profit above) 20.2 25.3
RISK ASSET RATIO
Tier 1 7.8 7.2
Total 12.5 11.0
GROUP YIELDS, SPREADS & MARGINS % %
Gross yield 6.56 7.09
Interest spread 2.53 2.60
Interest margin 2.98 3.11
EXCHANGE RATES
Period end - US$/£ 1.45 1.49
Average - US$/£ 1.44 1.52
Period end - Euro/£ 1.64 1.60
Average - Euro/£ 1.61 1.64
Note 1 Based on the analysis of the Profit and Loss account as set out on page
12. Comparatives for 2000 are on a non pro forma basis.
CHAIRMAN'S STATEMENT
Barclays delivered a strong performance in 2001, building on the excellent
progress achieved in 2000. We have continued to grow our profitability as well
as investing in the business and strengthening our position in the UK and
internationally.
Barclays is focused on safeguarding the financial interests of our shareholders
and customers, looking after our staff and contributing to the wellbeing of the
communities in which we live and work. In 2001 we experienced the impact of
the foot and mouth crisis in the UK and witnessed the terrible events in New
York. They remind us that we have a privileged role in supporting our
shareholders, our customers and the wider community. Our stakeholders rely on
us through the difficult times as well as the good ones. They expect of us
integrity, professionalism and expertise. We must be worthy of their trust -
without them, Barclays would not exist. That is why we strive to reach the
highest ethical and moral standards in everything we do.
The Financial Services Authority (FSA) in the UK is Barclays lead regulator. In
all, we have some 150 financial regulators around the world - and that excludes
regulators in other fields who oversee our activities. The regulatory system in
the UK changed significantly during 2001. The Financial Services and Markets
Act 2000 came into force on 1st December 2001, finally merging the roles of
various UK regulators. The FSA has now taken on the responsibilities of
self-regulatory organisations such as the Securities & Futures Authority and
Investment Management Regulatory Organisation. The result is a unified
regulatory regime in our home market. The FSA has introduced new regulatory
procedures and rules relating to governance, compliance and controls.
It is in the best interest of all stakeholders to have an effective and
independent regulator such as the FSA in the UK. However, higher and growing
costs of compliance with regulation are a key issue for the financial services
industry at a time of increasing domestic and international competition. We are
in an era of escalating regulation, often as a reaction to sudden or unexpected
events. It is crucial for the future of banking that regulators strike the
right balance between, on the one hand, protecting the safety and security of
the system and customers and, on the other, encouraging innovation that makes it
easier for customers to deal with financial institutions. We must avoid a
regime that simply increases the costs of doing business which ultimately leads
to higher prices and could constitute a barrier to entry and depress
competition. Barclays plays a significant role in the UK economy, and we will
continue to work with the authorities to help influence a proper balance.
Similarly, Barclays is committed to giving something back to the communities in
which we operate. We have a proud record of working in partnership with many
organisations on initiatives ranging from environmental improvement to the
economic regeneration of deprived areas, and from the enhancement of community
life to the inclusion into society of marginalised individuals. We provide
funding, advice, hands-on assistance from employee volunteers and financial
support through our community programme, which is one of the largest in the UK.
We try to ensure that everything we do as an organisation adds to shareholder
value. Millions of people own Barclays shares through their pension funds or
unit trusts. When we do well, we are helping to secure the financial well-being
of all those men and women. This is the single most important contribution we
can make to the public good.
We are building a world-class financial services organisation. Our people are
key to this and they have done a magnificent job in a difficult year. We
continue to invest in and develop our people wherever we operate in the world.
To stay competitive, we need to keep on raising our game. We can and we will.
Sir Peter Middleton GCB
Chairman
CHIEF EXECUTIVE'S STATEMENT
Barclays performed well in 2001. On a pro forma basis operating profit was
£4,134 million, up 10% on last year and earnings per share rose 10% from 158.1p
to 174.1p. Our after-tax return on equity was 20%. These results were achieved
despite a significant slow-down in all the major economies, volatile stock
markets and the technology, media and telecoms sector rundown, and the tragic
events of 11th September. Our good performance was reflected in a total
dividend pay-out for the year of 66.5p, a 15% increase over 2000.
Barclays results therefore reflected the benefits of a diversified and
competitively strong portfolio of businesses, robust risk management policies,
continued focus on productivity improvement, and continued strong revenue
growth.
Our primary goal is to rank consistently in the top quartile of value-creation
for shareholders in our comparator peer group*. Our performance on this measure
met the objective: for the two years to date of the first four year plan we are
ranked second out of twelve.
We also aim to double shareholder value every four years. On this measure, for
the two years to date we are marginally behind. The pace of shareholder value
creation would have required a £100 investment at the beginning of the period,
with dividends reinvested, to have grown to £142 by the end of 2001. We have
achieved £137.
Tackling a changing global marketplace
The financial services industry everywhere is reshaping itself to compete in
this global market. To take advantage of these opportunities, we have to be
clear about which businesses are likely to become global and those which
presently have a more domestic focus. For example, retail and commercial
banking are likely to remain regional, while investment banking and
institutional asset management are increasingly global. The standing of the
Barclays brand in domestic and global market places is an advantage in tackling
these opportunities.
Meeting the challenge of competition
Competition is intensifying. Barclays must beat the pace and speed of companies
that focus on a single product, while continuing to offer our own customers a
full range of services. At the same time, we have to compete with the world's
largest financial institutions in our home markets.
All this means our customers have more choice than ever before. This keeps us
sharp, for if we do not serve their needs effectively, they will look elsewhere.
A priority is to differentiate our services to provide greater value to
customers and ensure that they do not want to turn to our competitors.
Creating tomorrow's value
We can expect to see wide variations in growth and profitability between
different markets and products. The UK will continue to be a good market for
Barclays. We also expect several markets outside the UK (particularly in
continental Europe) to have good long-term potential for growth. Wealth
management products will increase in importance.
Our business development over the next 10 years will be biased towards
increasing the profit stream from outside the UK, while continuing to grow
earnings aggressively in a still fragmented home market. At the same time, we
expect to increase the proportion of profit contribution from value-added
relationship products and services, asset gathering and capital markets
activities as transactional activities increasingly commoditise. These are
areas where we can build on existing strengths.
* refer to page 47 for details
Shaping our destiny
In the medium term, we are concentrating on four priorities to help us increase
the value of the organisation. These are:
- to defend and grow Barclays UK businesses, becoming the 'first choice
provider' of all financial services for our personal and business
customers;
- to develop products and businesses with regional and global potential
where we have existing strengths, thus increasing the contribution from
sources outside the UK;
- to capitalise on our existing strengths in continental Europe and develop
a stronger presence, in selected markets, in both retail and commercial
banking;
- to build a leading position in the UK and Europe in serving the needs of
the mass affluent and high net worth customer segment.
Building a profitable organisation
The Group is making good progress on all four priorities.
- We are strengthening and extending our main UK banking businesses. We
are overhauling everything we do for our customers, to give them a range
of excellent products and services. We have already made a good start,
and we have filled product gaps through our acquisition of the Woolwich
and our strategic alliance with Legal & General.
- We are expanding the businesses with regional and global reach where
Barclays already has a strong competitive position. One example of this
is the investment banking business, Barclays Capital, which is performing
well and playing to its strengths. Its very effective leadership team
and outstanding people have distinctive competencies in financing and
risk management solutions to corporates, institutions and governments.
Another example is Barclaycard, a leading credit card brand in the UK and
Europe. The wide public awareness of its brand and its Information Based
Customer Management (IBCM) capabilities provide advantages in the full
range of credit card services for individual customers and card payment
facilities for retailers.
- We are building our retail and commercial banking presence in certain
western European markets. Barclays already has a stronger continental
European presence than most of its UK competitors, with operations in 12
countries and broad networks in France and Iberia. Our objective is to
become a much more significant player in continental Europe in the future.
- We are building on the Group's strengths in the wealth and
asset-gathering markets by developing unique products and services.
Barclays Private Clients has 1 million affluent customers.
Achieving operational excellence
To build a better Barclays, we are not only focusing on the shape of our
business - we are also focusing on the ways in which we run the business to
better manage for value.
We are:
- analysing every business for value creating characteristics and economic
profit potential within our total portfolio:
- focusing on achieving efficiency ratios for each strategic business unit
that ranks in the top quartile for such businesses globally;
- encouraging staff at all levels to take decisions based on clear
value-based guidelines;
- embedding a high-performance culture incorporating stretching performance
standards at every level, with variable pay-for-performance incentives
directly tied to economic profit generation;
- harnessing the power of technology to change the way we do things for
customers and for ourselves;
- developing deeper relationships with our customers, built upon an ethos
of service excellence, customer convenience and value for money.
Progress is evident in all these areas, but there is considerable room for
further improvement.
Managing for risk
Information technology has given us the means to analyse and assess risk much
more accurately than ever before, and Barclays is at the leading edge in the
field of credit and market risk. Our policy, implemented three years ago, of
tightening our risk controls in both corporate and personal lending means that
we can remain confident even in these more difficult times. This is an
important plank in our strategy. It gives us the confidence to grow the Group's
businesses where we see opportunities, making the right trade-offs between risk
and reward.
Equally important, the diversity of the businesses that make up the Barclays
Group is a source of strength and protection. A key part of the strategy is to
focus on attractive markets where the Group has a distinctive strength, while
avoiding the lure of businesses where it does not.
Our stakeholders
We do not believe that the interests of one group of stakeholders can be served
in isolation. Instead, we aim to create value by building a virtuous circle of
satisfied stakeholders, in which capable and committed staff, satisfied
customers and a deserved reputation for good corporate citizenship all
contribute to sustaining value creation.
