Final Results - Part 4
Barclays PLC
8 February 2001
PART 4
ADDITIONAL INFORMATION
CHANGES IN REPORTING OF GROUP STRUCTURE IN 2000
From 1st January 2000, Barclaycard became a separate business unit. Retail
Financial Services now comprises Retail Customers, Wealth Management, and,
from the 25th October 2000, The Woolwich.
Within Other operations, costs relating to the central administration of
certain operational property costs have been combined with Barclays Group
Property Services under the heading Property Costs.
Comparative figures have been restated for the above changes, where
appropriate.
ACQUISITIONS AND DISPOSALS
The acquisition of The Woolwich was completed on the 25th October 2000.
Details of the acquisition are set out on page 13.
There have been no other significant acquisitions since 31st December 1999.
Details of significant disposals are set out under exceptional items on page
24.
ACCOUNTING POLICIES
Changes to the Group's accounting policies have occurred following the
adoption in 2000 of Financial Reporting Standard 15 'Tangible Fixed Assets'
(FRS 15) and Financial Reporting Standard 16 'Current Tax' (FRS 16).
The Group has applied the transitional rules available under FRS 15. The
revalued book amounts of fixed assets will be retained without subsequent
revaluation subject to the requirement to test for impairment. This change
has had no impact on reported profit or shareholders' funds.
In accordance with FRS 16, incoming dividends, interest and other income now
exclude taxes, such as attributable tax credits, not payable wholly on behalf
of the Group. This change in policy has resulted in a reduction in profit
before tax for 1999 of £5m with a commensurate reduction in the tax charge.
Shareholders' funds are unchanged by this change in policy.
There have been no other significant changes to the accounting policies as
described in the 1999 Annual Report.
CHANGES IN ACCOUNTING PRESENTATION
The Group's share of the results of Joint Ventures and Associated Undertakings
are shown separately below operating profit having previously been included in
Other operating income. For the purposes of Business Group analysis the share
of the results is still included in Operating profit.
There have been no other changes in accounting presentation from that
reflected in the 1999 Annual report.
GROUP SHARE SCHEMES
The trustees of the Group's share schemes may make purchases of Barclays PLC
ordinary shares in the market following this announcement of the Group's
results for the purposes of those schemes' current and future requirements.
The total number of ordinary shares purchased would not be material in
relation to the issued share capital of Barclays PLC.
RECENT DEVELOPMENTS
On 16th of January, 2001 Barclays PLC and Legal & General Group Plc ('Legal &
General') announced their intention to form a strategic alliance under which
Barclays Bank PLC would, subject to regulatory approval, sell Legal & General
branded life, pension (including stakeholder pension) and investment products
through its UK distribution network.
NOTES
1. Loans and advances to banks 2000 1999
£m £m
Banking business:
United Kingdom 3,345 6,307
Other European Union 2,042 2,173
United States 2,056 2,118
Rest of the World 2,153 2,497
9,596 13,095
Less - provisions (26) (24)
9,570 13,071
Trading business 26,856 26,555
Total loans and advances to banks 36,426 39,626
Total loans and advances to banks at 31st December 2000 include £ 225m in
respect of The Woolwich.
Of the total loans and advances to banks, placings with banks were
£32.2bn at 31st December 2000 (1999: £36.1bn). Placings with banks include
reverse repos of £25.6bn (1999: £29.1bn). The majority of the placings have a
residual maturity of less than one year.
2. Loans and advances to customers 2000 1999
£m £m
Banking business:
United Kingdom 115,314 78,677
Other European Union 10,203 5,976
United States 6,376 4,048
Rest of the World 8,950 8,344
140,843 97,045
Less - provisions (2,327) (1,959)
- interest in suspense (93) (80)
138,423 95,006
Trading business 23,687 21,562
Total loans and advances to customers 162,110 116,568
Total loans and advances to customers at 31st December 2000 include £32,812m
in respect of The Woolwich.
Of the total loans and advances to customers, reverse repos were £
20.8bn at 31st December 2000 (1999: £16.9bn).
