Interim Results - Part 1
BARCLAYS PLC
5 August 1999
PART 1
Interim Results Announcement 1999
1999 INTERIM RESULTS
Page
Summary 1
Financial highlights 3
Half-year review 4
Summary of results 6
Consolidated profit and loss account (unaudited) 7
Consolidated profit and loss account for the
ongoing business (unaudited) 8
Consolidated balance sheet (unaudited) 9
Financial review 10
Additional information (unaudited) 36
Notes (unaudited) 39
Consolidated statement of changes in
shareholders' funds (unaudited) 52
Statement of total recognised gains
and losses (unaudited) 53
Consolidated cash flow statement (unaudited) 54
US GAAP data (unaudited) 57
Independent review report by the auditors 58
Other information 59
The information in this announcement does not comprise statutory accounts
within the meaning of Section 240 of the Companies Act 1985. Statutory
accounts for the year ended 31st December 1998, which also included the
Group's annual report on Form 20-F to the Securities and Exchange Commission
in the United States of America, have been delivered to the Registrar of
Companies in accordance with Section 242 of the Act and contained an
auditors' report which was unqualified and did not make any statements under
Section 237 of the Act.
BARCLAYS PLC, 54 LOMBARD STREET, LONDON EC3P 3AH, TELEPHONE 020 7699 5000
5th August 1999
BARCLAYS PLC - SUMMARY
RESULTS FOR SIX MONTHS TO 30TH JUNE 1999
Half-year ended
30.6.99 31.12.98 30.6.98
£m £m £m
Operating profit before provisions* 1,754 1,059 1,480
Provisions for bad and doubtful (320) (363) (129)
debts
Provisions for contingent - (76) -
liabilities and commitments
Operating profit * 1,434 620 1,351
Restructuring charge (345) - -
Former BZW businesses - (14) (19)
Exceptional items (net) (119) 5 (4)
Write-down of leases - - (40)
Write-down of fixed asset - (4) -
investments
Profit before tax 970 607 1,288
Tax charge (252) (153) (380)
Profit attributable to shareholders 696 431 886
Earnings per share 46.2p 28.9p 58.3p
Earnings per share (and excluding 70.7p 29.6p 60.0p
exceptional items) *
Dividend per share 17.5p 27.5p 15.5p
*Figures exclude the 1999 restructuring charge, the results of the former
BZW businesses and are stated prior to the impact of the Finance Act 1998.
Amounts reported below and in the first half review and summary of results
on pages 4, 5 and 6 for operating profit, earnings per share and post tax
return on average shareholders funds are on a similar basis unless
indicated otherwise.
- Operating profit rose by 6% to £1,434 million (1998: £1,351 million).
Earnings per share increased to 70.7p (1998: 60.0p).
- Operating income improved by 8% to £4,149 million (1998: £3,834
million) and there was tighter control of operating costs, up 2% to £2,395
million (1998: £2,354 million).
- Operating profit before provisions improved by 19% to £1,754 million
(1998: £1,480 million).
- The post-tax return on average shareholders' funds improved to 25.5%
(1998: 23.5%)
- The interim dividend increased by 13% to 17.5p (1998: 15.5p). The
Group returned £168 million of capital to shareholders through its share
buy-back programme as part of the expected share buy-back of around £500
million in 1999.
- Retail Financial Services increased operating profit by 14% to £820
million (1998: £721 million). Net interest income improved by 6% reflecting
strong growth in UK consumer lending and extended credit balances at
Barclaycard together with continued growth in mortgage lending and UK
savings balances. Fees and commissions grew by 4% predominantly in Wealth
Management. Total costs fell slightly.
- Corporate Banking produced a good underlying performance. Net fees and
commissions rose by 9% as a result of good growth in lending related fees
and foreign exchange related income. Provisions for bad and doubtful debts
increased to £65 million (1998: net credit £44 million), mainly as a result
of lower credit risk releases and recoveries. Operating profit was
£458 million (1998: £544 million excluding write-down of leases).