Driven by aspiration
We aspire to be one of the most valuable and admired financial service
organisations in the world. A company that leads in its chosen markets, that
uses technology to the benefit of its customers and the business. A company
with integrity and a passion for good citizenship and a model of excellence that
becomes the benchmark. We have made solid progress over the past year, yet we
know that more work needs to be done before we fully translate our aspirations
for customers, shareholders and communities into reality. We intend to do it.
Matthew W. Barrett
Group Chief Executive
KEY FACTS
31.12.01 31.12.00
Number of UK branches 2,088 2,129
Number of overseas branches 564 624
Number of UK Barclays Group ATMs 3,900 3,800
Employees worldwide 78,600 76,200
Total customers registered for online banking 3.3m 2.0m
PERSONAL FINANCIAL SERVICES AND WOOLWICH
UK current accounts 10.1m 9.7m
UK savings accounts 9.0m 8.4m
Open Plan customers 970,000 544,000
Total UK mortgage balances £51.9bn £47.5bn
BARCLAYS PRIVATE CLIENTS
Affluent and high net worth clients 1m 1m
Total customer funds £88bn £95bn
Stockbrokers - deal volumes per day 6,400 8,100
BARCLAYCARD
Barclaycard UK customers 8.2m 7.9m
Customers registered for on-line services 653,000 388,000
Retailer relationships 83,000 81,000
Number of retailer transactions processed 1.3bn 1.2bn
Barclaycards issued in continental Europe 1.25m 1.17m
BUSINESS BANKING
Number of UK Business Banking connections (market share 539,000 552,000
maintained)
Number of current accounts 748,000 765,000
Number of Business Premium deposit accounts 247,000 257,000
Customers registered for online banking/BusinessMaster 256,000 208,000
AFRICA
Customer accounts 1.5m 1.5m
BARCLAYS GLOBAL INVESTORS
Total assets under management £530bn £550bn
Number of institutional clients 2,000 1,800
BARCLAYS CAPITAL 31.12.01 31.12.00
League table Issuance value League table Issuance value
position position
Sterling bonds 1st £11bn 1st £12bn
Syndicated loans 1st $46bn 1st $89bn
(Europe, Middle East, Africa)
Syndicated loans (ex USA) 2nd $50bn 1st $98bn
All syndicated loans 5th $69bn 4th $116bn
All international bonds 10th $67bn 11th $48bn
SUMMARY OF RESULTS
PROFIT BEFORE TAX 2001 2000
£m £m
Personal Financial Services 498 423
Woolwich* 505 230
Barclays Private Clients 620 645
Barclaycard 555 464
Business Banking 1,152 1,102
Barclays Africa 133 110
Barclays Capital 685 575
Barclays Global Investors 71 59
Other operations (16) 17
Head office functions (69) (47)
Operating profit** 4,134 3,578
Restructuring charge (171) (232)
Woolwich integration costs (89) (7)
Woolwich fair value adjustments (33) (6)
Goodwill amortisation (229) (51)
Exceptional items (4) 214
3,608 3,496
* Comprises the contribution from Woolwich plc since its acquisition on 25th
October 2000 and the Barclays Mortgages business.
** Includes the loss from joint ventures and associated undertakings.
TOTAL ASSETS AND WEIGHTED RISK ASSETS
Total assets Weighted risk assets
2001 2000 2001 2000
£m £m £m £m
Personal Financial Services 7,244 6,562 6,097 5,598
Woolwich 57,630 55,243 30,142 28,620
Barclays Private Clients 13,736 13,352 9,167 8,390
Barclaycard 9,342 9,805 9,405 9,623
Business Banking 44,243 41,364 46,390 44,017
Barclays Africa 2,756 2,291 1,943 1,661
Barclays Capital 202,030 168,894 52,675 45,946
Barclays Global Investors 265 259 548 653
Other Operations
And Head office functions 7,142 5,440 2,506 2,532
Goodwill 4,091 4,269 - -
Retail life-fund assets 8,170 8,711 - -
356,649 316,190 158,873 147,040
CONSOLIDATED PROFIT AND LOSS ACCOUNT
2001 2000
£m £m
Interest receivable 13,458 11,788
Interest payable (7,354) (6,635)
Profit on repurchase of loan capital - 2
Net interest income 6,104 5,155
Net fees and commissions receivable 3,758 3,369
Dealing profits 1,011 677
Other operating income 452 397
Total non-interest income 5,221 4,443
Operating income 11,325 9,598
Administration expenses - staff costs (3,714) (3,219)
Administration expenses - other (2,303) (1,967)
Depreciation and amortisation (537) (306)
Operating expenses (6,554) (5,492)
Operating profit before provisions 4,771 4,106
Provisions for bad and doubtful debts (1,149) (817)
Provisions for contingent liabilities and commitments (1) 1
Operating profit 3,621 3,290
Loss from joint ventures and associated undertakings (9) (8)
Exceptional items (4) 214
Profit on ordinary activities before tax 3,608 3,496
Tax on profit on ordinary activities (1,010) (944)
Profit on ordinary activities after tax 2,598 2,552
Minority and other interests (equity and non-equity) (133) (79)
Profit for the financial year attributable to the members of 2,465 2,473
Barclays PLC
Dividends (1,110) (927)
Profit retained for the financial year 1,355 1,546
Earnings per ordinary share 148.2p 163.3p
Dividend per ordinary share:
First interim 23.0p 20.0p
Second interim (payable 26th April 2002) 43.5p 38.0p
CONSOLIDATED BALANCE SHEET
2001 2000
Assets: £m £m
Cash and balances at central banks 1,281 1,243
Items in course of collection from other banks 2,444 2,509
Treasury bills and other eligible bills 7,417 5,564
Loans and advances to banks - banking 12,196 9,556
- trading 35,693 27,345
47,889 36,901
Loans and advances to customers - banking 146,253 138,437
- trading 34,240 23,198
180,493 161,635
Debt securities 78,924 70,770
Equity shares 3,118 4,062
Interests in joint ventures and associated undertakings 88 122
Intangible fixed assets - goodwill 4,091 4,269
Tangible fixed assets 1,958 2,059
Other assets 20,776 18,345
348,479 307,479
Retail life-fund assets attributable to policyholders 8,170 8,711
Total assets 356,649 316,190
Liabilities:
Deposits by banks - banking 45,837 32,445
- trading 21,543 17,311
67,380 49,756
Customer accounts - banking 139,831 140,352
- trading 23,984 18,616
163,815 158,968
Debt securities in issue 41,846 31,883
Items in course of collection due to other banks 1,550 1,176
Other liabilities 49,259 44,539
Undated loan capital - convertible to preference shares 345 335
Undated loan capital - non-convertible 2,837 2,337
Dated loan capital - non-convertible 4,933 3,698
331,965 292,692
Minority interests and shareholders' funds:
Minority interests: equity 134 108
Minority interests: non-equity 1,872 1,492
Called up share capital 1,668 1,662
Reserves 12,840 11,525
Shareholders' funds: equity 14,508 13,187
16,514 14,787
348,479 307,479
Retail life-fund liabilities attributable to policyholders 8,170 8,711
Total liabilities and shareholders' funds 356,649 316,190
FURTHER ANALYSIS OF PROFIT AND LOSS ACCOUNT AND PRO FORMA DISCLOSURE
2001 2000 2000
Pro forma
£m £m £m
Interest receivable 13,513 13,546 11,799
Interest payable (7,374) (8,006) (6,639)
Profit on repurchase of loan capital - 2 2
Net interest income 6,139 5,542 5,162
Net fees and commissions receivable 3,758 3,597 3,369
Dealing profits 1,011 677 677
Other operating income 452 432 397
Total non-interest income 5,221 4,706 4,443
Operating income 11,360 10,248 9,605
Administration expenses - staff costs (3,578) (3,189) (3,047)
Administration expenses - other (2,181) (2,135) (1,900)
Depreciation and amortisation (308) (294) (256)
Operating expenses (6,067) (5,618) (5,203)
5,293 4,630 4,402
Provisions for bad and doubtful debts (1,149) (850) (817)
Provisions for contingent liabilities and commitments (1) 1 1
Loss from joint ventures and associated undertakings (9) (10) (8)
Operating profit 4,134 3,771 3,578
Restructuring charge (171) (232) (232)
Woolwich integration costs (89) (7) (7)
Woolwich fair value adjustments (33) (6) (6)
Goodwill amortisation (229) (219) (51)
Exceptional items (4) - 214
Profit on ordinary activities before tax 3,608 3,307 3,496
Earnings per ordinary share before restructuring charge, 174.1p 158.1p 164.0p
integration costs, Woolwich fair value adjustments,
goodwill amortisation and exceptional items
Post-tax return on average shareholders' funds (on a 20.2% 21.2% 25.3%
consistent basis with earnings per share above)
The above results for 31st December 2001 and 2000 are based on the operating
profit shown on page 10 before charging for costs directly associated with the
integration of Woolwich plc, Woolwich fair value adjustments, goodwill
amortisation and the restructuring charge.
The pro forma 2000 comparatives are based on the assumption that the acquisition
of Woolwich plc took place on 1st January 2000. Further details of the pro
forma adjustments are provided on page 13.
Woolwich fair value adjustments consist of £35m net interest charge (2000: £7m)
and £2m of credit to operating expenses (2000: £1m).
Basis of preparation of further analysis of results
The further analysis of the results for 31st December 2001 and 2000 presents
operating profit before the restructuring charge, costs associated with the
integration of Woolwich plc, Woolwich fair value adjustments and goodwill
amortisation. Barclays believes that identifying operating profit before
charging these items assists in the understanding of underlying profit trends in
the results.
Basis of preparation of pro forma results
In addition to the adjustments above, the acquisition of Woolwich plc on 25th
October 2000 has had a material impact on the Group's results. Therefore, in
order to facilitate the comparison of results in 2001 to those in 2000 pro forma
results have been prepared for the year ended 31st December 2000 on the
assumption that the acquisition of Woolwich plc, and the disposal of certain
other businesses, had taken place on 1st January 2000.