3. Provisions for bad and doubtful debts
2000 1999
Credit risk provisions £m £m
Provisions at beginning of year 1,913 1,862
Acquisitions and disposals 119 (9)
Exchange and other adjustments 8 (3)
Amounts written off
United Kingdom (592) (546)
Other European Union (45) (44)
United States (26) (40)
Rest of the World (17) (21)
(680) (651)
Recoveries (analysed below) 113 93
Sub-total 1,473 1,292
Provisions charged against profit:
New and increased specific provisions
United Kingdom 843 768
Other European Union 35 27
United States 27 45
Rest of the World 76 47
981 887
Less: Releases of specific provisions
United Kingdom (50) (114)
Other European Union (17) (21)
United States (6) (7)
Rest of the World (13) (15)
(86) (157)
Less: Recoveries
United Kingdom (100) (85)
Other European Union (6) (4)
United States (4) (4)
Rest of the World (3) -
(113) (93)
Net specific provisions charge 782 637
General provision - charge/(release) 40 (16)
Net credit risk charge to profit 822 621
Provisions at end of year 2,295 1,913
Country risk provisions
Provisions at beginning of year 70 81
Exchange and other adjustments (4) (11)
Amounts written off (net of recoveries) (3) -
Net specific provision releases (5) (2)
General provision charge - 2
Provisions at end of year 58 70
Total provisions at end of year 2,353 1,983
Total provisions charge to profit 817 621
Total provisions for bad and doubtful debts at end of year comprise:
2000 1999
Specific - credit risk £m £m
United Kingdom 1,343 1,075
Other European Union 111 126
United States 20 23
Rest of the World 118 74
Specific - credit risk 1,592 1,298
Specific - country risk 1 13
Total specific provisions 1,593 1,311
General provisions - credit risk 703 615
- country risk 57 57
2,353 1,983
The geographic analysis of provisions shown above is based on location of
office.
4. Other assets 2000 1999
£m £m
Own shares 5 5
Balances arising from off-balance sheet
financial instruments 12,100 13,390
Shareholders' interest in long-term assurance fund 820 555
London Metal Exchange warrants and other
metals trading positions 1,001 331
Sundry debtors 1,592 1,629
Prepayments and accrued income 2,827 2,203
18,345 18,113
'Own shares' represent Barclays PLC shares held in employee benefit trusts
that have not yet vested unconditionally with the eligible employees.
5. Other liabilities 2000 1999
£m £m
Obligations under finance leases payable 159 140
Balances arising from off-balance sheet
financial instruments 11,971 13,619
Short positions in securities 21,201 16,813
Current tax 642 462
Cash receipts from securitisation 747 1,049
Sundry creditors 3,464 3,036
Accruals and deferred income 4,457 3,290
Provisions for liabilities and charges 1,266 1,247
Dividend 632 484
44,539 40,140
Cash receipts from securitisation are in respect of the securitisation of a
portfolio of investment debt securities which did not qualify for linked
presentation under Financial Reporting Standard 5.
6. Potential credit risk lendings
The following table presents an analysis of potential credit risk
lendings in accordance with the US Securities and Exchange Commission
guidelines. Additional categories of disclosure are included, however, to
record lendings where interest continues to be accrued and where either
interest is being suspended or specific provisions have been raised. Normal
US banking practice would be to place such lendings on non-accrual status.
The amounts, the geographical presentation of which is based on
the location of the office recording the transaction, are stated before
deduction of the value of security held, specific provisions carried or
interest suspended.
6. Potential credit risk lendings (continued)
Non-performing lendings 2000 1999
£m £m
Non-accrual lendings:
United Kingdom 1,223 1,007
Foreign 316 244
Accruing lendings where interest is being suspended:
United Kingdom 351 326
Foreign 145 110
Other accruing lendings against which provisions have been
made:
United Kingdom 873 423
Foreign 149 130
Sub-totals:
United Kingdom 2,447 1,756
Foreign 610 484
Accruing lendings 90 days overdue, against which no
provisions have been made:
United Kingdom 296 343
Foreign 18 18
Reduced rate lendings:
United Kingdom 6 6
Foreign - 2
Total non-performing lendings
United Kingdom 2,749 2,105
Foreign 628 504
3,377 2,609
The increase in UK non-performing lendings primarily relates to the inclusion
of The Woolwich (£592m).
The residual increase largely arose in Barclaycard and Barclays Capital.
Potential problem lendings: In addition to the above, the
following table shows lendings which are current as to payment of principal
and interest, but where serious doubt exists as to the ability of the borrower
to comply with repayment terms in the near future.
