UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
August, 2006
Barclays PLC and
Barclays Bank PLC
(Names of Registrants)
1 Churchill Place
London E14 5HP
England
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No x
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b):
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This Report is a joint Report on Form 6-K filed by Barclays PLC and Barclays
Bank PLC. All of the issued ordinary share capital of Barclays Bank PLC is
owned by Barclays PLC.
This Report comprises:
Information given to The London Stock Exchange and furnished pursuant to
General Instruction B to the General Instructions to Form 6-K.
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EXHIBIT INDEX
1. Interim Results dated 03 August 2006
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each of
the registrants has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BARCLAYS PLC
(Registrant)
Date: August 03, 2006 By: /s/ Patrick Gonsalves
----------------------
Patrick Gonsalves
Deputy Secretary
BARCLAYS BANK PLC
(Registrant)
Date: August 03, 2006 By: /s/ Patrick Gonsalves
----------------------
Patrick Gonsalves
Joint Secretary
Interim Results Announcement
30th June 2006
BARCLAYS PLC
INTERIM ANNOUNCEMENT OF RESULTS FOR 2006
TABLE OF CONTENTS
Summary of key information
Performance summary
Financial highlights
Chief Executive's Half-year review
Consolidated income statement
Consolidated balance sheet
Results by business
Results by nature of income and expense
Analysis of amounts included in the balance sheet
Additional information
Notes
Consolidated statement of recognised income and expense
Summary consolidated cashflow statement
Other information
Appendix
Index
BARCLAYS PLC, 1 CHURCHILL PLACE, LONDON, E14 5HP, ENGLAND, UNITED KINGDOM.
TELEPHONE: +44 (0) 20 7116 1000. COMPANY NO. 48839
The information in this announcement, which was approved by the Board of
Directors on 2nd August 2006, does not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985 (the 'Act'). Statutory accounts
for the year ended 31st December 2005, which included certain information
required for the joint Annual Report on Form 20-F of Barclays PLC and Barclays
Bank PLC to the US Securities and Exchange Commission (SEC) and which contained
an unqualified audit report under Section 235 of the Act and which did not make
any statements under Section 237 of the Act, have been delivered to the
Registrar of Companies in accordance with Section 242 of the Act.
Unless otherwise stated, the information in this announcement reflects the
changes in Barclays group structure and reporting, and the revisions to the
Group's policy for the internal cost of funding and the segmental disclosure of
risk weighted assets, which were announced on 16th June 2006. For a fuller
discussion of the changes, please refer to the 'Group reporting changes in 2006'
announcement released on 16th June 2006. Details of these changes are also set
out on page 70.
Unless otherwise stated, the information set out in this announcement relates to
the six months to 30th June 2006 and is compared to the corresponding six months
of 2005.
Forward-looking statements
This document contains certain forward-looking statements within the meaning of
Section 21E of the US Securities Exchange Act of 1934, as amended, and Section
27A of the US Securities Act of 1933, as amended, with respect to certain of the
Group's plans and its current goals and expectations relating to its future
financial condition and performance. These forward-looking statements can be
identified by the fact that they do not relate only to historical or current
facts. Forward-looking statements sometimes use words such as 'aim',
'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal',
'believe', or other words of similar meaning. Examples of forward-looking
statements include, among others, statements regarding the Group's future
financial position, income growth, impairment charges, business strategy,
projected levels of growth in the banking and financial markets, projected
costs, estimates of capital expenditures, and plans and objectives for future
operations.
By their nature, forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances, including, but not limited to,
the further development of standards and interpretations under IFRS applicable
to past, current and future periods, evolving practices with regard to the
interpretation and application of standards under IFRS, as well as UK domestic
and global economic and business conditions, market related risks such as
changes in interest rates and exchange rates, the policies and actions of
governmental and regulatory authorities, changes in legislation, progress in the
integration of Absa into the Group's business and the achievement of synergy
targets related to Absa, the outcome of pending and future litigation, and the
impact of competition - a number of which factors are beyond the Group's
control. As a result, the Group's actual future results may differ materially
from the plans, goals, and expectations set forth in the Group's forward-looking
statements. Any forward-looking statements made by or on behalf of Barclays
speak only as of the date they are made. Barclays does not undertake to update
forward-looking statements to reflect any changes in Barclays expectations with
regard thereto or any changes in events, conditions or circumstances on which
any such statement is based. The reader should, however, consult any additional
disclosures that Barclays has made or may make in documents it has filed or may
file with the SEC.
Absa Definitions
'Absa Group Limited' refers to the South African company listed on the
Johannesburg Stock Exchange in which Barclays owns a controlling stake.
'Absa' refers to the total results for Absa Group Limited consolidated into the
results of Barclays PLC, translated into Sterling with adjustments for
amortisation of intangible assets, certain head office adjustments, transfer
pricing and minority interests.
'International Retail and Commercial Banking - Absa' is the portion of Absa's
results that is reported by Barclays within the International Retail and
Commercial Banking business.
'Absa Capital' is the portion of Absa's results that is reported by Barclays
within the Barclays Capital business.
Glossary of terms
The Cost:income ratio is defined as operating expenses compared to total income
net of insurance claims.
The Cost:net income ratio is defined as operating expenses compared to total
income net of insurance claims less impairment charges.
The Return on average economic capital by business is defined as attributable
profit compared to average economic capital.
'Income' refers to total income net of insurance claims, unless otherwise
specified.
'Profit' refers to profit before tax unless otherwise specified.
3rd August 2006
BARCLAYS PLC
"Barclays had an excellent first half, with earnings per share up 25%.
Successful strategy execution delivered outstanding performance from our global
wholesale businesses, a substantial contribution from Absa and sustained income
growth in UK Banking. We are very well positioned across the Group for future
growth."
John Varley, Group Chief Executive
RESULTS FOR THE SIX MONTHS TO 30TH JUNE 2006 (UNAUDITED)
Half-year ended
30.06.06 30.06.05 % Change
Group Results GBPm GBPm
Total income net of insurance claims 10,969 7,922 38
Impairment charges (1,057) (706) 50
Operating expenses (6,269) (4,542) 38
Profit before tax 3,673 2,690 37
Profit attributable to minority
interests (294) (134) 119
Profit attributable to equity holders
of the parent 2,307 1,841 25
Economic profit 1,385 1,004 38
Earnings per share 36.3p 29.1p 25
Dividend per share 10.5p 9.2p 14
Post-tax return on average
shareholders' equity 25.8% 23.4%
Summary of divisional profit before tax(1) GBPm GBPm % Change
UK Banking 1,265 1,138 11
UK Retail Banking 612 548 12
UK Business Banking 653 590 11
Barclaycard 297 346 (14)
International Retail and Commercial
Banking (IRCB) 539 174 210
IRCB - ex Absa 222 174 28
IRCB - Absa 317 - -
Barclays Capital 1,246 750 66
Barclays Global Investors 364 241 51
Wealth Management 110 84 31
(1) Summary excludes Wealth Management - closed life assurance activities and
Head office functions and other operations. Full analysis of business profit
before tax is on page 16.
PERFORMANCE SUMMARY
- The financial results reflect the successful execution of strategy:
- Total income up 38% to GBP10,969m
- Profit before tax up 37% to GBP3,673m
- Earnings per share up 25% to 36.3p
- Dividend per share up 14% to 10.5p
- Economic profit up 38% to GBP1,385m
- Return on average shareholders' equity of 26%.
- UK Banking produced strong profit growth, up 11% to GBP1,265m, with the
cost:income ratio improving a further three percentage points. UK Retail
Banking delivered a 12% improvement in profit to GBP612m, driven by
sustained income growth across the business and with additional investment
spend mostly offsetting the benefit of gains on the sale and leaseback of
property. UK Business Banking delivered strong, broadly based growth, with
profit up 11% to GBP653m.
- Barclaycard profit fell 14% to GBP297m. Strong income growth was offset by
a continued rise in impairment charges, principally in the UK unsecured
lending portfolios and by higher costs, mainly as a result of continued
investment in Barclaycard US, which is performing in line with the
acquisition business plan.
- International Retail and Commercial Banking - excluding Absa achieved a
profit of GBP222m, with strong underlying growth. There were good
performances in all geographies, with continued progress from recent
acquisitions in Spain and France and continued strong organic growth.
- International Retail and Commercial Banking - Absa's contribution to
profit was GBP317m in the first half of 2006. Absa Group Limited reported
16% growth in profit before tax to R4.9bn. Absa Group Limited's performance
reflected a favourable economic environment, strong growth in demand for
credit and in deposits, and good progress on the integration.
- Barclays Capital produced an outstanding performance, with profit rising
66% to GBP1,246m, and compared well against its peer group. Income growth
was broadly based across all asset classes and geographies, reflecting
returns on past investment and the strength of the client franchise. Profit
growth significantly exceeded the rate of growth of risk and capital
consumption.
- Barclays Global Investors maintained its track record of excellent
growth, with profit up 51% to GBP364m. There was strong performance across
products, distribution channels and geographies, whilst investing in key
growth initiatives. Net new assets in the period were US$30bn and at
30th June 2006 assets under management totalled US$1.6 trillion.
- Wealth Management profit rose 31% to GBP110m. This reflected balance sheet
growth across the business, higher client funds under management and
increased client activity, whilst investing for future growth.
- Group income grew 38%, or 23% excluding the impact of Absa. Income
growth was well diversified by income type and particularly strong in the
wholesale and international businesses. Net interest income represented 40%
of total income.
- Impairment charges rose 50%. Impairment charges on loans and advances,
excluding Absa, increased 30%. The increase was principally driven by a
continued increase in arrears balances and lower rates of recovery in UK
credit cards and unsecured loans. Small and medium business impairment
charges increased towards Risk Tendency. Wholesale charges were lower and
mortgage impairment was negligible.
- Operating expenses grew 38%, in line with income growth. Excluding Absa,
operating expenses growth was 21% and the cost:income ratios of all
businesses improved. Growth in operating expenses was driven by higher
performance related expenses, organic expansion of distribution channels in
International Retail and Commercial Banking and continued investment for
future growth.
- The Group took advantage of historically low yields on property to
realise gains of GBP238m from the sale and leaseback of some of its freehold
portfolio. The majority of the gains were in UK Banking (GBP145m) where they
were largely offset by an acceleration of investment expenditure. The
remaining property gains were recorded in Barclaycard (GBP38m) and
International Retail and Commercial Banking (GBP55m).
- Approximately 50% of the Group's profits were generated from outside the
UK.
- Barclays primary performance goal is to achieve top quartile Total
Shareholder Return (TSR). As at 30th June 2006, in the 2004-2007 goal
period, Barclays was positioned 7th within its peer group(1), which is third
quartile. Compound annual growth in economic profit is well ahead of the
growth target range (10%-13% pa).
(1) Peer group for 2006 remained unchanged from 2005: ABN Amro, BBVA,
BNP Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan, Lloyds TSB,
Royal Bank of Scotland and UBS.