Pro forma earnings per share and post-tax return on average shareholders' funds
have been calculated on a similar basis to the pro forma results.
The pro forma results for the year ended 31st December 2000 have been prepared
on the following basis:
Changes in accounting policies and accounting estimates
The results for Woolwich plc have been restated using Barclays Group accounting
policies. This has resulted in mortgage incentives and software costs,
previously capitalised and amortised, being expensed as incurred. The results
for Woolwich plc have been adjusted to reflect the Barclays depreciation rates
and other accounting estimates.
Adjustment to reflect net funding of the acquisition of Woolwich plc
Interest received has been reduced by £128m in the year to 31st December 2000 to
reflect interest foregone had the cash element of the acquisition been paid on
1st January 2000. This is based on the assumption that the amount would have
been deposited at the internal transfer price of cash, which is calculated based
on an average of one-month sterling LIBOR over the period.
Results of businesses disposed of
The results of any businesses disposed of during 2000 by either Barclays or
Woolwich plc have been eliminated, together with any profits or losses on
disposal. Proceeds of £286m are assumed to have been received on 1st January
2000 and interest received adjusted on the same basis as for the funding
adjustment above. Acquisitions and disposals in 2001 are not considered
material and consequently no adjustment is made in the pro forma presentation.
Goodwill amortisation.
Amortisation of £206m per year based on goodwill balance of £4,121m over its
estimated economic life of 20 years has been included in the pro forma accounts
for 2000.
Costs of acquisition
Incremental costs incurred by Woolwich plc in relation to the acquisition have
not been included.
FINANCIAL REVIEW
Results by nature of income and expense
In order to provide a like for like comparison, pro forma results have been
prepared for year ended 31st December 2000 and are set out on page 12 and also,
where relevant, by category of income and expense as below.
Net interest income 2001 2000
£m £m
Interest receivable 13,458 11,788
Interest payable (7,354) (6,635)
Profit on repurchase of loan capital - 2
6,104 5,155
Woolwich fair value adjustments 35 7
6,139 5,162
Pro forma basis 6,139 5,542
On a pro forma basis, net interest income increased 11% (£597m), with strong
growth in Barclaycard and Barclays Capital.
Personal Financial Services net interest income increased by 5% to £1,142m.
This was driven by strong growth in deposit balances and by continued growth in
consumer lending balances.
On a pro forma basis Woolwich net interest income remained stable at £851m,
despite highly competitive market conditions. The contribution from lending
activities improved and compensated for a reduction in retail deposit income,
where margin pressure was particularly intense during the year.
Barclays Private Clients net interest income increased by 6% to £839m as average
lending volumes increased by 16% and average deposits, primarily from UK
affluent clients, increased by 6%. The benefit was partially offset by margin
compression in deposits, due to reduced interest rates.
Barclaycard's net interest income increased by 20% to £820m. This was mainly as
a result of good growth in average UK extended credit balances which rose 9% and
improved cardholder rate management coupled with lower interest rates.
Business Banking net interest income rose 6% to £1,591m reflecting increased
lending and deposit balances partly offset by a slight reduction in the overall
margin. Average customer lending balances increased 9% and average customer
deposit balances increased 6%.
Barclays Capital net interest income increased 33% to £682m. The growth in net
interest income was mainly in money markets, which benefited from a favourable
interest rate environment, and in structured capital markets.
Overall banking margins were 2.98% compared with 3.11% in 2000. The adverse
impact on the margin of the acquisition of Woolwich plc was mitigated in part by
the benefit of a gain on closure of a surplus hedge following the Woolwich
acquisition. Increased margins in Barclaycard in part offset margin pressure in
Personal Financial Services, Barclays Private Clients and Business Banking.
The benefit of free funds fell 0.06% to 0.45%. The fall in short term market
rates increased the contribution to the net margin from the central management
of Group interest rate exposure to 0.11% from 0.05%. The overall benefit of
free funds on a hedged basis was flat at 0.56% (2000: 0.56%) as the increase in
the effective rate of the hedge was offset by a reduction in the proportion of
free funds to interest earning assets.
Yields, spreads and margins - banking business
Domestic business is conducted primarily in the UK in sterling. International
business is conducted primarily in foreign currencies. In addition to the
business carried out by overseas branches and subsidiaries, international
business is transacted in the United Kingdom by Barclays Capital, mainly with
customers domiciled outside the UK.
The yields, spreads and margins shown below have been computed on this basis,
which generally reflects the domicile of the borrower. They exclude profits and
losses on the repurchase of loan capital and the unwinding of the discount on
vacant leasehold property provisions.
2001 2000
Gross yield (i) % %
Group 6.56 7.09
Domestic 7.10 7.90
International 5.38 5.71
Interest spread (ii)
Group 2.53 2.60
Domestic 3.24 3.54
International 1.01 1.01
Interest margin (iii)
Group 2.98 3.11
Domestic 3.77 4.19
International 1.24 1.25
Average UK base rate 5.12 5.96
Notes
(i) Gross yield is the interest rate earned on average interest earning
assets.
(ii) Interest spread is the difference between the interest rate earned on
average interest earning assets and the interest rate paid on average
interest bearing liabilities.
(iii) Interest margin is net interest income as a percentage of average
interest earning assets.
Average interest earning assets and liabilities - banking business
2001 2000
Average interest earning assets £m £m
Group 205,017 166,200
Domestic 141,087 104,845
International 63,930 61,355
Average interest bearing liabilities
Group 182,435 147,367
Domestic 121,878 89,130
International 60,557 58,237
Net fees and commissions 2001 2000
£m £m
Fees and commissions receivable 4,223 3,689
Less: fees and commissions payable (465) (320)
3,758 3,369
Pro forma basis 3,758 3,597
On a pro forma basis, net fees and commissions rose 4% with strong performances
in Personal Financial Services, Barclaycard and BGI which were partially offset
by reductions in Barclays Private Clients and Barclays Capital.
Personal Financial Services net fees and commissions increased by 8% to £525m
mainly as a result of additional current account and overdraft lending activity,
and higher income from fee-based Additions current accounts.
Woolwich net fees and commissions of £301m were at a similar level to 2000, on a
pro forma basis. Income from IFA operations, increased by 17% to £89m, and fees
were assisted by good volumes in mortgage related activities. Income from other
business areas including unit trusts and life assurance reduced, mainly as a
result of stock market volatility.
Barclays Private Clients net fees and commissions decreased by 1% to £576m
primarily due to lower fund management and brokerage fees. Barclays
Stockbrokers maintained its leading position in the UK retail market.
Barclaycard net fees and commissions increased by 11% to £581m, principally as a
result of replacing UK annual account fees with fees based on account behaviour.
Business Banking net fees and commissions increased 6% to £833m. Lending
related fee growth was driven by good activity levels in the large business
market and by a strong fee income performance from Sales Financing. UK money
transmission income fell, with higher volumes offset by lower fee levels as a
result of strong competitive pressures. Foreign exchange related income
increased strongly as a result of higher turnover.
In Barclays Capital, net fees and commissions fell 15% to £405m mainly due to
lower financing volumes in syndicated loans. Primary bond fees increased
compared to 2000 but were offset by lower primary loan fees in line with the
fall in market volumes. Barclays Capital maintained its leading position in the
European syndicated loan markets.
Barclays Global Investors net fees and commissions increased £70m or 16% to
£505m. The increase was driven by a large increase in performance fees, as a
result of strong active product performance, increased securities lending
revenues, as well as higher transition fees due to increased business in client
portfolio restructuring. Management fees remained at a similar level as
revenues from net new client sales and cross-sales were offset by the impact of
significantly lower market levels.
Personal Financial Services, Barclays Private Clients and Business Banking fees
and commissions include £129m (2000: £120m) in aggregate in respect of foreign
exchange income on customer transactions with Barclays Capital.
Dealing profits 2001 2000
£m £m
Rates related business 823 635
Credit related business 188 42
1,011 677
Almost all of the Group's dealing profits arise in Barclays Capital.
Dealing profits rose 49% to £1,011m (2000: £677m). The strong performance was
underpinned by increased customer business in Barclays Capital, with client
transaction volumes increasing by 77% and improved contributions from the US and
Europe. Growth was broadly spread across a range of markets and products, with
major increases in government bonds, foreign exchange, interest rate derivatives
and debt capital markets.
The growth in dealing profits was achieved with a 3% lower average daily value
at risk (DVaR) 2001: £16.9m (2000: £17.5m). The reduction in market risk levels
reflects the continued focus on risk management.
Total foreign exchange income for 2001 was £525m (2000: £388m) and consisted of
revenues earned from both retail and wholesale activities. The foreign exchange
income earned by Personal Financial Services, Woolwich, Barclays Private
Clients, Barclaycard, Business Banking, Barclays Africa and Barclays Global
Investors on customer transactions, both externally and with Barclays Capital,
is reported in those business units within fees and commissions.
Other operating income 2001 2000
£m £m
Dividend income from equity shares 8 14
Profits on disposal of investment securities 37 45
Income from the long-term assurance business 172 171
Property rentals 30 22
Premium income on insurance underwriting 158 126
Other income 47 19
452 397
Pro forma basis 452 432
Other operating income increased by 14% to £452m.
Income from the long term assurance business was £172m (including £24m from
Woolwich Life) compared with £171m (including £5m from Woolwich Life) in 2000.
This income was restricted by lower stock market levels (£73m), and was partly
offset by one-off benefits of £45m as a result of the Legal & General strategic
alliance. From August 2001, the Group ceased to market its own life and pension
products (and at that date the costs of the regulated sales force and field
sales managers were no longer charged to the funds). Income from the sale of
Legal & General products after that date is included in fees and commissions.