- Barclays Capital increased operating profit by 14% to £178 million
(1998: £156 million). Total income increased by 24% with both the Rates and
Credit businesses performing well in a fair trading environment.
- Barclays Global Investors operating profit was £28 million (1998: £29
million). Total assets under management and advice grew to £434 billion
(31st December 1998: £370 billion). Increased revenues in the securities
lending business helped maintain the overall margin.
- Although costs in the first half of the year increased slightly
compared to the same period last year, costs for the full year, excluding
the restructuring charge of £345 million, are not expected to exceed the
1998 level of £4,877 million.
- The restructuring charge for 1999 primarily relating to Retail
Financial Services and Corporate Banking is estimated at £345 million and
has been charged in full in the first half of the year. The overall
provision for the 6,000 UK job losses announced in May is now expected to be
approximately £300 million. This is based on the estimated number of staff
opting to take their redundancy entitlement by way of enhanced pension borne
by the pension fund surplus. In addition to the 6,000 job losses, Retail
Financial Services has finalised plans relating to certain of its
international operations resulting in an additional charge of £45 million
and a further 1,000 job losses.
- Total provisions for bad and doubtful debts rose by £191 million to
£320 million, as a result of a £134 million rise in new and increased
specific credit risk provisions and a reduction in releases and recoveries.
The higher level of new and increased provisions mainly reflected strong
volume growth within Retail Financial Services.
- Shareholders' funds were £8.2 billion at 30th June 1999 (31st December
1998: £7.8 billion) and the tier 1 ratio 7.4% (31st December 1998: 7.3%).
The Group estimates it needs shareholders' funds of £6.6 billion to £7.0
billion to support its current business and to allow for future growth.
- The exceptional loss of £119 million is primarily in respect of the
loss on the sale of Merck Finck & Co, which includes £138 million of
goodwill previously written-off to reserves.
FINANCIAL HIGHLIGHTS
Half-year ended
30.6.99 31.12.98 30.6.98
RESULTS £m £m £m
Net interest income* 2,278 2,211 2,142
Non-interest income* 1,871 1,371 1,692
Operating income* 4,149 3,582 3,834
Operating expenses* (2,395) (2,523) (2,354)
Operating profit before 1,754 1,059 1,480
provisions*
Provisions for bad and doubtful (320) (363) (129)
debts
Provision for contingent - (76) -
liabilities and commitments
Operating profit* 1,434 620 1,351
Restructuring charge (345) - -
Former BZW businesses - (14) (19)
Exceptional items (119) 5 (4)
Write-down of leases - - (40)
Write-down of fixed asset - (4) -
investments
Profit before tax 970 607 1,288
Profit attributable to 696 431 886
shareholders
Profit retained 433 17 654
BALANCE SHEET
Shareholders' funds 8,218 7,842 7,822
Loan capital 4,117 3,734 3,597
Total capital resources 12,684 11,890 11,798
Total assets 241,265 219,494 248,956
Weighted risk assets 113,994 109,800 111,521
PER ORDINARY SHARE P P P
Earnings 46.2 28.9 58.3
Earnings (and excluding 70.7 29.6 60.0
exceptional items) *
Dividend 17.5 27.5 15.5
Net asset value 547 519 519
PERFORMANCE RATIO % % %
Post-tax return on average 16.8 11.0 22.8
shareholders' funds
Post-tax return on average
shareholders' funds (and 25.5 11.2 23.5
excluding exceptional items) *
RISK ASSET RATIO
Tier 1 7.4 7.3 7.2
Total 10.9 10.6 10.4
GROUP YIELDS, SPREADS & MARGINS % % %
Gross yield 6.90 7.70 7.93
Interest spread 2.96 2.71 2.66
Interest margin 3.50 3.45 3.38
EXCHANGE RATES US$/£ US$/£ US$/£
Period end 1.58 1.66 1.67
* Figures exclude the 1999 restructuring charge, the residual losses of the
former BZW businesses and are stated prior to the impact of the Finance
Act 1998.