FINANCIAL HIGHLIGHTS (UNAUDITED)
Half-year ended
30.06.06 31.12.05 30.06.05
RESULTS GBPm GBPm GBPm
----------
Net interest income 4,404 4,375 3,700
Net fee and commission income 3,652 3,165 2,540
Principal transactions(1) 2,575 1,630 1,549
Net premiums from insurance 510 501 371
contracts
Other income 61 98 49
-------- -------- --------
Total income 11,202 9,769 8,209
Net claims and benefits paid on
insurance contracts (233) (358) (287)
-------- -------- --------
Total income net of insurance claims 10,969 9,411 7,922
Impairment charges (1,057) (865) (706)
-------- -------- --------
Net income 9,912 8,546 7,216
Operating expenses (6,269) (5,985) (4,542)
Share of post-tax results of
associates 30 29 16
and joint ventures -------- -------- --------
Profit before tax 3,673 2,590 2,690
-------- -------- --------
Profit attributable to equity
holders of the parent 2,307 1,606 1,841
Economic profit 1,385 748 1,004
PER ORDINARY SHARE p p p
--------------------
Earnings 36.3 25.4 29.1
Diluted earnings 35.1 24.3 28.4
Dividend 10.5 17.4 9.2
Net asset value 276 269 249
PERFORMANCE RATIOS % % %
--------------------
Post-tax return on average
shareholders' equity 25.8 26.4 23.4
Cost:income ratio 57 64 57
Cost:net income ratio 63 70 63
As at
30.06.06 31.12.05 30.06.05
BALANCE SHEET GBPm GBPm GBPm
---------------
Shareholders' equity excluding
minority 17,988 17,426 16,099
interests
Minority interests 7,551 7,004 5,686
-------- -------- --------
Total shareholders' equity 25,539 24,430 21,785
Subordinated liabilities 13,629 12,463 11,309
-------- -------- --------
Total capital resources 39,168 36,893 33,094
-------- -------- --------
Total assets 986,124 924,357 850,123
Risk weighted assets 290,924 269,148 242,406
CAPITAL RATIOS % % %
----------------
Tier 1 ratio 7.2 7.0 7.6
Risk asset ratio 11.6 11.3 12.1
(1) Principal transactions comprise net trading income and net investment
income.
CHIEF EXECUTIVE'S HALF-YEAR REVIEW
Barclays had an excellent first half, delivering a substantial increase in
returns to shareholders, whilst continuing to invest heavily for the future.
Profit before tax increased 37% to GBP3,673m (2005: GBP2,690m). Earnings per
share rose 25% to 36.3p (2005: 29.1p). Economic profit increased 38%, and return
on average shareholders' equity was 26%, (2005: 23%). We increased the interim
dividend by 14% to 10.5p (2005: 9.2p).
The strength of the Group's results demonstrates successful execution of our
four strategic priorities:
- Building the best bank in the UK
- Accelerating growth of global businesses
- Developing retail and commercial banking activities in selected
countries outside the UK
- Enhancing operational excellence.
Group Performance
Total income grew 38% to GBP10,969m (2005: GBP7,922m). Income growth was broadly
based by business and geography. The growth demonstrated the strength of
momentum in each business, the contribution of Absa and especially strong
performances in the wholesale and institutional businesses. Excluding the effect
of the first time consolidation of Absa, total income was up 23% compared with
expense growth of 21%. The mix of income continued to evolve reflecting the
development of the business. Net interest income represented approximately 40%
of total income. Approximately half of our profits were made from outside the
UK.
Total impairment charges rose 50% to GBP1,057m (2005: GBP706m). Impairment
charges on loans and advances, excluding Absa, increased 30%. This reflected the
growth in the loan book, an increase in arrears balances and reduced recoveries
in UK unsecured loans and credit cards and some growth in impairment charges for
small and medium businesses as they trended towards Risk Tendency. Credit
related impairment was stable in UK mortgages and was lower in wholesale and
larger corporate business. Loans and advances to customers grew 19% since 30th
June 2005, or 8% excluding Absa.
Operating expenses increased 38% to GBP6,269m (2005: GBP4,542m). Excluding the
impact of Absa, operating expenses grew 21% and the cost:income ratio improved
in all businesses. The principal driver of expense growth was variable costs
driven by the outstanding performances in Barclays Capital and Barclays Global
Investors. Reported operating expenses were reduced by GBP238m from gains on the
sale and leaseback of freehold properties, as the Group took advantage of
historically low yields on property to realise gains on some of its freehold
portfolio. Gains of GBP145m in UK Banking were largely offset by an acceleration
of investment expenditure. The remaining property gains were in Barclaycard
(GBP38m) and International Retail and Commercial Banking (GBP55m).
Business Performance
UK Banking achieved strong growth in profit before tax, up 11% to GBP1,265m
(2005: GBP1,138m). The cost:income ratio improved three percentage points
relative to the first half of 2005.
UK Retail Banking profit before tax grew 12% to GBP612m (2005: GBP548m). Income
growth of 7% extended the momentum established in 2005. Operating expenses grew
3%, after property gains of GBP116m, which were largely reinvested through an
acceleration of our plans to develop the business.
UK Business Banking profit before tax increased 11% to GBP653m (2005: GBP590m).
Income growth of 12% was driven by strong growth in average loans and deposits.
Operating expenses increased 7% and benefited from property gains of GBP29m.
Barclaycard profit before tax fell 14% to GBP297m (2005: GBP346m) as the impact
of higher impairment charges and costs relating to international investment
exceeded income growth of 14%. Income growth reflected improved margins in the
UK Cards portfolio, balance growth in UK unsecured loans, and strong momentum in
international cards particularly Barclaycard US. Operating expenses grew 9%, or
18% excluding property gains, reflecting continued investment in Barclaycard US
and further development of the UK cards partnerships business.
International Retail and Commercial Banking profit before tax of GBP539m (2005:
GBP174m) reflected the first full period of our ownership of Absa. Absa Group
Limited reported 16% growth in profit before tax to R4,881m (2005: R4,193m),
driven by very strong growth in demand for banking assets, especially in
mortgages, vehicle and asset finance and credit cards. We are making good
progress with integration and the realisation of synergy benefits.
International Retail and Commercial Banking - excluding Absa increased profit
before tax by 28% to GBP222m (2005: GBP174m). Strong income growth of 11%
reflected good balance sheet growth in continental Europe, Africa and the Middle
East, development of the corporate business in Spain and a strong performance
from the Spanish funds business. Flat operating expenses reflected expansion of
the distribution network in Europe and India, offset by property gains of
GBP55m. We have reached an agreement, subject to regulatory approval, to dispose
of our 43.7% stake in FirstCaribbean International Bank to Canadian Imperial
Bank of Commerce for US$1.08bn.
Barclays Capital delivered outstanding results, increasing profit before tax 66%
to GBP1,246m (2005: GBP750m). Performance was driven by income growth of 58%,
arising from higher business volumes and client activity levels. Particularly
strong growth was delivered by interest rate products, equity products, currency
products, emerging markets, credit products and commodities. Growth in market
risk and capital consumption was substantially lower than growth in income and
profit. Operating expenses growth of 54% reflected performance related costs and
continued investment. The cost:net income ratio improved by two percentage
points.
Barclays Global Investors profit before tax increased 51% to GBP364m (2005:
GBP241m). This excellent profit performance reflected income growth from flows
of net new assets last year, strong investment performance in active products
and a two percentage point improvement in the cost: income ratio to 57%. Total
assets under management increased to US$1.6 trillion, and net new asset flows
continued to be strong.
Wealth Management delivered a 31% improvement in profit before tax to GBP110m
(2005: GBP84m). Income growth of 15% was driven by growth in client
transactions, deposit and loan balances and client funds under management.
Operating expenses grew 11% partly as a result of significant investment in
client-facing professionals and infrastructure.
Head office functions and other operations loss before tax increased to GBP157m
(2005: GBP40m). This was driven by a reduction in net interest income retained
in Group Treasury, which was partially offset by a lower net impact of
consolidation adjustments and lower operating expenses caused by the completion
in 2005 of the Head Office relocation. The net gain from hedging activity was
also lower than in 2005.
Capital Management
We continue to direct a lot of attention to capital management, maintaining a
strong credit rating whilst optimising the returns to shareholders. At 30th June
2006, our Tier 1 capital ratio was 7.2%. Our target Tier 1 capital ratio remains
7.25%.
As part of our active management of the balance sheet, we have taken advantage
of historically low yields on property to dispose of a portion of our freehold
estate and crystallised gains of GBP238m in the first half of 2006 and expect to
realise further gains of about GBP150m in the second half of 2006.
Dividends
We expect to grow dividends per share approximately in line with earnings per
share over the longer term. We weight the annual dividend towards the final
dividend to maintain flexibility, consistent with our practice of prior years.
Group Goals
Barclays ranked 7th in its Total Shareholder Return (TSR) peer group(1) for the
current four year goal period which commenced on 1st January 2004.
Outlook
For the rest of 2006, the global economic outlook remains positive and we expect
global growth to be at or ahead of the levels of 2005. We anticipate strong
economic performances in the United Kingdom, the United States of America, the
Eurozone and Japan. In South Africa, actions by the monetary authorities in
response to inflationary pressures are expected to moderate the pace of growth
but we remain confident as to the long-term growth prospects for the economy.
The instability in the Middle East may affect volatility and the volume of
activity in world financial markets.
We expect retail credit conditions in the UK to remain challenging in the second
half of 2006 as impairment trends continue to be affected by the rise in average
balances and the growth in personal bankruptcies. There are, however, signs of
stabilisation of the new flow into delinquency in our main credit card portfolio
as the measures taken in the past 18 months have had a positive impact on the
credit quality of new business and the management of existing exposures.
There is good earnings momentum across the Group and Barclays is well positioned
to deliver strong earnings growth going forward.
Senior Management
I am delighted to welcome to the Executive Committee Frits Seegers, who joined
Barclays on 10th July 2006 as Chief Executive, Global Retail and Commercial
Banking.
John Varley
Group Chief Executive
(1) Peer group for 2006 remained unchanged from 2005: ABN Amro, BBVA,
BNP Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan, Lloyds TSB,
Royal Bank of Scotland and UBS.