2000 1999
£bn £bn
United Kingdom 0.7 0.6
Foreign 0.4 0.1
1.1 0.7
The increase in foreign potential problem lendings reflect exposures held by
both Barclays Capital and Corporate Banking.
2000 1999
Credit risk provision coverage of: % %
- credit risk non-performing lendings 70.7 76.4
- total potential credit risk lendings 53.3 60.0
The high level of security held against the exposures included following the
acquisition of The Woolwich reduces the average level of provisions required
and consequently this reduces the Group's coverage ratios. Excluding Woolwich
balances and provisions, the coverage would be 81.2% and 58.1% respectively.
2000 1999
Interest forgone on non-performing £m £m
Lendings:
Interest income that would have been
Recognised under original contractual terms 246 165
Interest income included in profit (48) (45)
Interest forgone 198 120
7. Exposure to countries subject to International Monetary Fund
liquidity support programmes
Amounts outstanding, net of provisions, and commitments to
counterparties in countries which make significant use of International
Monetary Fund liquidity support programmes were as follows:
2000 1999
Asia £bn £bn
Indonesia 0.1 0.1
South Korea 0.2 0.4
Thailand 0.1 0.1
0.4 0.6
Latin America
Argentina * 0.9 -
Brazil ** - 0.8
Mexico ** - 0.9
1.3 2.3
* Not reportable in 1999
** Not reportable in 2000
The total was broken down, as follows:
2000 1999
£bn £bn
Banks 0.8 1.3
Governments and sovereigns 0.1 0.4
Corporates and project financings 0.4 0.6
1.3 2.3
The Group has a 50% shareholding in Banco Barclays e Galicia which in 2000 was
equity accounted as an Associate. As at 31st December 2000 this holding was
included in the balance sheet at a value of £31m (31st December 1999: £33m).
From 1st January 2001, following the completion of management changes, the
Group considers itself to exert dominant influence so that it has control over
the operations of Banco Barclays e Galicia SA and consequently from that date
the entity will be consolidated as a subsidiary in accordance with Financial
Reporting Standard 2.
During the year the general provision in respect of country transfer risk
arising from the Group's business world wide, including exposures in these
countries, remained unchanged at £57m as at 31st December 2000. This is in
addition to £703m of general provision held against credit risk.
8. European Economic and Monetary Union (EMU)
The delivery of changes required to deal with the introduction of euro notes
and coins, and the demise of the legacy currencies of the eurozone countries
are being planned. No significant incremental costs are expected as a result
of these preparations.
Barclays incurred minimal expenditure during 2000 with respect to any decision
to introduce the euro in the United Kingdom that may be made by the Government
in the near future.
9. Legal proceedings
Barclays is party to various legal proceedings, the ultimate
resolution of which is not expected to have a material adverse effect on the
financial position of the Group.
10. Geographical analysis
2000 1999
Profit before tax £m £m
United Kingdom 2,767 1,872
Other European Union 395 313
United States 105 131
Rest of the World 229 139
3,496 2,455
2000 1999
Total assets £m £m
United Kingdom 234,099 171,772
Other European Union 20,009 17,017
United States 38,662 39,536
Rest of the World 23,420 26,468
316,190 254,793
11. Contingent liabilities and commitments
2000 1999
Contingent liabilities £m £m
Acceptances and endorsements 1,170 1,530
Guarantees and assets pledged as
collateral security 15,180 12,044
Other contingent liabilities 6,503 5,360
22,853 18,934
Commitments
Standby facilities, credit lines and
other commitments 87,971 82,479
12. Off-balance sheet financial instruments, including derivatives
The tables set out below analyse the contract or underlying
principal amounts of derivative financial instruments held for trading
purposes and for the purposes of managing the Group's structural exposures.
Foreign exchange derivatives 2000 1999
£m £m
Contract or underlying principal amount
Forward foreign exchange 240,435 225,518
Currency swaps 125,812 88,453
Other exchange rate related contracts 105,603 65,803
471,850 379,774
Interest rate derivatives
Contract or underlying principal amount
Interest rate swaps 1,247,705 975,720
Forward rate agreements 39,939 49,577
OTC options bought and sold 377,565 266,085
Other interest rate related contracts 535,557 273,222
2,200,766 1,564,604
Equity, stock index and commodity derivatives
Contract or underlying principal amount 501,136 152,072
Other exchange rate related contracts are primarily OTC options.