HALF YEAR REVIEW
Barclays made good progress in the first half of 1999. Operating profit was
£1,434 million, an increase of 6% over the first half of 1998. Earnings per
share increased to 70.7 pence from 60.0 pence and average return on equity
improved to 25.5% (1998: 23.5%). Group operating income increased by 8% to
£4,149 million. The interim dividend is being increased by 13% to 17.5p.
We continue to return capital to shareholders through share buy-backs and
during the first half of 1999 completed around a third of our target of £500
million for the year.
All four businesses performed well in meeting their objectives to grow
revenue, to contain costs and to innovate. This was achieved at a time of
considerable change to bring about customer focus throughout Barclays which
is essential to our future.
Retail Financial Services now has three customer-focused business groupings:
Retail Customers, Wealth Management and Barclaycard. Its operating profit
rose by 14% to £820 million. This reflected good performances from UK
consumer lending, mortgages and savings and strong growth within Wealth
Management, where profit improved by 43% to £221 million. Barclaycard
profits rose as a result of growth in extended credit balances and through
cost savings from the change programme announced in September 1998.
Barclays.net was launched in March and is the first free internet service to
be provided by a UK bank and has led to increased demand for on-line
banking. On-line and telephone banking customers now total 1.3 million.
Underlying income growth remains strong within Corporate Banking, with good
levels of acquisition finance activity from our large corporate customers
and greater product sales to our middle market customers to whom we offer an
integrated approach. Operating profit declined from £544 million to £458
million. The decrease in profit resulted from a higher net provisions
charge of £65 million following a net credit of £44 million in 1998. This
largely reflected the expected reduction in the high levels of releases and
recoveries experienced a year ago. The quality of the lending portfolio has
also improved. A full range of euro products, including current and deposit
accounts, euro denominated overdrafts and loan products and specialised
leasing and sales financing, has been launched and supports our position as
one of the world's top cross-border payment banks.
Barclays Capital's profits improved by 14% to £178 million and reflect a
significant turnaround following the loss suffered in the second half of
1998. Both the Rates and Credit businesses performed well in favourable
trading conditions. The results were achieved while running a significantly
lower risk profile and using less regulatory capital. The focus has been on
strengthening the underlying business and delivering higher quality
earnings. Barclays Capital is making progress in building its European
franchise, following the introduction of the euro, and is among the leaders
in the developing debt markets in Europe.
Closer working between Barclays Capital and Corporate Banking is resulting
in greater opportunities to offer more effective and flexible finance
solutions for our large corporate and institutional customers.
Barclays Global Investors (BGI) profits were flat at £28 million
(1998: £29 million), reflecting an increase in its investment programme in
new products, channels and infrastructure to support its goal of leadership
in global fund management. It has taken on significant new business in all
the regions in which it operates and continues as the top-ranked manager of
tax-exempt assets in the world. Total assets under management grew by 17%
to £434 billion in the first half of the year.
In May, we announced the reshaping of our operations through the
centralisation of core processes and the application of new technologies to
enable us to improve service to our customers. As a result we will cut the
number of jobs in the United Kingdom by 6,000 this year, principally in
Retail Financial Services and Corporate Banking. At the same time we are
creating 1,800 new positions, largely in call centres within Retail
Financial Services, some of which will be filled by staff whose jobs have
gone. We have also worked closely with the unions to ensure the best
outcome for all affected staff. In addition we have now finalised plans
relating to certain of Retail Financial Services' international operations
resulting in a reduction of a further 1,000 jobs. As a result the total
restructuring charge is £345 million for 1999. The programme is expected to
yield annual gross savings in excess of £200m.
We are managing costs with determination and are committed to maintaining
costs for this year at 1998 levels, excluding the exceptional charge for
restructuring.
We are confident that Barclays is now prepared for the Year 2000. All our
mission critical systems, being those which could directly impact our
customers and our ability to continue to operate effectively, are now Year
2000 ready.