The result of the long term assurance business is after charging costs of £105m
(2000: £146m) borne directly in the funds.
The unutilised amount of the redress provision in Barclays Life for customers
who may have been mis-sold a personal pension is £47m at 31st December 2001
(2000: £80m). 8% of the cases originally identified for review remain to be
settled.
Premium income on insurance underwriting increased to £158m (2000: £126m)
predominantly benefiting from improved volumes relating to consumer lending and
credit card borrowings.
Operating expenses
The Group manages operating costs on the basis of three distinct categories:
strategic investment, revenue related and business as usual. In addition,
goodwill amortisation, integration costs and restructuring costs are reported
separately.
Costs are allocated to individual categories based on the following definitions:
Strategic investment costs relate to the development costs of an investment
project which has either or both of the following features:
- it generates or enables new revenue streams or definable growth in
revenue stream, or
- it generates or enables reduced costs.
Strategic investment costs exclude restructuring costs and project operating
costs.
Revenue related costs are those costs which are directly associated with a
corresponding change in revenues or profits. An increase or decrease in
revenues or profits will lead to an increase or decrease in these costs.
Business as usual costs are those costs not classified as strategic investment
or revenue related. This category includes operating costs of strategic
projects, other projects not classified as strategic and volume related costs
which are not revenue related.
Restructuring costs are those charges associated with the ongoing reorganisation
and restructuring of the Group's operations as part of its cost reduction
initiatives.
Integration costs are in respect of projects and initiatives associated with the
acquisition of Woolwich plc and include expenditure to achieve cost savings and
revenue synergies.
Operating expenses
Based on the above definitions the Group's costs are summarised in the following
table on both an actual and pro forma basis:
2001 2000 2000
Pro forma
£m £m £m
Business as usual costs 4,729 4,496 4,166
Strategic investment costs 551 478 440
Revenue related costs 748 593 528
6,028 5,567 5,134
Disposals and acquisitions 39 51 69
6,067 5,618 5,203
Restructuring charge 171 232 232
Goodwill amortisation 229 219 51
Woolwich integration costs 89 7 7
Woolwich fair value adjustment (2) (1) (1)
6,554 6,075 5,492
On a pro forma basis operating expenses increased 8% to £6,554m.
Business as usual costs rose by 5% (£233m) to £4,729m on a pro forma basis,
partly reflecting growth in Barclays Capital, Barclays Global Investors and £31m
of costs relating to the UK regulated sales force and field sales managers which
prior to the implementation of the strategic alliance with Legal & General were
reported within the long term assurance fund. Excluding the impact of this
change, business as usual costs rose by 4%.
Strategic investment costs increased by 15% (£73m) to £551m on a pro forma
basis, with the largest increases being in Barclaycard, Barclays Private Clients
and Barclays Capital. In Barclaycard this arose from recruitment in overseas
territories and investment in IT infrastructure. In Barclays Private Clients,
the increase supported the transformation programme. In Barclays Capital the
rise was mainly in respect of product, client coverage and distribution
capabilities.
Revenue related costs rose by 26% (£155m) to £748m on a pro forma basis,
primarily reflecting higher performance related remuneration in line with profit
growth in Barclays Capital and Barclays Global Investors.
Administrative expenses - staff costs 2001 2000
£m £m
Salaries and accrued incentive payments 3,149 2,655
Social security costs 243 178
Pension costs (17) (31)
Post-retirement health care - 1
Other staff costs 339 416
3,714 3,219
Included above:
Restructuring charge (114) (171)
Woolwich integration costs (24) (1)
Woolwich fair value adjustment 2 -
Excluding restructuring, integration costs and fair value 3,578 3,047
adjustment
Pro forma basis 3,578 3,189
2001 2000
Number of staff at period end:*
Personal Financial Services** 24,900 23,400
Woolwich*** 7,300 7,200
Barclays Private Clients**** 11,000 10,800
Barclaycard 4,200 4,000
Business Banking 9,700 9,500
Africa***** 8,000 8,000
Barclays Capital 5,700 4,900
Barclays Global Investors 2,100 2,100
Other Operations 5,300 5,900
Head office functions 400 400
Group total world wide**** 78,600 76,200
of which United Kingdom 59,200 57,000
* Staff numbers are on a full time equivalent basis and do not include
temporary and agency staff of 4,600 (31st December 2000: 4,800)
whose costs are included in staff costs.
** Includes 1,000 regulated salesforce and field sales managers and 100
administrative staff whose costs, following the strategic alliance
with Legal & General from 1st August 2001, are included in
administrative expenses - staff costs. Previously the costs were
borne within the long term assurance fund. In 2000, the total
related number of staff (1,000 regulated salesforce and field sales
managers and 200 administration staff) are excluded from the
comparatives above.
*** Includes Barclays Mortgages business and Woolwich plc business
following the acquisition on 25th October 2000.
**** Excludes 500 administrative staff (31st December 2000: 900) whose
costs are borne within the long term assurance fund.
***** Includes 900 staff on contracts previously not reported within
permanent headcount. 2000 figures have been restated accordingly.
Staff costs
Staff costs, excluding the restructuring charge and integration costs arising
from the acquisition of Woolwich plc, increased on a pro forma basis by 12%
(£389m) to £3,578m.
Salaries and accrued incentive payments rose by £494m. The rise largely
reflects increased performance related payments and the cost of building new
capability in Barclays Capital. Salaries and accrued incentive payments also
include the cost of the Performance Incentive Plan (PIP) which was launched in
2001. The PIP combines the previous bonus and profit sharing schemes into a
single bonus. In addition, staff costs in 2001 included £31m relating to the
regulated sales force and field sales managers whose costs were included in
staff costs following the formation of the strategic alliance with Legal &
General from 1st August 2001.
Staff numbers overall rose by 2,400 in the year of which 1,100 is attributable
to the inclusion of the UK regulated sales force and field sales managers and
related administrative staff.
Pension costs include a credit of £72m (2000: £74m) in respect of the Group's
main UK schemes.
The reduction in other staff costs reflects lower levels of job reductions
compared to 2000.
In addition to the 2,500 staff who have left the Group in 2001 under the 2000
and 2001 restructuring programmes, there are 1,800 staff where the notice
process was underway at 31st December 2001. The business groups impacted are
primarily Barclays Private Clients, Personal Financial Services and Business
Banking.
New jobs were created in most areas of the business with increases in Barclays
Capital, in line with the strategic plans for business growth, in customer
facing roles in Woolwich and Personal Financial Services, and in Business
Banking.
Administrative expenses - other 2001 2000
£m £m
Property and equipment expenses:
Hire of equipment 16 20
Property rentals 183 157
Other property and equipment expenses 775 641
974 818
Stationery, postage and telephones 318 261
Advertising and market promotion 212 221
Travel, accommodation and entertainment 143 123
Subscriptions and publications 83 65
Securities clearing and other operational expenses 36 26
Sundry losses, provisions and write-offs 141 115
Statutory and regulatory audit and accountancy fees 7 7
Consultancy fees 133 158
Professional fees 130 99
Other expenses 126 74
2,303 1,967
Included above:
Restructuring charge (57) (61)
Integration costs (65) (6)
Excluding restructuring charge and integration costs 2,181 1,900
Pro forma basis 2,181 2,135
Administrative expenses increased by £336m to £2,303m. On a pro forma basis,
the increase was 2% (£46m) to £2,181m.
The increase in administrative expenses is mainly attributable to higher levels
of business and increased strategic investment.
Depreciation and amortisation 2001 2000
£m £m
Property depreciation 105 85
Equipment depreciation 194 166
Loss on sale of equipment 9 4
308 255
Goodwill amortisation
- The Woolwich 206 38
- other 23 13
537 306
Included above:
Goodwill amortisation (229) (51)
Woolwich fair value adjustments - 1
Excluding goodwill and fair value adjustments 308 256
Pro forma basis 308 294
The increase in goodwill amortisation - other relates to the Group's Brazilian
operation, Banco Barclays SA (formerly Banco Barclays e Galicia SA), which has
been accounted for as a subsidiary from 1st January 2001.
Provisions for bad and doubtful debts
2001 2000
The charge for the year in respect of bad and doubtful debts £m £m
comprises:
Specific provisions
New and increased 1,440 981
Releases (133) (91)
Recoveries (142) (113)
1,165 777
General provision (release)/charge (16) 40
1,149 817
Pro forma basis 1,149 850
Total provisions for bad and doubtful debts at end of the
year comprise:
Specific provisions 1,971 1,593
General provisions 745 760
2,716 2,353
The net provision charge rose 41% (£332m) to £1,149m. On a pro forma basis the
increase in the net provision charge was 35%.
New and increased specific provisions increased by 47% (£459m) to £1,440m while
releases and recoveries of £275m were £71m higher. During the year there was a
£40m reclassification from general provision to specific provision in Personal
Financial Services based on the introduction of a statistical methodology
enabling earlier recognition of specific impairment. This is reflected as a new
and increased specific provision and a release of general provision.
Within the overall increase in the provision charge, Business Banking and
Barclays Capital accounted for 55% of this increase (on a pro forma basis). The
current deterioration in economic conditions on the corporate sector, where
there are smaller numbers of larger value lendings, has resulted in greater
volatility in provisions in this sector. In the personal sector, Barclaycard
provisions reflected the continued high levels of new customer recruitment, and
in the rest of the sector, provisions growth was primarily as a result of
increased lending volumes. There was an increase in new and increased
provisions in the US, primarily relating to a small number of large loans.
Increased levels of releases and recoveries were experienced by Business Banking
and Barclays Capital in the second half of 2001.
The net provision charge for the period as a percentage of average banking loans
and advances was 0.73% compared with 0.67% in 2000.
Provision coverage of total potential credit risk lendings decreased slightly to
52.9% compared with 54.5% at 31st December 2000.