Other interest rate related contracts are primarily exchange traded options
and futures.
Derivatives entered into as trading transactions, together with
any associated hedging thereof, are measured at fair value and the resultant
profits and losses are included in dealing profits. The tables below
summarise the positive and negative fair values of such derivatives, including
an adjustment for netting where the Group has the ability to insist on net
settlement which is assured beyond doubt, based on a legal right that would
survive the insolvency of the counterparty.
Positive fair values 2000 1999
£m £m
Foreign exchange derivatives 9,511 7,178
Interest rate derivatives 21,967 16,160
Equity, stock index and commodity derivatives 1,817 2,872
Effect of netting (20,748) (12,820)
Cash collateral meeting offset criteria (447) -
12,100 13,390
Negative fair values
Foreign exchange derivatives 9,685 7,583
Interest rate derivatives 21,229 15,590
Equity, stock index and commodity derivatives 2,588 3,266
Effect of netting (20,748) (12,820)
Cash collateral meeting offset criteria (783) -
11,971 13,619
13. Market risk
Market risk is the risk of loss arising from adverse movements in
the level or volatility of market prices, which can occur in the interest
rate, foreign exchange, equity and commodity markets. It is incurred as a
result of both trading and asset/liability management activities.
The market risk management policies of the Group are determined by
the Group Risk Management Committee, which also determines overall market risk
appetite. The Group's policy is that exposure to market risk arising from
trading activities is concentrated in Barclays Capital. The Group's banking
businesses are also subject to market risk, which arises in relation to
non-trading positions, such as capital balances, demand deposits and customer
originated transactions and flows.
The Group uses a daily 'value at risk' measure as the primary
mechanism for controlling market risk. Daily Value at Risk (DVAR) is an
estimate, with a confidence level of 98%, of the potential loss which might
arise if the current positions were to be held unchanged for one business day.
Daily losses exceeding the DVAR figure are likely to occur, on average, only
twice in every one hundred business days. Actual outcomes are monitored
regularly to test the validity of the assumptions made in the calculation of
DVAR.
Barclays Capital Trading Activities
In Barclays Capital, the formal process for the management of risk
is through the Barclays Capital Risk Management Committee. Day-to-day
responsibility for market risk lies with the Chief Executive of Barclays
Capital, supported by a dedicated global market risk management unit that
operates independently of the business areas.
There has been no significant change in overall market risk
exposure in 2000, although average DVAR was slightly higher than in 1999. The
daily average, maximum and minimum values of DVAR were estimated as below.
Year end DvaR at 31st December 2000 was £19.0m (1999: £20.2m).
The daily average, maximum and minimum values of DVAR were estimated as below.
Twelve months to Twelve months to
31st December 2000 31st December 1999
Average High* Low* Average High* Low*
£m £m £m £m £m £m
Interest rate risk 16.2 23.7 10.7 13.7 30.2 6.2
Foreign exchange risk 2.9 4.7 1.8 2.8 11.7 0.8
Equities risk 3.9 7.1 1.4 1.7 3.7 0.6
Commodities risk 1.4 3.5 0.9 1.2 2.2 0.5
Diversification effect (6.9) (3.3)
Total DVAR 17.5 27.7 11.5 16.1 32.5 7.7
* The high (and low) DVAR figures reported for each category did not
necessarily occur on the same day as the high (and low) DVAR reported as a
whole. A corresponding diversification effect cannot be calculated and is
therefore omitted from the above table.
Barclays Capital uses the historical simulation method for calculating DVAR.
At the beginning of 2000, the length of the historical sample was increased
from one to two years. This change has not had a material impact on the
reported numbers. The figures shown in the above table were calculated using
a one year sample for 1999 and a two year sample in 2000.
14. US GAAP
There are some significant differences between accounting
practices in the United States (US GAAP) and those in the United Kingdom (UK
GAAP). Key figures on a UK GAAP basis and as estimated on a US GAAP basis are:
2000 2000 1999 1999
£m £m £m £m
UK GAAP US GAAP UK GAAP US GAAP
Net income 2,473 2,195 1,759 1,695
Shareholders' funds 13,187 13,029 8,483 8,262
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