Matthew Barrett as Group Chief Executive and David Allvey as Group Finance
Director will join us over the next two months. They bring valuable
experience to the central leadership of the Group which already has strong
leaders at business level.
Work to add value to the Barclays brand - arguably the most valuable brand
in the UK - is progressing well; all our businesses are working to ensure we
strengthen this important asset. We are also in the process of introducing
an updated visual identity across the Group.
Barclays is winning business through our strengthening brand, the commitment
and creativity of our staff and their determination to maintain our business
values. They will enable us to meet our customers needs as the business
changes aggressively to stay ahead of the competition.
Sir Peter Middleton
Chairman and Group Chief Executive
SUMMARY OF RESULTS
Half-year ended
PROFIT BEFORE TAX 30.6.99 31.12.98 30.6.98
£m £m £m
Retail Financial Services 820 780 721
Corporate Banking* 458 447 544
Barclays Capital 178 (426) 156
Barclays Global Investors 28 23 29
Businesses in Transition** - 24 24
Other operations (12) (111) (92)
Head office functions (32) (35) (25)
Goodwill amortisation (6) (6) (6)
Provision for litigation - (76) -
settlement***
Operating profit 1,434 620 1,351
Restructuring charge (345) - -
Former BZW businesses - (14) (19)
Exceptional items (119) 5 (4)
Write-down of leases - - (40)
Write-down of fixed asset - (4) -
investments
970 607 1,288
30.6.99 31.12.98 30.6.98
TOTAL ASSETS £m £m £m
Retail Financial Services 45,746 46,150 42,671
Corporate Banking 46,662 45,341 42,519
Barclays Capital 135,941 114,706 150,094
Barclays Global Investors 199 183 167
Businesses in Transition - - 88
- former BZW businesses
- other - 554 443
Other operations and Head office 5,204 5,475 6,223
functions
Retail life-fund assets 7,513 7,085 6,751
attributable to policyholders
241,265 219,494 248,956
WEIGHTED RISK ASSETS
Retail Financial Services 31,657 31,499 29,712
Corporate Banking 46,381 43,507 40,162
Barclays Capital 31,652 29,344 36,053
Barclays Global Investors 297 207 150
Businesses in Transition - - 61
- former BZW businesses
- other - 594 470
Other operations**** 4,007 4,649 4,913
113,994 109,800 111,521
* Figures are stated prior to the impact of the Finance Act 1998.
** Businesses in Transition profit before tax excludes the results of
former BZW businesses which are shown separately.
***The provision in the second half of 1998 relates to the settlement of
the Atlantic litigation.
****Including supervisory adjustments.
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
Half-year ended
30.6.99 31.12.98 30.6.98
£m £m £m
Interest receivable 4,497 4,938 5,014
Interest payable (2,219) (2,728) (2,876)
Write-down of leases - - (40)
Profit on redemption/repurchase of - - 3
loan capital
Net interest income 2,278 2,210 2,101
Net fees and commissions 1,417 1,429 1,350
receivable
Dealing profits 325 (230) 197
Other operating income 129 168 156
Total non-interest income 1,871 1,367 1,703
Operating income 4,149 3,577 3,804
Administration expenses - staff (1,668) (1,425) (1,386)
costs
Administration expenses - other (935) (969) (860)
Depreciation and amortisation (137) (138) (137)
Operating expenses (2,740) (2,532) (2,383)
Operating profit before provisions 1,409 1,045 1,421
Provisions for bad and doubtful (320) (363) (129)
debts
Provisions for contingent - (76) -
liabilities and commitments
Operating profit 1,089 606 1,292
Exceptional items (119) 5 (4)
Write-down of fixed asset - (4) -
investments
Profit on ordinary activities 970 607 1,288
before tax
Tax on profit on ordinary (252) (153) (380)
activities
Profit on ordinary activities 718 454 908
after tax
Minority interests (equity and non- (22) (23) (22)
equity)
Profit attributable to the members 696 431 886