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Half-year ended
30.06.06 31.12.05 30.06.05
Continuing operations GBPm GBPm GBPm
Interest income 10,544 9,584 7,648
Interest expense (6,140) (5,209) (3,948)
-------- -------- --------
Net interest income 4,404 4,375 3,700
-------- -------- --------
Fee and commission income 4,077 3,558 2,872
Fee and commission expense (425) (393) (332)
-------- -------- --------
Net fee and commission income 3,652 3,165 2,540
-------- -------- --------
Net trading income 2,201 1,145 1,176
Net investment income 374 485 373
-------- -------- --------
Principal transactions 2,575 1,630 1,549
Net premiums from insurance contracts 510 501 371
Other income 61 98 49
-------- -------- --------
Total income 11,202 9,769 8,209
Net claims and benefits paid on
insurance contracts (233) (358) (287)
-------- -------- --------
Total income net of insurance claims 10,969 9,411 7,922
Impairment charges (1,057) (865) (706)
-------- -------- --------
Net income 9,912 8,546 7,216
-------- -------- --------
Operating expenses excluding
amortisation of intangible assets (6,206) (5,923) (4,525)
Amortisation of intangible assets (63) (62) (17)
-------- -------- --------
Operating expenses (6,269) (5,985) (4,542)
Share of post-tax results of
associates and joint ventures 30 29 16
-------- -------- --------
Profit before tax 3,673 2,590 2,690
Tax (1,072) (724) (715)
-------- -------- --------
Profit for the period 2,601 1,866 1,975
-------- -------- --------
Profit attributable to minority
interests 294 260 134
Profit attributable to equity holders
of the parent 2,307 1,606 1,841
-------- -------- --------
2,601 1,866 1,975
-------- -------- --------
p p p
Basic earnings per ordinary share 36.3 25.4 29.1
Diluted earnings per ordinary share 35.1 24.3 28.4
Dividends per ordinary share:
Interim dividend 10.5 - 9.2
Final dividend - 17.4 -
Dividend GBP667m GBP1,105m GBP582m
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at
30.06.06 31.12.05 30.06.05
Assets GBPm GBPm GBPm
Cash and balances at central banks 6,777 3,906 4,106
Items in the course of collection from 2,600 1,901 2,208
other banks
Trading portfolio assets 181,857 155,723 134,235
Financial assets designated at fair
value:
- held on own account 18,833 12,904 9,747
- held in respect of linked liabilities
to customers under investment contracts 79,334 83,193 69,792
Derivative financial instruments 136,901 136,823 133,932
Loans and advances to banks 35,330 31,105 35,225
Loans and advances to customers 282,097 268,896 237,123
Available for sale financial investments 53,716 53,497 61,143
Reverse repurchase agreements and cash
collateral on securities borrowed 171,869 160,398 149,400
Other assets 5,866 4,734 3,598
Investments in associates and joint
ventures 560 546 438
Goodwill 5,968 6,022 4,590
Intangible assets 1,125 1,269 120
Property plant and equipment 2,515 2,754 2,407
Deferred tax assets 776 686 2,059
-------- -------- --------
Total assets 986,124 924,357 850,123
-------- -------- --------
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at
30.06.06 31.12.05 30.06.05
Liabilities GBPm GBPm GBPm
Deposits from banks 86,221 75,127 84,538
Items in the course of collection due to
other banks 2,700 2,341 2,809
Customer accounts 253,200 238,684 217,715
Trading portfolio liabilities 74,719 71,564 65,598
Financial liabilities designated at fair
value 43,594 33,385 8,231
Liabilities to customers under investment
contracts 81,380 85,201 71,608
Derivative financial instruments 138,982 137,971 132,784
Debt securities in issue 102,198 103,328 93,328
Repurchase agreements and cash collateral on
securities lent 146,165 121,178 122,076
Other liabilities 10,767 11,131 9,649
Current tax liabilities 592 747 786
Insurance contract liabilities, including
unit-linked liabilities 3,558 3,767 3,589
Subordinated liabilities 13,629 12,463 11,309
Deferred tax liabilities 430 700 1,891
Other provisions for liabilities 474 517 386
Retirement benefit liabilities 1,976 1,823 2,041
-------- -------- --------
Total liabilities 960,585 899,927 828,338
-------- -------- --------
Shareholders' equity
Called up share capital 1,628 1,623 1,616
Share premium account 5,720 5,650 5,554
Other reserves 587 1,377 1,593
Retained earnings 10,279 8,957 7,575
Less: treasury shares (226) (181) (239)
-------- -------- --------
Shareholders' equity excluding minority
interests 17,988 17,426 16,099
Minority interests 7,551 7,004 5,686
-------- -------- --------
Total shareholders' equity 25,539 24,430 21,785
-------- -------- --------
-------- -------- --------
Total liabilities and shareholders' equity 986,124 924,357 850,123
-------- -------- --------
FINANCIAL REVIEW
Results by business
The following section analyses the Group's performance by business. For
management and reporting purposes, Barclays is organised into the following
business groupings:
- UK Banking, comprising
- UK Retail Banking
- UK Business Banking
- Barclaycard
- International Retail and Commercial Banking, comprising
- International Retail and Commercial Banking - excluding Absa
- International Retail and Commercial Banking - Absa, included with effect
from 27th July 2005
- Barclays Capital
- Barclays Global Investors
- Wealth Management
- Wealth Management - closed life assurance activities
- Head office functions and other operations.
UK Banking
UK Banking delivers banking solutions to Barclays UK retail and business banking
customers. It offers a range of integrated products and services and access to
the expertise of other Group businesses. Customers are served through a variety
of channels comprising the branch network, automated teller machines, telephone
banking, online banking and relationship managers. UK Banking is managed through
two business areas, UK Retail Banking and UK Business Banking.
UK Retail Banking
UK Retail Banking comprises Personal Customers, Local Business (formerly Small
Business), UK Premier and Home Finance (formerly Mortgages). This cluster of
businesses aims to build broader and deeper relationships with both existing and
new customers. Personal Customers and Home Finance provide a wide range of
products and services to retail customers, including current accounts, savings
and investment products, mortgages and general insurance. Local Business
provides banking services to small businesses with an annual turnover up to
GBP1m. UK Premier provides banking, investment products and advice to affluent
customers.
UK Business Banking
UK Business Banking provides relationship banking to Barclays larger and medium
business customers in the United Kingdom. Customers are served by a network of
relationship and industry sector specialist managers who provide local access to
an extensive range of products and services, as well as offering business
information and support. Customers are also offered access to the products and
expertise of other businesses in the Group, particularly Barclays Capital. UK
Business Banking provides asset financing and leasing solutions through a
specialist business.
Barclaycard
Barclaycard is a multi-brand credit card and consumer lending business. It is
one of Europe's leading credit card businesses and has an increasing
international presence.
In the UK, Barclaycard includes Barclaycard branded credit cards, Barclays
branded loans, FirstPlus secured lending, Monument cards, SkyCard and the retail
finance business Clydesdale Financial Services. Barclaycard also manages card
operations on behalf of Solution Personal Finance.
Outside the UK, Barclaycard provides credit cards in the United States, Germany,
Spain, Italy, Portugal and a number of other countries. In the Nordic region,
Barclaycard operates through Entercard, a joint venture with ForeningsSparbanken
(Swedbank). Barclaycard has successfully launched the Manchester United affinity
credit card in 11 countries across Asia Pacific, Africa, Europe and in the
United States.
Barclaycard Business processes card payments for retailers and merchants and
issues credit and charge cards to corporate customers and the UK government.
Barclaycard works closely with other parts of the Group, including UK Retail
Banking, UK Business Banking and International Retail and Commercial Banking, to
leverage their distribution capabilities.
International Retail and Commercial Banking
International Retail and Commercial Banking provides Barclays international
personal and corporate customers with banking services. The products and
services offered to customers are tailored to meet the regulatory and commercial
environments within each country. For reporting purposes from 2005, the
operations have been grouped into two components: International Retail and
Commercial Banking - excluding Absa and International Retail and Commercial
Banking - Absa.
As announced on 29th June 2006, Barclays has now entered into a definitive
agreement with Canadian Imperial Bank of Commerce for the sale of its 43.7%
shareholding in FirstCaribbean International Bank Limited, which is expected to
complete by the end of 2006.
International Retail and Commercial Banking works closely with all other parts
of the Group to leverage synergies from product and service propositions.
International Retail and Commercial Banking - excluding Absa
International Retail and Commercial Banking - excluding Absa provides a range of
banking services, including current accounts, savings, investments, mortgages
and loans to personal and corporate customers across Spain, Portugal, France,
Italy, the Caribbean, Africa and the Middle East.
International Retail and Commercial Banking - Absa
International Retail and Commercial Banking - Absa represents Barclays
consolidation of Absa, excluding Absa Capital which is included as part of
Barclays Capital. Absa Group Limited is one of South Africa's largest financial
services organisations serving personal, commercial and corporate customers
predominantly in South Africa. International Retail and Commercial Banking -
Absa serves retail customers through a variety of distribution channels and
offers a full range of banking services, including basic bank accounts,
mortgages, instalment finance, credit cards, bancassurance products and wealth
management services; it also offers customised business solutions for commercial
and large corporate customers.
Barclays Capital
Barclays Capital is a leading global investment bank which provides large
corporate, institutional and government clients with solutions to their
financing and risk management needs.
Barclays Capital services a wide variety of client needs, from capital raising
and managing foreign exchange, interest rate, equity and commodity risks,
through to providing technical advice and expertise. Activities are organised
into three principal areas: Rates, which includes fixed income, foreign
exchange, commodities, emerging markets, money markets, sales, trading and
research, prime services and equity products; Credit, which includes primary and
secondary activities for loans and bonds for investment grade, high yield and
emerging market credit, as well as hybrid capital products, asset based finance,
commercial mortgage backed securities, credit derivatives, structured capital
markets and large asset leasing; and Private Equity. Barclays Capital includes
Absa Capital, the investment banking business of Absa.
Barclays Global Investors
Barclays Global Investors (BGI) is one of the world's largest asset managers and
a leading global provider of investment management products and services.
BGI offers structured investment strategies such as indexing, global asset
allocation and risk-controlled active products, including hedge funds. BGI also
provides related investment services such as securities lending, cash management
and portfolio transition services. In addition, BGI is the global leader in
assets and products in the exchange traded funds business, with over 150 funds
for institutions and individuals trading in thirteen markets globally. BGI's
investment philosophy focuses on the three dimensions of performance; return,
risk and cost, offering clients total performance management.
Wealth Management
Wealth Management serves affluent, high net worth and intermediary clients
worldwide, providing private banking, asset management, stockbroking, offshore
banking, wealth structuring and financial planning services.
Wealth Management works closely with all other parts of the Group to leverage
synergies from client relationships and product capabilities.
Wealth Management - closed life assurance activities
Wealth Management - closed life assurance activities comprise the closed life
assurance businesses of Barclays and Woolwich in the UK.
Head office functions and other operations
Head office functions and other operations comprise:
- Head office and central support functions
- Businesses in transition
- Consolidation adjustments.
Head office and central support functions comprise the following areas:
Executive Management, Finance, Treasury, Corporate Affairs, Human Resources,
Strategy and Planning, Internal Audit, Legal, Corporate Secretariat, Property,
Tax, Compliance and Risk. Costs incurred wholly on behalf of the businesses are
recharged to them.
Businesses in transition principally relate to certain lending portfolios that
are centrally managed with the objective of maximising recovery from the assets.
Consolidation adjustments largely reflect the elimination of inter-segment
transactions.
Group reporting changes in 2006 (see page 70)
Barclays announced on 16th June 2006 the impact of certain changes in Group
structure and reporting on the 2005 and 2004 results.
