Final Results - Summary
Barclays PLC
14 February 2002
BARCLAYS PLC - SUMMARY
RESULTS FOR YEAR TO 31 DECEMBER 2001
Pro forma results
- Operating income up 11% to £11,360 million from £10,248 million
- Operating profit up 10% to £4,134 million from £3,771 million
- Profit before tax up 9% to £3,608 million from £3,307 million
- Provisions up 35% to £1,149 million, in line with Risk Tendency
levels published at the half year
- Operating expenses up 8% to £6,067million from £5,618 million partly
reflecting increases in both strategic investment and revenue
related costs. Business as usual costs rose 5%
- Earnings per share up 10% to 174.1p from 158.1p
- Dividend per share up 15% to 66.5p from 58.0p
The pro forma results for 2000 above assume that the acquisition of the Woolwich
plc took place on 1 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 12 of the press release. Elsewhere in
the press release, unless indicated otherwise, comparatives are to the actual
results for 2000.
- Attributable profit of £2,465 million is 8% ahead of 2000 (excluding
the exceptional gain on sale of Dial of £186 million)
Highlights during 2001
- Strong set of results demonstrating the benefit of having a
diversified and integrated portfolio of businesses
- Robust risk management with provisions in line with our expectations
- The transformation of the business continues. Product range and
services rejuvenated - for example around two million personal
customers benefited through improvements to overdraft package
- Exceeded Woolwich integration synergy targets by 39%. Synergies of
£111m before tax achieved, against target of £80m
- Open Plan from Barclays launched in UK, Spain and Portugal. In UK
attracted £600m of business in 12 weeks. In Spain daily
applications for mortgages up seven times with over 80% of
applicants new to Barclays
- Following introduction of Woolwich mortgages to Barclays branches
mortgage lending in the second half increased by 38% over second
half 2000
- Sales of Legal & General life and funds products in the fourth
quarter were 18% higher than Barclays life and funds sales in fourth
quarter 2000
- 77% year on year increase on client transaction volumes at Barclays
Capital
- Partnership approach paid dividends for business customers - more
than 1,200 ailing businesses returned to health and blanket support
given to customers affected by Foot and Mouth
- The Group remains the largest UK online bank with 3.3 million
customers on line
- Community contributions totalled £31m
Commenting on the results, Barclays Group Chief Executive, Matthew Barrett,
said: -
'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.
'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.'
For further information, please contact:
Media Relations
Leigh Bruce Chris Tucker
Communications Director PR Director
Tel: 020 7699 2658 Tel: 020 7699 3161
Investor Relations
Cathy Turner
Head of Investor Relations
Tel: 020 7699 3638
Photographs of the Barclays Chairman, Chief Executive and Finance Director will
be available from www.newscast.co.uk from 1.00pm.
The full results document is available from: www.investor.barclays.co.uk
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.
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
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
11. Comparatives for 2000 are on a non pro forma basis.
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 12.
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.
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
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 11 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.
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.
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.
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
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