of Barclays PLC
Dividends (263) (414) (232)
Profit retained 433 17 654
Earnings per ordinary share 46.2p 28.9p 58.3p
Earnings per ordinary share
for the ongoing business 70.7p 29.6p 60.0p
Dividend per ordinary share:
First interim (payable 1st October 17.5p - 15.5p
1999)
Second interim - 27.5p -
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE ONGOING
BUSINESS (UNAUDITED)
Half-year ended
30.6.99 31.12.98 30.6.98
£m £m £m
Interest receivable 4,497 4,938 5,014
Interest payable (2,219) (2,727) (2,875)
Profit on redemption/repurchase - - 3
of loan capital
Net interest income 2,278 2,211 2,142
Net fees and commissions 1,417 1,431 1,340
receivable
Dealing profits 325 (225) 198
Other operating income 129 165 154
Total non-interest income 1,871 1,371 1,692
Operating income 4,149 3,582 3,834
Administration expenses - staff (1,421) (1,422) (1,367)
costs
Administration expenses - other (837) (962) (850)
Depreciation and amortisation (137) (139) (137)
Operating expenses (2,395) (2,523) (2,354)
Operating profit before 1,754 1,059 1,480
provisions
Provisions for bad and doubtful (320) (363) (129)
debts
Provisions for contingent - (76) -
liabilities and commitments
Operating profit for the ongoing 1,434 620 1,351
business
Restructuring charge (345) - -
Former BZW businesses - (14) (19)
Exceptional items (119) 5 (4)
Write-down of leases - - (40)
Write-down of fixed asset - (4) -
investments
Profit on ordinary activities 970 607 1,288
before tax
The results shown on page 7 include the restructuring charge in the first
half of 1999 and the residual losses relating to the former BZW businesses
and the impact of the 1998 Finance Act in previous periods. The table above
presents the consolidated profit and loss account for the ongoing business
excluding the impact of these items.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
Half-year ended
30.6.99 31.12.98 30.6.98
Assets: £m £m £m
Cash and balances at central 780 942 709
banks
Items in course of collection 2,709 2,475 3,129
from other banks
Treasury bills and other eligible 8,321 4,748 6,890
bills
Loans and advances to banks 14,214 20,316 19,725
- banking
- trading 25,805 16,296 18,109
40,019 36,612 37,834
Loans and advances to customers 88,952 81,469 76,483
- banking
- trading 17,094 14,641 31,670
106,046 96,110 108,153
Debt and equity securities 56,767 50,068 62,173
Interests in associated 131 150 143
undertakings and joint ventures
Intangible fixed assets - 209 196 183
goodwill
Tangible fixed assets 1,878 1,939 1,909
Other assets 16,892 19,169 21,082
233,752 212,409 242,205
Retail life-fund assets 7,513 7,085 6,751
attributable to policyholders
Total assets 241,265 219,494 248,956
Liabilities:
Deposits by banks - banking 24,863 25,951 31,206
- trading 14,213 8,469 19,989
39,076 34,420 51,195
Customer accounts - banking 98,629 96,099 96,527
- trading 18,316 12,706 20,343
116,945 108,805 116,870
Debt securities in issue 22,976 17,824 21,625
Items in course of collection due 1,308 1,279 1,726
to other banks
Other liabilities 40,763 38,191 38,991
Undated loan capital - 317 301 300
convertible to preference shares
Undated loan capital - non- 1,463 1,441 1,410
convertible
Dated loan capital - non- 2,337 1,992 1,887
convertible
Other subordinated liabilities - - - 58
non-convertible
225,185 204,253 234,062
Minority interests and
shareholders' funds:
Minority interests: equity 72 51 59
Minority interests: non-equity 277 263 262
Called up share capital 1,503 1,511 1,509
Reserves 6,715 6,331 6,313
Shareholders' funds: equity 8,218 7,842 7,822
8,567 8,156 8,143
233,752 212,409 242,205
Retail life-fund liabilities 7,513 7,085 6,751
attributable to policyholders
Total liabilities and 241,265 219,494 248,956
shareholders' funds
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