Barclays has realigned a number of reportable business segments based on the
reorganisation of certain portfolios to better reflect the type of client
served, the nature of the products offered and the associated risks and rewards.
The Group's policy for the internal cost of funding and the segmental disclosure
of risk weighted assets were also revised with effect from 1st January 2006. The
resulting restatements had no impact on the Group Income Statement or Balance
Sheet.
The figures in this document for the six months ended 30th June 2006 and the
comparatives for the prior periods reflect the new structure.
SUMMARY OF RESULTS (UNAUDITED)
Analysis of profit attributable to equity holders of the parent
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
UK Banking 1,265 1,062 1,138
-------- -------- --------
UK Retail Banking 612 492 548
UK Business Banking 653 570 590
-------- -------- --------
Barclaycard 297 294 346
International Retail and Commercial
Banking 539 459 174
-------- -------- --------
International Retail and Commercial
Banking - ex Absa 222 161 174
International Retail and Commercial
Banking - Absa 317 298 -
-------- -------- --------
Barclays Capital 1,246 681 750
Barclays Global Investors 364 299 241
Wealth Management 110 82 84
Wealth Management - closed life
assurance activities 9 (4) (3)
Head office functions and other
operations (157) (283) (40)
-------- -------- --------
Profit before tax 3,673 2,590 2,690
Tax (1,072) (724) (715)
-------- -------- --------
Profit for the period 2,601 1,866 1,975
Profit attributable to minority
interests (294) (260) (134)
-------- -------- --------
Profit attributable to equity holders
of the parent 2,307 1,606 1,841
-------- -------- --------
TOTAL ASSETS AND RISK WEIGHTED ASSETS
Total assets
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
UK Banking 134,391 130,304 129,093
-------- -------- --------
UK Retail Banking 70,906 70,389 71,476
UK Business Banking 63,485 59,915 57,617
-------- -------- --------
Barclaycard 26,604 25,771 24,166
International Retail and Commercial Banking 65,132 63,556 29,985
-------- -------- --------
International Retail and Commercial Banking
- ex Absa 35,832 34,195 29,985
International Retail and Commercial Banking
- Absa 29,300 29,361 -
-------- -------- --------
Barclays Capital 659,328 601,193 573,131
Barclays Global Investors 77,298 80,900 68,877
Wealth Management 6,841 6,094 5,843
Wealth Management - closed life assurance
activities 7,243 7,276 6,653
Head office functions and other operations 9,287 9,263 12,375
-------- -------- --------
986,124 924,357 850,123
-------- -------- --------
Risk weighted assets
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
UK Banking 84,625 79,929 83,554
-------- -------- --------
UK Retail Banking 33,841 32,803 37,129
UK Business Banking 50,784 47,126 46,425
-------- -------- --------
Barclaycard 23,968 21,752 21,335
International Retail and Commercial Banking 42,081 41,228 18,900
-------- -------- --------
International Retail and Commercial Banking
- ex Absa 21,408 20,394 18,900
International Retail and Commercial Banking
- Absa 20,673 20,834 -
-------- -------- --------
Barclays Capital 130,533 116,677 107,201
Barclays Global Investors 1,378 1,456 1,408
Wealth Management 4,915 4,061 4,457
Wealth Management - closed life assurance
activities - - -
Head office functions and other operations 3,424 4,045 5,551
-------- -------- --------
290,924 269,148 242,406
-------- -------- --------
Further analysis of total assets and risk weighted assets, can be found on page
61.
UK Banking
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net interest income 1,959 1,960 1,784
Net fee and commission income 919 879 841
-------- -------- --------
Net trading income 2 2 (2)
Net investment income 17 9 17
-------- -------- --------
Principal transactions 19 11 15
Net premiums from insurance contracts 135 139 141
Other income 2 13 20
-------- -------- --------
Total income 3,034 3,002 2,801
Net claims and benefits on insurance
contracts (26) (25) (33)
-------- -------- --------
Total income net of insurance claims 3,008 2,977 2,768
Impairment charges (198) (188) (139)
-------- -------- --------
Net income 2,810 2,789 2,629
-------- -------- --------
Operating expenses excluding
amortisation of intangible assets (1,546) (1,728) (1,484)
Amortisation of intangible assets (1) (2) (1)
-------- -------- --------
Operating expenses (1,547) (1,730) (1,485)
Share of post-tax results of
associates 2 3 (6)
and joint ventures -------- -------- --------
Profit before tax 1,265 1,062 1,138
-------- -------- --------
Cost:income ratio 51% 58% 54%
Cost:net income ratio 55% 62% 57%
Risk Tendency GBP470m GBP430m GBP400m
Return on average economic capital 36% 33% 33%
Economic profit GBP641m GBP577m GBP553m
As at
30.06.06 31.12.05 30.06.05
Loans and advances to customers GBP120.6bn GBP118.2bn GBP117.1bn
Customer accounts GBP136.0bn GBP129.7bn GBP126.8bn
Total assets GBP134.4bn GBP130.3bn GBP129.1bn
Risk weighted assets GBP84.6bn GBP79.9bn GBP83.6bn
Key Facts
Number of UK branches 2,014 2,029 2,053
UK Banking profit before tax increased 11% (GBP127m) to GBP1,265m (2005:
GBP1,138m) driven by good income growth, partly offset by higher impairment
charges and costs. Gains from the sale and leaseback of properties of GBP145m
included in operating expenses were largely offset by GBP114m of incremental
investment expenditure undertaken to accelerate the development of UK Retail
Banking.
UK Banking has targeted a cost:income ratio reduction of two percentage points
per annum in each of 2005, 2006 and 2007. This was exceeded in 2005 as the cost:
income ratio improved by three percentage points to 56% for the year. Good
progress has been made in delivering the 2006 cost:income ratio reduction and in
the first half of 2006 a year-on-year improvement of three percentage points was
achieved.
UK Retail Banking
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net interest income 1,137 1,158 1,050
Net fee and commission income 608 572 559
-------- -------- --------
Net trading income - - -
Net investment income - - 9
-------- -------- --------
Principal transactions - - 9
Net premiums from insurance contracts 135 139 141
Other income - 4 12
-------- -------- --------
Total income 1,880 1,873 1,771
Net claims and benefits on insurance
contracts (26) (25) (33)
-------- -------- --------
Total income net of insurance claims 1,854 1,848 1,738
Impairment charges (98) (75) (75)
-------- -------- --------
Net income 1,756 1,773 1,663
Operating expenses (1,144) (1,282) (1,108)
Share of post-tax results of associates
and joint ventures - 1 (7)
-------- -------- --------
Profit before tax 612 492 548
-------- -------- --------
Cost:income ratio 62% 69% 64%
Cost:net income ratio 65% 72% 67%
Risk Tendency GBP195m GBP180m GBP170m
Return on average economic capital 36% 37% 33%
Economic profit GBP314m GBP316m GBP270m
As at
30.06.06 31.12.05 30.06.05
Loans and advances to customers GBP65.0bn GBP64.8bn GBP66.0bn
Customer accounts GBP81.7bn GBP78.8bn GBP75.4bn
Total assets GBP70.9bn GBP70.4bn GBP71.5bn
Risk weighted assets GBP33.8bn GBP32.8bn GBP37.1bn
Key Facts
Personal Customers
--------------------
Number of UK current accounts 11.3m 11.1m 10.9m
Number of UK savings accounts 10.9m 10.8m 10.7m
Total UK mortgage balances (residential) GBP59.3bn GBP59.6bn GBP61.0bn
Number of household insurance policies 727,000 616,000 590,000
Local Business and UK Premier
-------------------------------
Number of Local Business customers 641,000 630,000 617,000
Number of UK Premier customers 293,000 286,000 280,000
UK Retail Banking profit before tax increased 12% (GBP64m) to GBP612m
(2005: GBP548m).
Total income net of insurance claims increased 7% (GBP116m) to GBP1,854m (2005:
GBP1,738m), demonstrating continued momentum. The improvement was broadly based
across business segments and income categories. There was strong growth in Local
Business, UK Premier and Personal Customers retail savings.
Net interest income increased 8% (GBP87m) to GBP1,137m (2005: GBP1,050m).
Growth was driven by higher contributions from Local Business, UK Premier and
Personal Customers retail savings.
UK residential mortgage balances ended the period at GBP59.3bn (31st December
2005: GBP59.6bn). Gross advances were 43% higher at GBP7.3bn (31st December
2005: GBP5.1bn), which represented a market share of 5% (2005: 4%) but this was
offset by redemptions. Mortgage applications, by value, were 67% higher than
last year and reflected the launch of new competitive products in a stronger
market, supported by greater promotion, as well as improved capacity and
servicing. Mortgage servicing was brought back in-house with the termination
of an outsourcing arrangement taking effect in February 2006. Significant
progress has been made since then in improving processing efficiency. The
average loan to value ratio within the mortgage book on a current valuation
basis was 34% (2005: 34%).
In non-mortgage loans, Local Business average loans and advances balances
increased 15%, and UK Premier average loans and advances balances increased 34%.
The assets margin improved slightly to 0.86% (2005: 0.83%) reflecting a broadly
stable mortgage margin, despite the impact of new product launches and a higher
contribution from non-mortgage assets.
Total average customer deposit balances increased 8% to GBP77.6bn (2005:
GBP72.1bn). Good growth was achieved in Local Business and in UK Premier where
average balances increased 8% and 9% respectively. Within Personal Customers,
retail savings average balance growth was 8% and current account average
balances increased 5%. The liabilities margin was broadly stable at 1.98%
(2005: 2.01%).
Net fee and commission income increased 9% (GBP49m) to GBP608m (2005: GBP559m).
There was strong growth in current account and debit card fees. Local Business
delivered strong growth, driven by increased income from current accounts. There
was also strong growth from UK Premier, reflecting higher income from investment
advice and banking services.
Net premiums from insurance underwriting activities decreased to GBP135m (2005:
GBP141m), reflecting lower consumer loan volumes and reduced take-up of
insurance on these loans.
Impairment charges increased 31% (GBP23m) to GBP98m (2005: GBP75m). The increase
was driven by strong volume growth and some deterioration in delinquency rates
in the Local Business loan portfolio. Losses from the mortgage portfolio
remained negligible, with arrears at low levels and broadly stable compared
with the year-end 2005 position.
Operating expenses increased 3% (GBP36m) to GBP1,144m (2005: GBP1,108m). Gains
from the sale and leaseback of property of GBP116m were largely offset by
incremental investment expenditure to bring forward planned improvements in
operating efficiency and customer service. This included the costs associated
with enhancing the Woolwich brand, improving the branch network and
streamlining and re-engineering back office processes, as recently announced,
as well as additional investment in technology deployed in branches and
restructuring costs. The cost:income ratio improved two percentage points to
62% (2005: 64%).