Loss from joint ventures and associated undertakings
2001 2000
£m £m
Loss from joint ventures (1) (1)
Loss from associated undertakings (8) (7)
(9) (8)
The loss from associated undertakings in 2001 is attributable to start up costs
of new ventures in Business Banking.
The loss from associated undertakings in 2000 largely arose in the Brazilian
entity Banco Barclays SA (formerly Banco Barclays e Galicia SA). This business
was consolidated as a subsidiary undertaking from 1st January 2001.
Exceptional items 2001 2000
£m £m
(Loss)/profit on disposal of other Group undertakings (4) 214
The net loss on disposal of Group undertakings includes goodwill written off of
£7m. It represents losses of £19m offset by gains of £15m.
The profit in 2000 reflected primarily a £186m profit on the sale of the Dial
business and £18m from the sale of Barclays Property Investment Limited.
Tax
The charge for the year assumes a UK corporation tax rate of 30% for the year
2001 (2000: 30.0%). The effective rate of tax is 28.0% (2000: 27.0%).
Included in the charge is £23m (2000: £48m) tax on the increase in the
shareholders' interest in the long-term assurance fund.
There has been no change in the policy for partial provision for deferred
taxation in respect of leasing.
Earnings per ordinary share
Earnings per ordinary share is based upon the results after deducting tax,
profit attributable to minority interests and dividends on staff shares.
2001 2000
Earnings in year £2,465m £2,473m
Earnings in year before restructuring, integration costs, £2,895m £2,483m
goodwill amortisation, fair value adjustments and exceptional
items
Weighted average of ordinary shares in issue 1,663m 1,514m
Calculation of adjusted earnings per share pence pence
Basic earnings per ordinary share 148.2 163.3
Restructuring charge 7.2 10.7
Integration costs 3.8 0.3
Goodwill amortisation 13.5 3.4
Woolwich fair value adjustments 1.2 0.4
Exceptional items 0.2 (14.1)
Adjusted earnings per share 174.1 164.0
Dividends on ordinary shares
The Board has decided to pay, on 26th April 2002, a second interim dividend for
the year ended 31st December 2001 of 43.5p per ordinary share, for shares
registered in the books of the Company at the close of business on 1st March
2002. Shareholders who have their dividends mandated to their bank or building
society account will receive a consolidated tax voucher detailing the dividends
paid in the 2002/2003 tax year in late October 2002.
For qualifying US and Canadian resident ADR holders, the second interim dividend
of 43.5p per ordinary share becomes 174.0p per ADS (representing four shares).
The ADR depositary will mail the dividend on 26th April 2002 to ADR holders on
the record on 1st March 2002.
For qualifying Japanese shareholders, the second interim dividend of 43.5p per
ordinary share will be distributed in mid May to shareholders on the record on
1st March 2002.
Shareholders may have their dividends reinvested in Barclays PLC shares by
participating in the Barclays Dividend Reinvestment Plan. The plan is available
to all shareholders, including members of Barclays Sharestore, provided that
they do not live in or are subject to the jurisdiction of any country where
their participation in the plan would require Barclays or The Plan Administrator
to take action to comply with local government or regulatory procedures or any
similar formalities. Any shareholder wishing to obtain details and a form to
join the plan should contact The Plan Administrator by writing to The Plan
Administrator to Barclays, PO Box 82, The Pavilions, Bridgwater Road, Bristol,
BS99 7NH or by phoning 0870 702 0196. The completed form should be returned to
The Plan Administrator on or before 5th April 2002 for it to be effective in
time for the payment of the second interim dividend on 26th April 2002.
Shareholders who are already in the plan need take no action unless they wish to
change their instructions in which case they should write to The Plan
Administrator.
Balance sheet
Capital resources 2001 2000
£m £m
Shareholders' funds 14,508 13,187
Minority and other interests 2,006 1,600
16,514 14,787
Loan capital 8,115 6,370
24,629 21,157
The Group manages actively both its debt and equity capital. Total capital
resources increased in the year by £3,472m.
Shareholders' funds increased by £1,321m due to profit retentions.
The increase in minority and other interests reflects the issue by Barclays Bank
PLC of US$750m (£520m) 7.375% Step-up Callable Perpetual Reserve Capital
Instruments on 5th June 2001. This was offset in part by redemption of the
outstanding Series D1 and D2 Non-cumulative Dollar denominated Preference shares
at an aggregate cost of US$213m (£148m).
Loan capital rose by £1,745m primarily reflecting raisings of £2,499m offset by
repayments of £715m.
Capital ratios
Weighted risk assets and capital resources, as defined for supervisory purposes
by the Financial Services Authority, comprise:
2001 2000
Weighted risk assets: £m £m
Banking book
on-balance sheet 120,113 112,633
off-balance sheet 20,368 18,413
Associated undertakings and joint ventures 499 783
Total banking book 140,980 131,829
Trading book
Market risks 7,801 6,440
Counterparty and settlement risks 10,092 8,771
Total trading book 17,893 15,211
Total weighted risk assets 158,873 147,040
Capital resources:
tier 1 capital 12,443 10,547
tier 2 capital 8,397 6,619
tier 3 capital 392 331
Total gross capital resources 21,232 17,497
Less: supervisory deductions (1,333) (1,312)
Total net capital resources 19,899 16,185
% %
Tier 1 ratio 7.8 7.2
Risk asset ratio 12.5 11.0
Total Assets
The Group's balance sheet grew £40bn or 13% in the year to £357bn. Weighted
risk assets rose by 8% to £159bn.
Within Business Banking, assets grew by 7% to £44bn in the year, with weighted
risk assets increasing by 5% in the same period. Growth has been predominantly
in lending to larger business customers.
Barclays Capital assets increased by 20% to £202bn during 2001, predominantly as
a result of growth in the Rates businesses. There was an increase of £15bn in
the balance of reverse repos and stock-lending assets, driven mainly by the
prime brokerage business where collateralised customer inventory financing
positions continued to grow. In addition, there were increases in the holdings
of debt securities of £10bn mainly government debt. Total weighted risk assets
increased by only 15% to £53bn, reflecting the relatively low weightings
associated with government securities and reverse repos.
In the year, Woolwich total assets grew by 4% to £58bn, and weighted risk assets
rose by 5% to £30bn. UK mortgage outstandings grew by 9% to £52bn.
Barclays Private Clients total assets of £13.7bn were 3% above the £13.4bn at
the end of 2000.
Within Barclaycard total assets fell by £0.5bn in the year to £9.3bn. Weighted
risk assets reduced by 2% to £9.4bn. The reduction reflected lower consumer
lending balances.
Within Personal Financial Services total assets grew by 10% to £7.2bn. Weighted
risk assets were 9% higher at £6.1bn due to growth in both current account
overdrafts and consumer lending.
Personal Financial Services
Personal Financial Services provides a broad range of financial services to
personal customers in the United Kingdom. It offers services and products to
meet customers' individual requirements via an integrated range of delivery
channels, comprising the branch network, cash machines, telephone banking and
the internet.
Personal Financial Services works closely with other businesses in the Group, in
particular Woolwich, Barclays Private Clients, Barclaycard and Business Banking.
2001 2000
£m £m
Net interest income 1,142 1,092
Net fees and commissions 525 488
Other operating income 147 126
Operating income 1,814 1,706
Operating costs (1,006) (1,010)
Provisions for bad and doubtful debts (310) (273)
Operating profit 498 423
Restructuring costs (13) (51)
Integration costs (33) -
Profit before tax and exceptional items 452 372
Personal Financial Services achieved a strong increase in operating profit, up
18% (£75m) to £498m (2000: £423m). Operating income increased by £108m (6%) to
£1,814m (2000: £1,706m), while costs were held flat at £1,006m (2000: £1,010m).
Net interest income increased by £50m (5%) to £1,142m (2000: £1,092m). This was
driven by strong growth in deposit balances, and by continued growth in consumer
lending balances. Average asset and liability margins for the year were both
slightly reduced, reflecting the lower interest rate environment.
Average savings balances increased 11% to £12.3bn (2000: £11.1bn), ahead of
market growth. New products launched during 2001, such as the Regular Savings
and Tracker Accounts, together with continued balance growth in e-savings,
contributed to this strong performance. Improvements to current account
products contributed to increased average current account credit balances, of
8%. The net inflow of current accounts totalled 120,000.
Average consumer lending balances increased by 7% to £4.7bn (2000: £4.4bn),
below market growth, due to adopting a cautious risk assessment approach
throughout the year. Asset quality has improved, with personal pricing on the
Barclayloan product resulting in an increased proportion of better quality
lending.
Net fees and commissions increased by £37m (8%) to £525m (2000: £488m) mainly as
a result of additional current account and overdraft lending activity, and
higher income from the fee-based Additions current account where the number of
accounts increased by 16% to 1,219,000 (2000: 1,050,000).
Other operating income increased by £21m (17%) to £147m (2000: £126m). This was
predominantly due to higher levels of payment protection insurance and
underwriting which benefited from improved volumes relating to consumer lending
and credit card borrowing.
Operating costs were maintained at £1,006m (2000: £1,010m) notwithstanding the
growth in business volumes.
Provisions rose 14% (£37m) to £310m (2000: £273m). This increase included a
one-off £20m charge in respect of interest previously held in suspense.
Excluding this charge, provisions rose by 6% which was below the rate of growth
of consumer lending balances and reflected the benefit of the increased use of
personal pricing.
Barclays Open Plan was launched in a small part of the branch network in
September 2001 and had already attracted 10,000 customers by 31st December 2001.
Woolwich
The Woolwich business comprises Woolwich plc and Barclays Mortgages, the UK
mortgage and household insurance operations of Barclays. Woolwich is a
predominantly UK-based business. It provides a wide range of personal financial
services, including financial advice from one of the UK's largest independent
financial advisory (IFA) teams.