UK Business Banking
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net interest income 822 802 734
Net fee and commission income 311 307 282
--------- --------- ---------
Net trading income 2 2 (2)
Net investment income 17 9 8
--------- --------- ---------
Principal transactions 19 11 6
Other income 2 9 8
--------- --------- ---------
Total income 1,154 1,129 1,030
Impairment charges (100) (113) (64)
--------- --------- ---------
Net income 1,054 1,016 966
--------- --------- ---------
Operating expenses excluding
amortisation of intangible assets (402) (446) (376)
Amortisation of intangible assets (1) (2) (1)
--------- --------- ---------
Operating expenses (403) (448) (377)
Share of post-tax results of
associates 2 2 1
and joint ventures --------- --------- ---------
Profit before tax 653 570 590
--------- --------- ---------
Cost:income ratio 35% 40% 37%
Cost:net income ratio 38% 44% 39%
Risk Tendency GBP275m GBP250m GBP230m
Return on average economic capital 35% 30% 33%
Economic profit GBP327m GBP261m GBP283m
As at
30.06.06 31.12.05 30.06.05
Loans and advances to customers GBP55.6bn GBP53.4bn GBP51.1bn
Customer accounts GBP54.3bn GBP50.9bn GBP51.4bn
Total assets GBP63.5bn GBP59.9bn GBP57.6bn
Risk weighted assets GBP50.8bn GBP47.1bn GBP46.5bn
Key Facts
Total number of Business Banking
customers 147,000 144,000 144,000
UK Business Banking profit before tax increased 11% (GBP63m) to GBP653m (2005:
GBP590m), driven by strong income growth. Performance was particularly strong in
Larger Business. The first half of 2006 included an GBP11m contribution for a
full six months from Iveco Finance, in which a 51% stake was acquired on 1st
June 2005. Iveco Finance is performing in line with the acquisition business
plan.
Total income increased 12% (GBP124m) to GBP1,154m (2005: GBP1,030m), with the
increase being broadly based and driven by strong balance sheet growth.
Net interest income increased 12% (GBP88m) to GBP822m (2005: GBP734m) largely
driven by growth in the loan portfolio.
Average lending balances increased 21% to GBP51.1bn (2005: GBP42.1bn), with good
contributions from all business areas and a stable lending margin. Iveco Finance
contributed GBP1.6bn of the growth in average lending balances. Average deposit
balances increased 11% to GBP43.7bn (2005: GBP39.2bn) with good growth from both
Larger Business and Medium Business. The deposit margin experienced some
compression, although it improved relative to the second half of 2005.
Net fee and commission income increased 10% (GBP29m) to GBP311m (2005: GBP282m),
principally from foreign exchange and derivative business transacted through
Barclays Capital on behalf of a number of business customers.
Income from principal transactions was GBP19m (2005: GBP6m), relating
principally to profit realised on the sale of three equity investments.
Impairment charges increased 56% (GBP36m) to GBP100m (2005: GBP64m). The
increase in impairment reflected the growth in lending balances and the
inclusion of Iveco Finance.
Operating expenses increased 7% (GBP26m) to GBP403m (2005: GBP377m) reflecting
volume growth, increased expenditure on front line staff, higher revenue
related costs and the inclusion of Iveco Finance. Operating expenses include a
credit of GBP29m on the sale and leaseback of property. The cost:income ratio
improved two percentage points to 35% (2005: 37%).
Barclaycard
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net interest income 914 896 830
Net fee and commission income 533 518 454
Net investment income 15 - -
Net premiums from insurance contracts 15 14 10
-------- -------- --------
Total income 1,477 1,428 1,294
Net claims and benefits on insurance
contracts (6) (5) (2)
-------- -------- --------
Total income net of insurance claims 1,471 1,423 1,292
Impairment charges (696) (590) (508)
-------- -------- --------
Net income 775 833 784
-------- -------- --------
Operating expenses excluding
amortisation of intangible assets (471) (531) (430)
Amortisation of intangible assets (8) (8) (9)
-------- -------- --------
Operating expenses (479) (539) (439)
Share of post-tax results of associates
and joint ventures 1 - 1
-------- -------- --------
Profit before tax 297 294 346
-------- -------- --------
Cost:income ratio 33% 38% 34%
Cost:net income ratio 62% 65% 56%
Risk Tendency GBP1,340m GBP1,100m GBP980m
Return on average economic capital 13% 14% 18%
Economic profit GBP55m GBP68m GBP115m
As at
30.06.06 31.12.05 30.06.05
Loans and advances to customers GBP24.8bn GBP24.0bn GBP23.1bn
Total assets GBP26.6bn GBP25.8bn GBP24.2bn
Risk weighted assets GBP24.0bn GBP21.8bn GBP21.3bn
Key Facts
Number of Barclaycard UK customers 11.2m 11.2m 11.2m
Number of retailer relationships 95,000 93,000 92,000
UK credit cards - average outstanding balances GBP9.6bn GBP10.1bn GBP10.2bn
UK credit cards - average extended credit balances GBP8.2bn GBP8.6bn GBP8.8bn
UK loans - average consumer lending balances GBP11.6bn GBP10.3bn GBP9.9bn
International - average extended credit balances GBP2.3bn GBP1.8bn GBP1.7bn
International - cards in issue 5.3m 4.3m 3.7m
Barclaycard profit before tax decreased 14% (GBP49m) to GBP297m (2005: GBP346m)
as strong income growth was more than offset by higher impairment charges and
increased costs from the continued development of the International businesses.
Total income net of insurance claims increased 14% (GBP179m) to GBP1,471m (2005:
GBP1,292m) driven by good performances across the diversified UK cards and
consumer loans businesses and Barclaycard Business, and by very strong momentum
in international cards.
Net interest income increased 10% (GBP84m) to GBP914m (2005: GBP830m). UK
average extended credit card balances fell 7% to GBP8.2bn (2005: GBP8.8bn),
reflecting lower promotional rate balances and tighter lending criteria. UK
average consumer lending balances increased 17% to GBP11.6bn (2005: GBP9.9bn).
International average extended credit card balances rose 35% to GBP2.3bn (2005:
GBP1.7bn). Margins in credit cards improved in the first half of 2006 to 8.78%
(2005: 7.56%), due to the impact of increased card rates and a reduced
proportion of promotional rate balances in the UK. Margins in consumer lending
fell to 4.34% (2005: 5.15%), due to continued competitive pressures and a change
in the product mix, with a higher weighting to secured lending in FirstPlus.
Net fee and commission income increased 17% (GBP79m) to GBP533m (2005: GBP454m)
as a result of increased contributions from SkyCard, FirstPlus, Barclaycard
Business and Barclaycard International.
Investment income of GBP15m represents the proceeds arising from the sale of
part of the stake in MasterCard Inc, as part of its flotation.
Impairment charges increased 37% (GBP188m) to GBP696m (2005: GBP508m). Relative
to the second half of 2005, impairment charges increased 18%. The increase was
driven by a rise in delinquent balances, increased numbers of bankruptcies and
lower rates of recovery from customers in the UK cards and loans businesses.
The rise in delinquent balances is reflected in a significant increase in
non-performing loans.
Operating expenses increased 9% (GBP40m) to GBP479m (2005: GBP439m), which
included a gain from the sale and leaseback property of GBP38m. Excluding this
gain, underlying operating expenses increased 18% (GBP78m) to GBP517m largely
as a result of the continued investment in Barclaycard US and the development
of the UK Partnerships business.
Barclaycard International continued its growth strategy, with the continental
European businesses delivering excellent results and the Swedbank joint venture
performing in line with its business plan. Barclaycard International loss before
tax increased to GBP4m (2005: loss GBP3m). The loss before tax for Barclaycard
US was GBP21m (2005: loss GBP13m). The performance and integration of
Barclaycard US proceeded in line with expectations, with continued strong
growth in balances and customer numbers and the creation of a number of new
partnerships.
International Retail and Commercial Banking
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net interest income 847 776 274
Net fee and commission income 669 534 171
-------- -------- --------
Net trading income 3 (3) 6
Net investment income 47 76 67
-------- -------- --------
Principal transactions 50 73 73
Net premiums from insurance contracts 174 167 60
Other income 34 46 14
-------- -------- --------
Total income 1,774 1,596 592
Net claims and benefits on insurance
contracts (119) (120) (85)
-------- -------- --------
Total income net of insurance claims 1,655 1,476 507
Impairment charges (68) (24) (8)
-------- -------- --------
Net income 1,587 1,452 499
-------- -------- --------
Operating expenses excluding
amortisation of intangible assets (1,030) (974) (343)
Amortisation of intangible assets (45) (45) (2)
-------- -------- --------
Operating expenses (1,075) (1,019) (345)
Share of post-tax results of
associates and joint ventures 27 26 20
-------- -------- --------
Profit before tax 539 459 174
-------- -------- --------
Cost:income ratio 65% 69% 68%
Cost:net income ratio 68% 70% 69%
Risk Tendency GBP195m GBP175m GBP75m
Return on average economic capital 30% 24% 22%
Economic profit GBP187m GBP135m GBP70m
As at
30.06.06 31.12.05 30.06.05
Loans and advances to customers GBP50.4bn GBP49.3bn GBP21.7bn
Customer accounts GBP23.0bn GBP22.6bn GBP9.6bn
Total assets GBP65.1bn GBP63.6bn GBP30.0bn
Risk weighted assets GBP42.1bn GBP41.2bn GBP18.9bn
Key Facts
Number of international branches 1,542 1,516 799
International Retail and Commercial Banking profit before tax increased GBP365m
to GBP539m (2005: GBP174m). The increase reflected the inclusion of
International Retail and Commercial Banking - Absa profit before tax of GBP317m
for 2006 and strong underlying organic growth in Europe.
International Retail and Commercial Banking - excluding Absa
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net interest income 296 288 274
Net fee and commission income 226 206 171
-------- -------- --------
Net trading income 12 25 6
Net investment income 29 21 67
-------- -------- --------
Principal transactions 41 46 73
Net premiums from insurance contracts 50 69 60
Other income 14 9 14
-------- -------- --------
Total income 627 618 592
Net claims and benefits on insurance
contracts (65) (76) (85)
-------- -------- --------
Total income net of insurance claims 562 542 507
Impairment charges (16) (5) (8)
-------- -------- --------
Net income 546 537 499
-------- -------- --------
Operating expenses excluding
amortisation of intangible assets (341) (391) (343)
Amortisation of intangible assets (4) (4) (2)
-------- -------- --------
Operating expenses (345) (395) (345)
Share of post-tax results of associates
and joint ventures 21 19 20
-------- -------- --------
Profit before tax 222 161 174
-------- -------- --------
Cost:income ratio 61% 73% 68%
Cost:net income ratio 63% 74% 69%
Risk Tendency GBP70m GBP75m GBP75m
Return on average economic capital 26% 17% 22%
Economic profit GBP94m GBP45m GBP70m
As at
30.06.06 31.12.05 30.06.05
Loans and advances to customers GBP27.0bn GBP25.4bn GBP21.7bn
Customer accounts GBP10.9bn GBP10.4bn GBP9.6bn
Total assets GBP35.8bn GBP34.2bn GBP30.0bn
Risk weighted assets GBP21.4bn GBP20.4bn GBP18.9bn
Key Facts
Number of international branches 815 798 799
Number of Barclays Africa and Middle 1.3m 1.3m 1.3m
East customer accounts
Number of Barclays Europe customers 801,000 800,000 760,000
Number of European mortgage customers 232,000 221,000 206,000
European mortgages - average balances (Euros) EUR24.9bn EUR21.2bn EUR19.9bn
European assets under management (Euros) EUR23.8bn EUR22.6bn EUR19.5bn
International Retail and Commercial Banking - excluding Absa performed well,
with profit before tax increasing 28% (GBP48m) to GBP222m (2005: GBP174m). The
performance was broad based, with stronger underlying profits in all
geographies. Underlying profit before tax, excluding gains from asset sales in
2006 and 2005 increased 17% (GBP24m) to GBP167m (2005: GBP143m).
Total income net of insurance claims increased 11% (GBP55m) to GBP562m (2005:
GBP507m). Underlying income increased 18% (GBP86m) to GBP562m (2005: GBP476m).
Net interest income increased 8% (GBP22m) to GBP296m (2005: GBP274m), reflecting
strong balance sheet growth in continental Europe, Africa and the Middle East,
and the development of the corporate business in Spain.
Total average customer loans increased 25% to GBP26.2bn (2005: GBP20.9bn).
Mortgage balance growth in continental Europe was particularly strong, with
average Euro balances up 25%. Growth in European mortgages as a proportion of
total balances and competitive pressures in key European markets contributed to
lower lending margins. Average customer deposits increased 12% to GBP10.2bn
(2005: GBP9.1bn), with deposit margins rising modestly.
Net fee and commission income increased 32% (GBP55m) to GBP226m (2005: GBP171m).
This reflected a strong performance from the Spanish funds business, where
average assets under management increased 14%, together with good growth in
France, including the contribution of the ING Ferri business which was acquired
on 1st July 2005. Net fee and commission income showed solid growth in Africa
and the Middle East.
Principal transactions reduced to GBP41m (2005: GBP73m), which in 2005 included
GBP23m from the redemption of preference shares in FirstCaribbean
InternationalBank.
Impairment charges increased to GBP16m (2005: GBP8m), principally as a result
of the absence in 2006 of one-off recoveries which arose in 2005 in Africa and
the Middle East.
Operating expenses were flat at GBP345m, including gains from the sale and
leaseback of property in Spain of GBP55m. Excluding these gains, underlying
operating expenses increased 16% to GBP400m (2005: GBP345m). The increase was
below the growth in underlying income, and reflected the continued expansion of
the business in Africa and the Middle East, investments in the European
distribution network, particularly in Portugal and Italy, and the acquisition
of the ING Ferri business in France.
Barclays Spain continued to perform strongly. Profit before tax increased 25%
(GBP17m) to GBP86m (2005: GBP69m), excluding one off gains on asset sales of
GBP55m (2005: GBP8m) and integration costs of GBP16m (2005: GBP28m). This was
driven by the continued realisation of benefits from the integration of Banco
Zaragozano, together with good growth in mortgages and assets under management.
Profit before tax also increased strongly in Portugal reflecting good flows of
new customers and increased business volumes. France performed well as a result
of good organic growth and the acquisition of ING Ferri.
Africa and the Middle East profit before tax was in line with prior year at
GBP62m (2005: GBP62m). This reflected balance sheet growth across the
businesses offset by continued investment and higher impairment charges as a
result of the absence of one off recoveries that arose in 2005.
The share of post tax profits from associates increased GBP1m to GBP21m
(2005: GBP20m) reflecting an increased contribution from FirstCaribbean.
International Retail and Commercial Banking - Absa
Half-year Period from
ended 27.07.05 until
30.06.06 31.12.05(1)
GBPm GBPm
Net interest income 551 488
Net fee and commission income 443 328
--------- ---------
Net trading income (9) (28)
Net investment income 18 55
--------- ---------
Principal transactions 9 27
Net premiums from insurance contracts 124 98
Other income 20 37
--------- ---------
Total income 1,147 978
Net claims and benefits on insurance contracts (54) (44)
--------- ---------
Total income net of insurance claims 1,093 934
Impairment charges (52) (19)
--------- ---------
Net income 1,041 915
--------- ---------
Operating expenses excluding amortisation of
intangible assets (689) (583)
Amortisation of intangible assets (41) (41)
--------- ---------
Operating expenses (730) (624)
Share of post-tax results of associates and joint
ventures 6 7
--------- ---------
Profit before tax 317 298
--------- ---------
Cost:income ratio 67% 67%
Cost:net income ratio 70% 68%
Risk Tendency GBP125m GBP100m
Return on average economic capital 37% 36%
Economic profit GBP93m GBP90m
As at
30.06.06 31.12.05
Loans and advances to customers GBP23.4bn GBP23.9bn
Customer accounts GBP12.1bn GBP12.2bn
Total assets GBP29.3bn GBP29.4bn
Risk weighted assets GBP20.7bn GBP20.8bn
Key Facts
Number of branches 727 718
Number of ATMs 6,256 5,835
Number of retail customers 8.0m 7.6m
Number of corporate customers 80,000 79,000
(1) Barclays acquired a controlling stake in Absa Group Limited on 27th July
2005.
The comparable period referred to below, for illustrative purposes only, is the
six months to 30th June 2005. Barclays acquired a controlling stake in Absa
Group Limited on 27th July 2005. A summary of Absa Group Limited's results for
the six months to 30th June 2006 is included in the Appendix on page 92(1).
Absa Group Limited's profit before tax increased 16% reflecting very good
performances from banking operations which were well spread across all business
segments. Absa's bancassurance offering was negatively affected by increased
equity market volatility.
Net interest income grew strongly as credit demand remained strong. Growth in
loans and advances to customers was driven by mortgages and credit cards.
Margins contracted modestly reflecting an increased reliance on wholesale
funding as well as increased competition.
Growth in non-interest income reflected increased retail transaction volumes,
partially offset by the closure of the Absa Group's international operations
outside Africa and lower fair value gains in respect of the listed equity
portfolio.
Impairment charges grew, largely within Absa Home Loans and Retail Banking
Services. The ratio of non-performing loans to total advances continued to
improve.
Operating expenses increased, principally due to the further expansion of the
Absa branch and ATM network and regulatory and compliance expenditure.
We are making good progress with integration and the realisation of synergy
benefits.
(1) Absa Group's interim reporting period has changed from the six months ended
30th September to the six months ended 30th June. This change was necessitated
by the need to align Absa's financial reporting with that of Barclays. To
facilitate evaluation and interpretation, these results are compared with
unaudited proforma results for the six months ended 30th June 2005.
Barclays Capital
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net interest income 495 540 525
Net fee and commission income 516 403 373
-------- -------- --------
Net trading income 2,139 1,116 1,115
Net investment income 277 253 160
-------- -------- --------
Principal transactions 2,416 1,369 1,275
Other income 10 12 8
-------- -------- --------
Total income 3,437 2,324 2,181
Impairment charges (70) (59) (52)
-------- -------- --------
Net income 3,367 2,265 2,129
-------- -------- --------
Operating expenses excluding
amortisation of intangible assets (2,120) (1,583) (1,378)
Amortisation of intangible assets (1) (1) (1)
-------- -------- --------
Operating expenses (2,121) (1,584) (1,379)
-------- -------- --------
Profit before tax 1,246 681 750
-------- -------- --------
Cost:income ratio 62% 68% 63%
Cost:net income ratio 63% 70% 65%
Risk Tendency GBP125m GBP110m GBP80m
Return on average economic capital 47% 30% 38%
Average net income generated per
member GBP330 GBP242 GBP259
of staff ('000)
Economic profit GBP671m GBP323m GBP383m
As at
30.06.06 31.12.05 30.06.05
Total assets GBP659.3bn GBP601.2bn GBP573.1bn
Risk weighted assets GBP130.5bn GBP116.7bn GBP107.2bn
Key Facts(1) 30.06.06 30.06.05
League League
table Issuance table Issuance
position value position value
All international bonds (all 2nd $111.0bn 4th $96.0bn
currencies)
Sterling bonds 2nd GBP10.9bn 2nd GBP8.3bn
International securitisations 4th $16.5bn 9th $10.7bn
US investment grade bonds 7th $3.2bn 4th $5.1bn
(1) League tables compiled by Barclays Capital from external sources including
Dealogic and Thomson Financial.
Barclays Capital delivered record profit before tax and net income. Profit
before tax increased 66% (GBP496m) to GBP1,246m (2005: GBP750m). This was the
result of the very strong income performance which was driven by higher business
volumes and client activity levels. Net income increased 58% (GBP1,238m) to
GBP3,367m (2005: GBP2,129m). Profit before tax for Absa Capital was GBP45m.
Excluding Absa Capital, profit before tax increased by 60%.
Total income increased 58% (GBP1,256m) to GBP3,437m (2005: GBP2,181m) as a
result of very strong growth across the Rates and Credit businesses. Income
grew across all asset classes, in particular interest rate products, equity
products, currency products, emerging markets, credit products and commodities.
Income by geography was well spread with significant contributions from the US,
Europe and Asia. The top line performance reflects returns from past
investments and the strength of the client franchise. Average DVaR grew to
GBP36m (2005: GBP30m) well below the rate of income growth.
Secondary income, comprising principal transactions (net trading income and net
investment income) and net interest income, is mainly generated from providing
client financing and risk management solutions. Secondary income increased 62%
(GBP1,111m) to GBP2,911m (2005: GBP1,800m).
Net trading income increased 92% (GBP1,024m) to GBP2,139m (2005: GBP1,115m)
with very strong contributions across the Rates and Credit businesses, in
particular equities, commodities, fixed income and credit derivatives. These
results were driven by higher volumes of client led activity and favourable
market conditions. Net investment income increased 73% (GBP117m) to GBP277m
(2005: GBP160m) driven by investment realisations, primarily in Private Equity
and structured capital markets. Net interest income decreased 6% (GBP30m) to
GBP495m (2005: GBP525m) driven by lower contributions from money markets.
Primary income, which comprises net fee and commission income from advisory and
origination activities, grew 38% (GBP143m) to GBP516m (2005: GBP373m). This
reflected higher volumes and continued market share gains in a number of key
markets, with strong contributions from bonds, European leveraged loans and
convertibles issuances.
Impairment charges of GBP70m relate primarily to impairment charges on available
for sale assets of GBP83m, partially offset by recoveries in the loan portfolio.
The impairment charge on available for sale assets arose where an intention to
sell caused losses in the available for sale portfolio to be treated as other
than temporary in nature. The impairment charge arose from interest rate
movements rather than credit deterioration. There is a corresponding gain
recognised in net trading income.