2001 2000*
£m £m
Net interest income 851 318
Net fees and commissions 301 77
Income from long-term assurance business 24 5
Other operating income 34 4
Operating income 1,210 404
Operating costs (632) (170)
Provisions for bad and doubtful debts (76) (4)
Profit from joint ventures 3 -
Operating profit 505 230
Restructuring costs (3) (4)
Integration costs (46) (7)
Fair value adjustments (33) (6)
Profit before tax and exceptional items 423 213
* Includes Barclays Mortgages business and operating profit of £70m in
respect of Woolwich plc business from 25th October 2000 to 31st December
2000.
Pro forma profit and loss account for Woolwich plc and Barclays Mortgages
As set out on pages 12 and 13 the Group is presenting pro forma results. The
analysis below is provided to assist in the understanding of the underlying
trends. Unless indicated, the commentary that follows is based on pro forma
results.
2001 2000
£m £m
Net interest income 851 850
Net fees and commissions 301 306
Income from long-term assurance business 24 34
Other operating income 34 16
Operating income 1,210 1,206
Operating costs (632) (613)
Provisions for bad and doubtful debts (76) (39)
Profit/(loss) from joint ventures 3 (2)
Operating profit 505 552
Restructuring costs (3) (4)
Integration costs (46) (7)
Profit before tax and exceptional items* 456 541
* The fair value adjustments detailed on page 12 are not reflected in this
presentation.
Operating profit reduced by 9% to £505m (2000: £552m) primarily as a result of a
reduced contribution from Barclays Mortgages, which was £62m lower than the
previous year.
Net interest income was maintained at £851m (2000: £850m). The contribution
from lending activities improved, benefiting from a strong second half and
compensated for a reduction in retail deposit income, where margin pressure was
particularly intense during the year.
Lending performance was strong with UK mortgage balances increasing 9% to
£51.9bn. From April, Woolwich branded mortgages have been sold through the
Barclays retail network. Gross mortgage advances increased during the year by
37% to £15.7bn, a market share of 9.8% relative to share of balances outstanding
of 9%. Net lending on UK mortgages increased by 45% to £4.3bn, a market share
of 7.8%, with the market share of net lending for the second half of the year in
excess of 8%. Consumer finance lending balances have increased 32% to £1.5bn.
Net fees and commissions were £301m (2000: £306m). This primarily reflected a
good performance from the IFA operations, where income for the year increased by
17% to £89m, and from growth in fees from mortgage related activities. Income
from business areas, such as unit trusts and life assurance reduced mainly as a
result of stock market volatility.
Operating costs were £632m, an increase of 3%. Revenue related costs increased
£19m due to increased business volumes such as mortgages and IFA sales.
Business as usual costs were held at £504m (2000: £500m).
Provisions for the year increased to £76m (2000: £39m), principally reflecting
growth in consumer finance lending balances. In 2000, provisions were impacted
by a provision release of £8m in Barclays Mortgages in the first half of the
year.
During 2001 the number of Open Plan customers increased 76%, to 960,000 (2000:
544,000), with product penetration increasing slightly to 3.1 (2000: 3.0)
products per customer. During the course of the year an increasing number of
Open Plan recruits were new to the Woolwich.
Barclays Private Clients
Barclays Private Clients serves one million affluent and high net worth clients
across thirty three countries worldwide, providing banking and asset management
services.
The business continued its transformation programme to integrate the businesses
that previously formed Wealth Management. This programme aims to deliver
operational economies of scale and improved customer service and product
capability built around a single relationship for the provision of banking and
investment products.
2001 2000
£m £m
Net interest income 839 793
Net fees and commissions 576 579
Income from long-term assurance business 148 166
Other operating income 18 36
Operating income 1,581 1,574
Operating costs (925) (906)
Provisions for bad and doubtful debts (36) (23)
Operating profit 620 645
Restructuring costs (29) (41)
Integration costs (9) -
Profit before tax and exceptional items 582 604
Operating profit of Barclays Private Clients decreased by 4% to £620m (2000:
£645m). This was due to significant strategic investment spend. Operating
income was held at 2000 levels, despite difficult market conditions, due to the
diversity of product, geography and client mix.
Net interest income increased by 6% to £839m (2000: £793m). Average lending
volumes increased by 16% to £8.6bn (2000: £7.4bn) and average deposits,
primarily from UK affluent clients, increased by 6% to £38bn (2000: £36bn). The
benefit of increased balances was partially offset by margin compression in
deposits, due to reduced interest rates.
Net fees and commissions decreased by 1% to £576m (2000: £579m) primarily due to
lower fund management and brokerage fees. This was partially offset by
commission income of £35m from the sale of Legal & General products. Average
daily volumes in UK retail stockbroking decreased by 21% to 6,400 (2000: 8,100).
Barclays Stockbrokers continued to maintain its leading UK position with
market share of retail stockbroking, as measured by retail client orders,
remaining at 11%.
Income from long term assurance, declined by 11% to £148m (2000: £166m). Lower
stock market levels in the year resulted in a £70m negative impact on income.
This was partly offset by one-off benefits such as the £45m gain from the Legal
& General strategic alliance.
Operating costs increased 2% to £925m (2000: £906m). This includes £31m
relating to the regulated sales force and field sales managers following the
Legal & General strategic alliance, whose costs were previously borne within the
long term assurance fund. Excluding this, total costs reduced 1%. Cost
reduction and productivity improvement outweighed inflationary and volume
related pressures, resulting in a 5% decrease in business as usual costs and
revenue related costs in total to £830m. Strategic investment costs increased
by £62m to £95m, supporting the transformation programme.
Total customer funds, which include assets under management and customer
deposits, amounted to £88bn (2000: £95bn). Assets under management fell by £7bn
to £50bn primarily due to the impact of falling stock markets and the transfer
of assets under management following the Legal and General strategic alliance.
Despite more difficult market conditions net new funds were flat.
Within total customer funds, Barclays Private Clients has £10bn (2000: £15bn) of
assets under management relating to retail life and funds businesses.
The Legal & General strategic alliance is representative of Barclays Private
Clients strategy of distributing best of breed investment products to customers.
The launch of stakeholder pensions commenced in April 2001. The sale through
Barclays distribution channels of protection and bond products commenced in
August 2001 and of unit trusts and ISAs in September 2001. Legal & General
product sales for the fourth quarter of 2001 (the first full quarter that
Barclays distributed the full complement of Legal & General products) increased
by 18% compared with similar product sales by Barclays Life and Barclays Funds
over the same period in 2000.
Barclays Private Clients includes the Barclays Caribbean operation which signed
an agreement in October 2001 to combine its retail, corporate and offshore
banking operations with those of Canadian Imperial Bank of Commerce (CIBC) to
create FirstCaribbean International Bank. Further details are on page 53.
Barclaycard
Barclaycard is a leading credit card business in Europe. In addition to its
operations in the United Kingdom, Germany, France, Spain and Greece, it also
operates in Africa and the Caribbean. It offers a full range of credit card
services to individual customers, together with card payment facilities to
retailers and other businesses.
2001 2000
£m £m
Net interest income 820 685
Net fees and commissions 581 524
Operating income 1,401 1,209
Operating costs (473) (439)
Provisions for bad and doubtful debts (370) (304)
Loss from joint ventures (3) (2)
Operating profit 555 464
Restructuring costs (8) (4)
Profit before tax and exceptional items 547 460
Operating profit of Barclaycard increased by 20% to £555m (2000: £464m). The
improved performance benefited from the application of Information Based
Customer Management techniques, which allow pricing and features to be
responsive to customer needs. A greater insight into the behaviours of
customers has allowed Barclaycard to develop targeted offers, which has
increased the revenue per customer, whilst reducing the cost of acquisition of
new business.
Net interest income increased by 20% to £820m (2000: £685m). This was mainly as
a result of good growth in average UK extended credit balances which rose 9% to
£6.0bn (2000: £5.5bn), and improved cardholder rate management coupled with
lower interest rates. Recruitment of UK customers reached 763,000 (2000:
740,000), aided by the Barclaycard Premiership sponsorship and in spite of lower
balance consolidation activity.
Fees and commissions increased by 11% to £581m (2000: £524m), principally as a
result of replacing UK annual account fees with fees based on account behaviour.
Operating costs increased 8% to £473m (2000: £439m). Strategic investment costs
increased 31% to £77m (2000: £59m) arising from further recruitment of customers
outside the UK and investment in capacity to facilitate the growing number of on
line users which rose 68% during 2001. Business as usual costs increased by 2%
to £383m, despite fraud losses rising by 22%.
Provisions increased by 22% to £370m (2000: £304m). This was mainly
attributable to growth in lending across the UK and international businesses and
the continuing high levels of recruitment during the last two years.
Barclaycard's international businesses recorded an operating loss of £19m (2000:
loss £26m) reflecting the continued cost of business expansion. The improved
performance was driven by a 38% rise in average extended credit balances and a
48% increase in total income. Total cards issued in continental Europe grew 7%
to 1.25m during 2001.
Business Banking
Business Banking provides relationship banking to the Group's small, medium and
large business customers in the United Kingdom. Customers are served by a
network of relationship and specialist managers who provide local access to an
extensive range of products and services, as well as offering information and
support. Customers are also offered access to business centres in mainland
Europe and the United States.
Market share was maintained at around one quarter of small and medium businesses
in the United Kingdom, despite a fall in both the number of start ups and in the
overall business stock.
Non-banking services are provided to customers through Barclays B2B, which
delivers business services such as smart-sourcing targeted at customers with an
annual turnover of over £100m up to £1bn.
2001 2000
£m £m
Net interest income 1,591 1,503
Net fees and commissions 833 787
Other operating income (4) (7)
Operating income 2,420 2,283
Operating costs (1,047) (1,055)
Provisions for bad and doubtful debts (210) (120)
Loss from associated undertakings (11) (6)
Operating profit 1,152 1,102
Restructuring costs (31) (59)
Integration costs (1) -
Profit before tax and exceptional items 1,120 1,043
Operating profit increased 5% (£50m) to £1,152m (2000: £1,102m).
Net interest income rose 6% to £1,591m reflecting increased lending and deposit
balances partly offset by a slight reduction in the overall margin. Average
customer lending balances increased 9% to £40.9bn (2000: £37.5bn) and average
customer deposit balances increased 6% to £42.4bn (2000: £40bn).
Lending growth was focused towards higher quality. This was reflected in strong
lending growth to large business customers and also through steady volumes of
lending to medium and small business customers. The Sales Financing product
range, which includes factoring and invoice discounting, saw rapid growth in
turnover, up 55% as a result of investment in this area, while Barclays Asset
Finance direct new business volumes were up over 20%.
UK lending margins continued to reduce, reflecting the focus of growth in higher
quality lending. The overall deposit margin remained broadly unchanged.
Net fees and commissions increased 6% to £833m. Lending related fees growth was
driven by good activity levels in large business with a strong fee income
performance from Sales Financing. UK money transmission income continued to
fall, with higher volumes offset by lower fee levels as a result of strong
competitive pressures. Foreign exchange related income increased strongly as a
result of higher turnover.
The use of Businessmaster continues to increase with over 70% of large business
customers and over 50% of medium business customers registered for the service.
Businessmaster allows customers direct access to account information and
provides a facility to make same day and international payments. In Small
Business, over 35% of customers were registered to use the Online Banking system
at the end of December 2001.
Operating costs fell 1% compared to 2000. Strategic investment costs were
maintained at £98m (2000: £97m) and were focused towards the development of new
customer value propositions and improving efficiency. Operating costs included
the £36m (2000: £32m) total operating costs of Barclays B2B and £9m of costs of
Banco Barclays SA (formerly Banco Barclays e Galicia SA) which was consolidated
as a subsidiary from 1st January 2001, having been previously reported as an
associated undertaking.
Provisions increased, as expected, to £210m (2000: £120m) from relatively low
levels in 2000. This reflected weaker economic conditions especially in the
manufacturing sectors.
Barclays Africa
Barclays Africa provides banking services to personal and corporate customers in
North Africa, sub-Saharan Africa and islands in the Indian Ocean. It operates a
diversified portfolio of banking operations in Botswana, Egypt, Ghana, Kenya,
Mauritius, Seychelles, South Africa, Tanzania, Uganda, Zambia and Zimbabwe.
2001 2000
£m £m
Net interest income 180 181
Net fees and commissions 130 126
Other operating income 6 7
Operating income 316 314
Operating costs (158) (157)
Provisions for bad and doubtful debts (25) (47)
Operating profit 133 110
Restructuring costs (7) (16)
Profit before tax and exceptional items 126 94
Operating profit increased £23m (21%) to £133m (2000: £110m), primarily as a
result of a £22m reduction in the net provision charge to £25m (2000: £47m).
Net interest income was at a similar level to last year. Total average customer
lending balances increased 3% to £1.3bn. Total average customer deposit
balances increased £67m (3%), to £2.2bn. Margins decreased due to increased
competitive pressures.
Net fees and commissions increased 3% to £130m (2000: £126m) through increased
activity levels following the introduction of new personal product offerings.
Operating costs increased 1% to £158m (2000: £157m) including costs to establish
new branch operations in Tanzania.
Barclays Capital
Barclays Capital conducts the Group's investment banking business. As the
Group's principal point of access to the wholesale markets, it provides
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 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 manages wholesale client relationships, having integrated the
larger corporate and institutional businesses, which previously operated out of
Corporate Banking. This has extended the client base in Europe, Latin America
and the Middle East and is enabling the delivery of a wider product range across
the wholesale markets.
2001 2000
£m £m
Net interest income 682 512
Dealing profits 1,006 680
Net fees and commissions 405 474
Other operating income 53 39
Operating income 2,146 1,705
Operating costs (1,322) (1,064)
Provisions for bad and doubtful debts (139) (66)
Operating profit 685 575
Restructuring costs (23) (2)
Profit before tax and exceptional items 662 573
Barclays Capital continued to grow operating profits and fund significant
investment during the year while improving the cost income ratio to 61.6% (2000:
62.4%). The proportion of revenues derived from outside the UK continued to
increase and overall has grown by 11% to 50%.
Operating profit increased 19% (£110m) to £685m (2000: £575m) with both the
Rates and Credit businesses performing well. Operating income growth of 26%
reflects increased volumes of transactions for customers and good market
conditions.
Net interest income increased 33% to £682m (2000: £512m). The growth in net
interest income was mainly in money markets, which benefited from a favourable
interest rate environment, and in structured capital markets. Corporate lending
continues to be tightly managed, with an overall decline in the credit portfolio
of 7% to £14bn.
Dealing profits rose 48% to £1,006m (2000: £680m). The strong performance was
underpinned by increased customer business, with client transaction volumes
increasing by 77% and improved contributions from the US and Europe. Growth was
broadly spread across a range of markets and products, with major increases in
government bonds, foreign exchange, interest rate derivatives and debt capital
markets.
The growth in operating profits was achieved with a 3% lower average daily value
at risk (DVaR) 2001: £16.9m (2000: £17.5m). The reduction in market risk levels
reflects the continued focus on risk management and the benefit of the portfolio
effect which arises from conducting a broader span of activities.
Net fees and commissions fell 15% to £405m (2000: £474m) mainly due to lower
financing volumes in syndicated loans. Primary bond fees increased compared to
2000 but were offset by lower primary loan fees in line with the fall in market
volumes. Barclays Capital maintained its leading position in the European
syndicated loan markets. Net fees and commissions include £61m (2000: £81m)
internal fees for structured capital markets activities.
Operating costs rose 24% to £1,322m (2000: £1,064m) largely due to variable
revenue related costs increasing in line with performance. Business as usual
costs grew 7% as a result of a 16% rise in headcount and higher trading volumes.
Staff costs were maintained at 52% of total operating income less provisions
(2000: 50%). There was increased strategic investment costs mainly in respect
of product, client coverage and distribution capabilities. The results of the
expanded business include an increased proportion of variable revenue related
costs giving greater flexibility for the future.
Provisions increased to £139m (2000: £66m), reflecting greater uncertainty in
certain sectors in the US and UK.
Barclays Global Investors
Barclays Global Investors (BGI) is the world's largest institutional asset
manager, with offices in eight countries. BGI provides active, enhanced index
and index strategies and manages assets for clients worldwide. BGI's investment
philosophy focuses on managing all dimensions of performance: return, risk and
cost. BGI's strategies are complemented by a range of value chain services that
enhance investors' total portfolio returns, including cash management,
securities lending and transition management.
2001 2000
£m £m
Net interest income 5 6
Net fees and commissions 505 435
Other operating income (1) (1)
Operating income 509 440
Operating costs (437) (381)
Loss from associated undertakings (1) -
Operating profit before tax and exceptional items 71 59
Operating profit increased 20% to £71m in a year of significantly lower stock
market levels. The diversity of revenue mix has sustained growth in profits
during this year's economic downturn and difficult market environment.
Net fees and commissions increased £70m (16%) to £505m (2000: £435m). The
increase was driven by a large increase in performance fees as a result of
strong active product performance, increased securities lending revenues as a
result of increases in stock lending volumes and spreads, and by higher
transition fees due to increased business in client portfolio restructuring.
Management fees remained at a similar level as revenues from net new sales and
cross-sales were offset by the impact of significantly lower market levels.
Operating costs increased £56m (15%) to £437m (2000: £381m), primarily
reflecting higher performance related staff costs.
Total assets under management fell 4% to £530bn (2000: £550bn). This was the
net result of increases of £42bn attributable to net new business, £15bn due to
exchange rate translation movements and a reduction of £77bn attributable to
adverse market movements. Assets under management consisted of £438bn of
indexed funds and £92bn under advanced active management.
During 2001 BGI launched 40 Exchange Traded Funds (ETFs) globally bringing total
ETFs to 104 at 31st December 2001 with assets of £14.8bn and a global market
share of nearly 20%. BGI have received awards for its web capabilities
reflecting its progress in developing internet-based client service, transaction
and reporting capabilities.
Other operations
Property costs includes Barclays Group Property Services, which is responsible
for the management of the majority of the Group's operational premises and
property related services. Property costs also include the central
administration of certain operational properties.
Central services primarily comprises Service Provision, which provides central
information technology services, and certain activities which support the
operating businesses.
Within Management of Group capital are certain central items including residual
balances arising from centrally managed transition businesses.
The Group maintains hedges with respect to its capital and its current account
balances, which are designed both to reduce the impact of short-term interest
rate fluctuations on profits and to increase profitability over the interest
rate cycle. The hedges increase profitability when average short-term interest
rates are lower than average medium-term interest rates and depress
profitability when average short-term interest rates are higher than average
medium-term interest rates. Earnings on centrally held Group capital are
allocated to business groups on the basis of economic capital.
2001 2000
£m £m
Property costs 15 28
Central services (38) (26)
Management of Group capital* 7 15
Operating (loss)/profit (16) 17
Restructuring costs (52) (44)
Loss before tax and exceptional items (68) (27)
* Management of Group capital is after charging £61m (2000: £81m) internal
fees for structured capital markets activities arranged by Barclays Capital.
Within Property costs, the reduced property surplus in 2001 includes decreased
disposal activity.
The increased deficit in Central services reflects additional investment in core
technology and operational infrastructure.
The decreased surplus in Management of Group capital is attributable to reduced
credits arising in centrally managed transition businesses and lower internal
fees.