Operating expenses increased 54% (GBP742m) to GBP2,121m (2005: GBP1,379m),
reflecting higher performance related costs due to strong results. The cost:net
income ratio improved to 63% (2005: 65%). Staff costs to net income ratio
improved to 51% (2005: 52%). Compared with the first half of 2005, performance
related pay, discretionary investment spend and short-term contractor resource
represented a higher proportion of operating expenses of 54% (2005: 46%).
Total headcount increased by 600 during the first half of 2006 to 10,500 (31st
December 2005: 9,900). Growth was broadly based across all regions and reflected
further investments in the front office, systems development and control
functions to support greater business volumes.
Barclays Global Investors
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net interest income 7 9 6
Net fee and commission income 837 727 570
-------- -------- --------
Net trading income 1 - 2
Net investment income - - 4
-------- -------- --------
Principal transactions 1 - 6
-------- -------- --------
Total income 845 736 582
-------- -------- --------
Operating expenses excluding
amortisation of intangible assets (479) (435) (340)
Amortisation of intangible assets (2) (2) (2)
-------- -------- --------
Operating expenses (481) (437) (342)
Share of post-tax results of associates
and joint ventures - - 1
-------- -------- --------
Profit before tax 364 299 241
-------- -------- --------
Cost:income ratio 57% 59% 59%
Average net income generated per member
of staff ('000) GBP360 GBP330 GBP298
Return on average economic capital 260% 282% 214%
Economic profit GBP195m GBP170m GBP129m
As at
30.06.06 31.12.05 30.06.05
Total assets GBP77.3bn GBP80.9bn GBP68.9bn
Risk weighted assets GBP1.4bn GBP1.5bn GBP1.4bn
Key Facts
Number of institutional clients 2,800 2,800 2,700
Assets under management:
-indexed GBP571bn GBP586bn GBP517bn
-active GBP199bn GBP198bn GBP169bn
-managed cash and other GBP107bn GBP97bn GBP95bn
Total assets under management GBP877bn GBP881bn GBP781bn
Total assets under management (US$) $1,623bn $1,513bn $1,401bn
Net new assets in period GBP17bn GBP19bn GBP29bn
Net new assets in period (US$) $30bn $27bn $61bn
Number of iShares products 164 149 135
Total iShares assets under management(1) GBP124bn GBP113bn GBP84bn
(1) Included in indexed assets.
Barclays Global Investors (BGI) delivered excellent growth in profit before tax,
increasing 51% (GBP123m) to GBP364m (2005: GBP241m), reflecting exceptionally
strong income growth. The performance was broad-based by products, distribution
channels and geographies.
Net fee and commission income increased 47% (GBP267m) to GBP837m
(2005: GBP570m). The very strong income performance was attributable to
increased management and incentive fees, particularly in the iShares and active
businesses. Incentive fees increased 41% (GBP31m) to GBP107m (2005: GBP76m).
Higher asset values, driven by good net new inflows and higher market levels,
and a strong investment performance, contributed to the growth in income.
Operating expenses increased 41% (GBP139m) to GBP481m (2005: GBP342m) as a
result of higher performance based expenses, significant investment in key
growth initiatives and ongoing investment in product development and
infrastructure. The cost:income ratio improved to 57% (2005: 59%).
Total headcount rose by 100 to 2,400 (31st December 2005: 2,300). Headcount
increased in all regions, across product groups and the support functions,
reflecting continued investment to support strategic initiatives.
Total assets under management of GBP877bn remained in line with 2005 year-end
levels (31st December 2005: GBP881bn). Net new inflows of GBP17bn and positive
market move impact of GBP27bn were more than offset by the adverse impact of
exchange rate movements of GBP48bn. In US$ terms assets under management
increased by US$110bn to US$1,623bn (31st December 2005: US$1,513bn),
comprising US$30bn of net new assets, US$43bn of favourable market movements
and US$37bn of exchange rate movements.
Wealth Management
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net interest income 178 169 160
Net fee and commission income 336 306 283
-------- -------- --------
Net trading income - - -
Net investment income - - 5
-------- -------- --------
Principal transactions - - 5
Other income (1) - (1)
-------- -------- --------
Total income 513 475 447
Impairment charges (1) (1) (1)
-------- -------- --------
Net income 512 474 446
-------- -------- --------
Operating expenses excluding
amortisation of intangible assets (400) (391) (361)
Amortisation of intangible assets (2) (1) (1)
-------- -------- --------
Operating expenses (402) (392) (362)
-------- -------- --------
Profit before tax 110 82 84
-------- -------- --------
Cost:income ratio 78% 83% 81%
Cost:net income ratio 79% 83% 81%
Risk Tendency GBP10m GBP5m GBP5m
Return on average economic capital 52% 42% 35%
Average net income generated per
member GBP70 GBP66 GBP62
of staff ('000)
Economic profit GBP77m GBP60m GBP49m
As at
30.06.06 31.12.05 30.06.05
Loans and advances to customers GBP5.1bn GBP4.7bn GBP4.4bn
Customer accounts GBP25.0bn GBP23.1bn GBP22.5bn
Total assets GBP6.8bn GBP6.1bn GBP5.8bn
Risk weighted assets GBP4.9bn GBP4.1bn GBP4.5bn
Key Facts
Total client assets GBP84.7bn GBP78.3bn GBP74.2bn
Wealth Management profit before tax rose 31% (GBP26m) to GBP110m (2005: GBP84m),
driven by broad based income growth and favourable market conditions, partially
offset by increased volume related costs and increased investment in people and
infrastructure to support future growth.
Total income increased 15% (GBP66m) to GBP513m (2005: GBP447m).
Net interest income increased 11% (GBP18m) to GBP178m (2005: GBP160m) reflecting
growth in both customer deposits and customer lending. Average loans to
customers grew 16% to GBP4.9bn, driven mainly by increased lending to offshore
and private banking clients. Average customer deposits grew 10% (GBP2.3bn) to
GBP24.5bn (2005: GBP22.2bn). Asset margins increased to 1.11% (2005: 0.98%)
and the deposit margin was stable at 1.08% (2005: 1.06%).
Net fee and commission income increased 19% (GBP53m) to GBP336m (2005: GBP283m).
The increase reflected growth in client assets and higher transactional income,
including increased sales of investment products to private banking and
financial planning clients, and higher stockbroking volumes.
Operating expenses increased 11% (GBP40m) to GBP402m (2005: GBP362m) with
greater volume related and investment costs. Investment costs include increased
hiring and improvements to infrastructure with the upgrade of technology and
operations platforms. The cost:net income ratio improved two percentage points
to 79% (2005: 81%).
Total client assets, comprising customer deposits and client investments,
increased to GBP84.7bn (31st December 2005: GBP78.3bn) reflecting good net new
asset inflows and favourable market conditions.
Wealth Management - closed life assurance activities
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net interest income (4) 2 (16)
Net fee and commission income 25 26 18
-------- -------- --------
Net trading income 1 - -
Net investment income 24 144 115
-------- -------- --------
Principal transactions 25 144 115
Net premiums from insurance contracts 93 95 100
Other income 6 10 1
-------- -------- --------
Total income 145 277 218
Net claims and benefits on insurance
contracts (82) (208) (167)
-------- -------- --------
Total income net of insurance claims 63 69 51
Operating expenses (54) (73) (54)
-------- -------- --------
Profit/(loss) before tax 9 (4) (3)
-------- -------- --------
Cost:income ratio 86% 106% 106%
Return on average economic capital 22% 11% (18)%
Economic profit/(loss) GBP4m GBP1m GBP(8m)
As at
30.06.06 31.12.05 30.06.05
Total assets GBP7.2bn GBP7.3bn GBP6.7bn
Wealth Management - closed life assurance activities profit before tax was GBP9m
(2005: loss GBP3m) predominantly due to lower funding costs and reduced customer
redress costs in 2006.
Profit before tax excluding customer redress costs was GBP43m (2005: GBP37m).
Total income increased to GBP63m (2005: GBP51m) due to reduced funding costs.
Operating expenses remained steady at GBP54m. Costs relating to redress for
customers decreased to GBP34m (2005: GBP40m) whilst other operating expenses
increased to GBP20m (2005: GBP14m).
Head office functions and other operations
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net interest income 8 23 137
Net fee and commission income (183) (228) (170)
-------- -------- --------
Net trading income 55 30 55
Net investment income (6) 3 5
-------- -------- --------
Principal transactions 49 33 60
Net premiums from insurance contracts 93 86 60
Other income 10 17 7
-------- -------- --------
Total income (23) (69) 94
Impairment (charges)/releases (24) (3) 2
-------- -------- --------
Net (loss)/income (47) (72) 96
-------- -------- --------
Operating expenses excluding
amortisation of intangible assets (106) (208) (135)
Amortisation of intangible assets (4) (3) (1)
-------- -------- --------
Operating expenses (110) (211) (136)
-------- -------- --------
Loss before tax (157) (283) (40)
-------- -------- --------
Risk Tendency GBP25m GBP25m GBP35m
As at
30.06.06 31.12.05 30.06.05
Total assets GBP9.3bn GBP9.3bn GBP12.4bn
Risk weighted assets GBP3.4bn GBP4.0bn GBP5.6bn
Head office functions and other operations loss before tax increased GBP117m to
GBP157m (2005: loss GBP40m). This reflects the reduced interest income on
capital retained within Treasury, following the acquisition of Absa Group
Limited, partially offset by lower net impact of asymmetric consolidation
adjustments, and lower operating expenses following the head office relocation
to Canary Wharf in 2005.
Group segmental reporting is performed in accordance with Group accounting
policies. This means that inter-segment transactions are recorded in each
segment as if undertaken on an arm's length basis. Consolidation adjustments
necessary to eliminate the inter-segment transactions, including adjustments to
eliminate the timing differences on the recognition of inter-segment income and
expenses, are included in Head Office functions and other operations.
The impact of such asymmetric consolidation adjustments reduced by GBP51m to
GBP81m (2005: GBP132m). These adjustments related to the timing of the
recognition of insurance commissions included in Barclaycard and UK Banking
amounting to GBP35m (2005: GBP49m); internal fees for structured capital
markets activities of GBP41m (2005: GBP63m); and fees paid to Barclays Capital
for capital raising and risk management advice of GBP5m (2005: GBP32m).
Net interest income reduced GBP129m to GBP8m (2005: GBP137m) mainly due to a
reduction in net interest income retained in Treasury as 2005 included interest
earned on excess capital held in anticipation of the acquisition of Absa Group
Limited. Treasury's net interest income also included the hedge ineffectiveness
for the period, which together with other related Treasury adjustments,
amounted to a loss of GBP3m (2005: GBP35m gain) and the cost of hedging the
foreign exchange risk on the Group's investment in Absa, which amounted to
GBP39m (2005: GBPnil).
Net trading income of GBP55m (2005: GBP55m) includes GBP59m (2005: GBPnil) in
respect of a hedge of the translation exposure arising from Absa's Rand
earnings, of which GBP10m was realised at 30th June 2006.