Head office functions
Head office functions comprise all the Group's central costs, including the
Group executive, Group finance, corporate communications, human resources,
corporate planning, audit, marketing, legal, corporate secretariat, public
policy and risk. Costs incurred wholly on behalf of the business units are
recharged to them.
2001 2000
£m £m
Operating costs (69) (47)
Restructuring costs (5) (11)
Total (74) (58)
The increase in operating costs reflects expenditure on Group initiatives, the
cost of which is held centrally.
Restructuring charge
2001 2000
£m £m
Staff costs 114 171
Administrative expenses - other 57 61
171 232
Total restructuring charge of £171m, primarily relates to other operations
(£52m), Business Banking (£31m), Barclays Private Clients (£29m) and Barclays
Capital (£23m). Expenditure of £91m was incurred during the year against the
provisions raised as at 31st December 2000 and £86m in respect of the 2001
programme. Accrued provision at 31st December 2001 amounted to £130m (31st
December 2000: £132m).
Woolwich integration costs
2001 2000
£m £m
Staff costs 24 1
Administration expenses - other 65 6
89 7
Total integration costs, including those incurred in 2000 in respect of the
acquisition of Woolwich plc, are expected to be in the order of £200m by the end
of 2003.
Woolwich integration synergies
2001
£m
Actual synergies achieved in the year ended 31st December 2001
were as follows:
Gross revenue synergies 49
Attributable operating costs (22)
Net revenue synergies 27
Cost savings 41
Avoided costs* 43
Total pre-tax effect 111
* Avoided costs are primarily strategic investment costs which are not
required due to the acquisition and integration of Woolwich plc.
The Group expects to realise pre-tax synergies of at least £400m per annum from
1st January 2004. This is represented by pre-tax annual cost savings of at
least £150m and pre-tax revenue synergies, net of attributable costs, of at
least £250m. Pre-tax cost and revenue synergies totalling £111m have been
achieved in 2001.
Revenue synergies do not include the following which are of a one-off nature
relating to 2001. £29m arising from the closure of surplus hedge positions in
Personal Financial Services and Barclays Private Clients which were no longer
required following the acquisition of Woolwich plc and £24m relating to the
restructuring of the Life Funds.
In addition the Group achieved related tax savings totalling £32m.
Shareholder Value
Barclays is focused on delivering superior value creation for shareholders
through creation and delivery of superior products and services to customers.
Barclays uses value-based management (VBM) to align management decision taking
at all levels with the interests of its shareholders.
Through VBM, Barclays has a disciplined focus on strategy development and
business planning to realise sustainable competitive advantage. Group
businesses undertake strategy development based on generation of alternative
business models to enable identification and selection of the value-maximising
alternatives.
In order to manage for value, demanding performance goals have been established
which are explicitly linked to shareholder value and are consistent with being a
top quartile performer. These performance goals are now specified in terms of
three primary measures of shareholder value performance - total shareholder
return relative to peers, absolute value goal performance and economic profits.
Total Shareholder Return
Total shareholder returns are defined as the combination of share price
appreciation and dividend yield realised by investors. The goal is to achieve
and sustain top quartile total shareholder return relative to the Group's
peers*.
We believe relative total shareholder return performance is the best way of
evaluating the Group's performance against selected competitors, and is the best
external measure of shareholder value creation.
In 2001 Barclays was in the top quartile, producing total shareholder return
significantly above the average for the Group's peer group* (13% increase versus
average decrease of 2%). Since this financial performance measure was adopted
in January 2000, total shareholder return for the two years ended 31st December
2001 was 37%. This places the Group in the top quartile relative to our peer
group (Abbey National, ABN Amro, Alliance & Leicester, Citigroup, HBOS, HSBC,
Lloyds TSB, Prudential, Royal Bank of Scotland, Standard Chartered and UBS),
whose total shareholder return was 19% over the same period.
Absolute value goal
As well as judging performance relative to the Group's peer group, we have set
ourselves an absolute value goal. Our aim in this is to make £100 invested in
Barclays at the beginning of January 2000 generate a further £100 for the
investor by the end of 2003, from a combination of share price growth and
dividends.
£100 invested in Barclays at the beginning of 2000 was worth £137 at the end of
2001. This derives from a 28% increase in the share price (from £17.82 to
£22.75), plus re-invested dividend payments across the two years of 113.5p.
Economic Profit and Economic Capital
The Group's performance goals also require that economic profit is doubled over
the period 2000 to 2003 inclusive. If this is achieved then it is believed that
shareholders have the best opportunity of having their investment in Barclays
doubled over the same period.
Economic profit is the post-tax attributable profit generated by a business over
and above the cost of capital. The Group's goal is to double the economic
profit of the Group over four years, consistent with its relative total
shareholder return and value goals.
The cumulative economic profit required to achieve the Group's goal of doubling
economic profit over four years, using 1999 as a base year, is £6.1bn between
the years 2000 and 2003 inclusive. This represents a 19% compound annual growth
rate (CAGR). At the end of 2001, the Group generated £2.7bn cumulative economic
profit, which is ahead of the goal which requires £2.5bn of cumulative economic
profit at this stage in the four year period.
2001 2000
£m £m
Profit after tax and minority interests (excluding goodwill 2,689 2,524
amortisation)
Average shareholders' funds 14,546 10,131
Post tax cost of equity 10.5% 11%
Cost of average shareholders' funds* (1,446) (1,095)
Economic profit 1,243 1,429
* The cost includes a charge for purchased goodwill. A post tax cost of
equity of 8.5% has been used for Woolwich plc goodwill.
Economic profit for the Group is defined as profit after tax and minority
interests excluding goodwill amortisation, less a charge for the cost of average
shareholders' funds (which includes purchased goodwill). This is calculated
using a capital asset pricing model. The cost of equity includes estimates of
the future equity market risk premium of 4.5% and the relative risk of Barclays
shares compared to the FTSE, measured by beta. A forward looking beta of 1.2
has been used. The cost of average shareholders' funds in 2001 was 10.5%, down
from 11% in 2000, primarily as a result of lower overall interest rates.
The quantum of economic capital, which is distinct from regulatory capital, is
derived from an estimate of risk, based on contribution to overall Group
volatility. Each business group is charged for its use of economic capital.
The cost of economic capital is deducted from profit after tax and minority
interests to arrive at economic profit. The use of economic capital is an
integral part of value-based management.
Economic capital and economic profit by business are set out below:
Average economic capital
2001 2000
£m £m
Personal Financial Services 1,300 1,200
Woolwich* 900 300
Barclays Private Clients 800 800
Barclaycard 1,000 1,000
Business Banking 2,500 2,200
Africa 200 200
Barclays Capital 1,900 1,700
Barclays Global Investors 100 100
Other operations 500 600
Head office functions - -
Average economic capital 9,200 8,100
Goodwill** 4,600 1,200
Variance to average shareholders' funds*** 700 800
Total average shareholders' funds 14,500 10,100
* Average economic capital for Woolwich includes capital attributable to
Barclays Mortgages business and for Woolwich plc from 25th October
2000.
** The movement in average goodwill (which is stated gross of any
amortisation) primarily reflects the acquisition of Woolwich plc on the
25th October 2000.
*** The variance to average shareholders' funds represents the variance
between average economic capital by business and average shareholders'
funds.
The Business Banking average economic capital allocation increased by £300m to
£2,500m as a result of growth in the lending book and the impact in the second
half of the year of the global economic slow-down. The average economic capital
movement was in line with the risk tendency increase.
Economic profit
2001 2000
£m £m
Personal Financial Services 192 132
Woolwich 165 112
Barclays Private Clients 348 355
Barclaycard 253 214
Business Banking - operating 483 486
- sale of subsidiary - 186
Africa 44 28
Barclays Capital 223 172
Barclays Global Investors 38 21
Other operations (23) (72)
Head office functions (31) (39)
Economic profit 1,692 1,595
Goodwill**** (403) (114)
Variance to average shareholders' funds (46) (52)
Economic profit 1,243 1,429
**** Cost of equity charge on purchased goodwill.
Risk tendency
2001 2000
£m £m
Personal Financial Services 270 240
Woolwich 115 95
Barclays Private Clients 45 45
Barclaycard 375 300
Business Banking 260 215
Africa 30 20
Barclays Capital 150 115
1,245 1,030
The Group uses a credit risk measurement system which estimates the cost of
credit by different customer categories. The approach, which applies to both
business and personal sector lendings, estimates losses over the next twelve
months from the balance sheet date and is termed Risk Tendency.
It was initially used primarily to aid the Group's understanding of the credit
quality of the lending portfolio. As confidence has been gained in the measure
it has been used to inform a wider range of decisions for example pricing
policy, provisioning and portfolio management. The system relies on a series of
models which assess the probability of customer default, the probable customer
exposure at the time of default and the probable level of loss. A consistent
approach is used across the organisation. Model outputs are a way of assessing
what might happen in the future based on past experience.
A number of different models are used in the risk tendency calculation
reflecting the diversity of the portfolio. They are being improved constantly
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.
When first developed the models were calibrated to estimate the average loss
rate over an economic cycle, as customer relationships tend to last many years.
Experience has shown some difficulties with this approach. Consequently, the
basis of Risk Tendency has been developed to allow greater use in pricing and
portfolio management and to overcome the issues surrounding estimating the
length and amplitude of an economic cycle. As a result, default probabilities
will be estimated for the forthcoming twelve months. As 2000 was a relatively
neutral economic year in the UK the change in focus of the calculation should
not result in a significant difference in the result.
The Risk Tendency number should not be regarded as a forecast of the next twelve
months provisions. Risk Tendency is calculated on the existing fully performing
credit portfolio as at the calculation date, a subset of the total portfolio.
Risk Tendency does not forecast next year's provisions relating to
non-performing loans. Risk Tendency does not make any allowance for growth or
change in the composition of the loan book post the reporting date.
This information is provided by RNS
The company news service from the London Stock Exchange
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