Impairment charges increased GBP26m to GBP24m (2005: recovery GBP2m). The
increase was driven by impairment in the transition businesses.
Operating expenses decreased GBP26m to GBP110m (2005: GBP136m), primarily due
to the elimination in 2006 of expenses incurred in 2005 relating to the head
office relocation to Canary Wharf (2005: GBP52m).
FINANCIAL REVIEW
Results by nature of income and expense
Net interest income
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Cash and balances at central banks 7 6 3
Financial instruments 1,406 1,305 967
Loans and advances to banks 523 251 439
Loans and advances to customers 7,883 7,275 5,669
Other 725 747 570
-------- -------- --------
Interest income 10,544 9,584 7,648
-------- -------- --------
Deposits from banks (1,263) (1,102) (954)
Customer accounts (1,844) (1,530) (1,185)
Debt securities in issue (2,388) (1,913) (1,355)
Subordinated liabilities (340) (312) (293)
Other (305) (352) (161)
-------- -------- --------
Interest expense (6,140) (5,209) (3,948)
-------- -------- --------
Net interest income 4,404 4,375 3,700
-------- -------- --------
Group net interest income increased 19% (GBP704m) to GBP4,404m (2005:
GBP3,700m). The inclusion of Absa added net interest income of GBP600m in the
first half of 2006. Group net interest income excluding Absa grew 3%.
A component of the benefit of free funds included in Group net interest income
is the structural hedge which functions to reduce the impact of the volatility
of short-term interest rate movements. The contribution of the structural hedge
decreased to GBP47m (2005: GBP58m), largely due to the impact of relatively
higher short-term interest rates and lower medium-term rates.
Interest income includes GBP48m (2005: GBP30m) accrued on impaired loans.
Business margins
Half-year ended
30.06.06 31.12.05 30.06.05
% % %
UK Retail Banking assets 0.86 1.01 0.83
UK Retail Banking liabilities 1.98 1.97 2.01
UK Business Banking assets 1.86 1.87 1.87
UK Business Banking liabilities 1.44 1.38 1.54
Barclaycard assets 6.64 6.70 6.48
-------- -------- --------
Barclaycard assets-cards 8.78 8.35 7.56
Barclaycard assets-loans 4.34 4.78 5.15
-------- -------- --------
International Retail and Commercial
Banking-ex Absa assets(1) 1.24 1.26 1.47
International Retail and Commercial
Banking-ex Absa liabilities(1) 2.12 2.03 2.00
International Retail and Commercial
Banking-Absa assets(1), (2) 3.45 3.52 -
International Retail and Commercial
Banking-Absa liabilities(1), (2) 2.41 2.39 -
Wealth Management assets 1.11 0.99 0.98
Wealth Management liabilities 1.08 1.02 1.06
Average balances
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
UK Retail Banking assets 64,989 65,689 66,511
UK Retail Banking liabilities 77,566 74,867 72,072
UK Business Banking assets 51,103 45,879 42,059
UK Business Banking liabilities 43,671 41,837 39,234
Barclaycard assets 25,727 24,729 23,759
-------- -------- --------
Barclaycard assets-cards 13,307 13,233 13,126
Barclaycard assets-loans 12,420 11,496 10,633
-------- -------- --------
International Retail and Commercial
Banking-ex Absa assets(1) 26,245 24,847 20,931
International Retail and Commercial
Banking-ex Absa liabilities(1) 10,174 9,372 9,065
International Retail and Commercial
Banking-Absa assets(1) 24,228 20,225 -
International Retail and Commercial
Banking-Absa liabilities(1) 13,455 13,338 -
Wealth Management assets 4,891 4,560 4,229
Wealth Management liabilities 24,521 24,257 22,603
(1) International Retail and Commercial Banking business margins, average
balances and business net interest income have been restated on a consistent
basis to reflect changes in methodology.
(2) For the second half of 2005, this reflects the five month post-acquisition
period on an annualised basis.
Business net interest income
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
UK Retail Banking assets 276 336 273
UK Retail Banking liabilities 762 744 718
UK Business Banking assets 471 433 390
UK Business Banking liabilities 312 292 300
Barclaycard assets 846 828 770
-------- -------- --------
Barclaycard assets-cards 579 553 496
Barclaycard assets-loans 267 275 274
-------- -------- --------
International Retail and Commercial
Banking-ex Absa assets(1) 162 158 153
International Retail and Commercial
Banking-ex Absa liabilities(1) 107 96 90
International Retail and Commercial
Banking-Absa assets(1) 414 308 -
International Retail and Commercial
Banking-Absa liabilities(1) 161 138 -
Wealth Management assets 27 22 21
Wealth Management liabilities 132 124 120
-------- -------- --------
Business net interest income 3,670 3,479 2,835
-------- -------- --------
Reconciliation of business interest income to Group net interest income
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Business net interest income 3,670 3,479 2,835
Other:
- Barclays Capital 495 540 525
- Barclays Global Investors 7 9 6
- Other 232 347 334
-------- -------- --------
Group net interest income 4,404 4,375 3,700
-------- -------- --------
Business net interest income is derived from the interest rate earned on average
assets or paid on average liabilities relative to the average Bank of England
base rate, local equivalents for international businesses or the rate managed by
the bank using derivatives. The margin is expressed as annualised business
interest income over the relevant average balance. Asset and liability margins
cannot be added together as they are relative to the average Bank of England
base rate, local equivalent for international businesses or the rate managed by
the bank using derivatives. The benefit of capital attributed to these
businesses is excluded from the calculation of business margins and business net
interest income.
Average balances are calculated on daily averages for most UK banking operations
and monthly averages elsewhere.
Within the reconciliation of Group net interest income, there is an amount
captured as Other. This relates to: benefit of capital, excluded from the
business margin calculation, Head office functions and other operations; net
funding on non-customer assets and liabilities; and Wealth Management - closed
life assurance activities.
(1) International Retail and Commercial Banking business margins, average
balances and business net interest income have been restated on a consistent
basis to reflect changes in methodology.
UK Retail Banking assets margin improved slightly to 0.86% (2005: 0.83%)
reflecting a stable mortgage margin, despite the impact of new product launches
and a higher contribution from non-mortgage assets. UK Retail Banking
liabilities margin was broadly stable at 1.98% (2005: 2.01%).
UK Business Banking assets margin was broadly stable at 1.86% (2005: 1.87%). The
UK Business Banking liabilities margin decreased 10 basis points to 1.44% (2005:
1.54%), although it improved relative to the second half of 2005.
Barclaycard cards margin increased 122 basis points to 8.78% (2005: 7.56%).
Margins in the cards business improved principally due to the impact of
increased card rates in the second half of 2005 and the continued roll-off of
promotional rate balances through the first half of 2006. Barclaycard loans
margin decreased 81 basis points to 4.34% (2005: 5.15%). Margins in the loans
business continued to reduce due to both a change in the product mix, with a
higher weighting to secured loans, and competitive pressures.
International Retail and Commercial Banking - excluding Absa assets margin
decreased 23 basis points to 1.24% (2005: 1.47%) largely reflecting growth in
mortgage assets as a proportion of total assets in Europe, revised competitive
pricing strategies aimed at increasing market share, and competitive pressures.
International Retail and Commercial Banking - excluding Absa liabilities margin
increased 12 basis points to 2.12% (2005: 2.00%) mainly as a consequence of
increased margins in Africa and the acquisition of the ING Ferri business in
France.
International Retail and Commercial Banking - Absa assets margin of 3.45%
(Second half 2005: 3.52%) was broadly stable compared to the margin for the
first five months of Barclays ownership. The liabilities margin of 2.41% (Second
half 2005: 2.39%) remained consistent.
Wealth Management assets margin increased 13 basis points to 1.11% (2005: 0.98%)
principally due to a change in product mix and pricing. Wealth Management
liabilities margin was broadly stable at 1.08% (2005: 1.06%).
Net fee and commission income
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Fee and commission income 4,077 3,558 2,872
Fee and commission expense (425) (393) (332)
-------- -------- --------
Net fee and commission income 3,652 3,165 2,540
-------- -------- --------
Fee and commission income rose 42% (GBP1,205m) to GBP4,077m (2005: GBP2,872m).
The inclusion of Absa increased fee and commission income by GBP479m in the
first half of 2006. Excluding Absa, fee and commission income grew 25%, driven
by a broad based performance across the Group, particularly within Barclays
Global Investors reflecting increases in both management and incentive fees,
higher asset values, higher market levels and a strong investment performance.
Fee and commission expense increased 28% (GBP93m) to GBP425m (2005: GBP332m),
largely reflecting the inclusion of Absa, which added GBP43m, and increases in
Barclaycard.
Net fee and commission income increased 44% (GBP1,112m) to GBP3,652m (2005:
GBP2,540m). The inclusion of Absa increased net fee and commission income by
GBP436m in the first-half of 2006. Group net fee and commission income excluding
Absa grew 27%, reflecting growth across all businesses.
Total foreign exchange income was GBP457m (2005: GBP298m) and consisted of
revenues earned from both retail and wholesale activities. Foreign exchange
income earned on customer transactions by UK Retail Banking, UK Business
Banking, International Retail and Commercial Banking, Barclaycard, Barclays
Global Investors and Wealth Management, both externally and with Barclays
Capital, is reported in those respective business units within fee and
commission income. The foreign exchange income earned in Barclays Capital and in
Treasury is reported within trading income.
Principal transactions
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Rates related business 1,636 873 859
Credit related business 565 272 317
-------- -------- --------
Net trading income 2,201 1,145 1,176
-------- -------- --------
Cumulative gain from disposal of
available for
sale assets/investment securities 120 33 87
Dividend income 18 9 13
Net income from financial instruments 86 214 175
designated at fair value
Other investment income 150 229 98
-------- -------- --------
Net investment income 374 485 373
-------- -------- --------
Principal transactions 2,575 1,630 1,549
-------- -------- --------
Most of the Group's trading income is generated in Barclays Capital.
Net trading income increased 87% (GBP1,025m) to GBP2,201m (2005: GBP1,176m) due
to strong performances across Barclays Capital Rates and Credit businesses, in
particular in fixed income, equities, commodities and credit derivative
products. This was driven by higher volumes of client-led activity across a
broad range of products and geographical regions and by the continued return on
prior year investments. The inclusion of Absa increased net trading income by
GBP31m in the first-half of 2006. Group net trading income excluding Absa grew
85%.
Net investment income remained flat at GBP374m (2005: GBP373m). The inclusion of
Absa increased net investment income by GBP32m in the first-half of 2006.
The cumulative gain from disposal of available for sale assets and investment
securities increased 38% (GBP33m) to GBP120m (2005: GBP87m) driven by investment
realisations primarily in Private Equity.
Fair value movements on certain assets and liabilities have been reported within
net trading income or within net investment income depending on the nature of
the transaction. Fair value movements on insurance assets included within net
investment income contributed GBP46m (2005: GBP149m).
Net premiums from insurance contracts
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Gross premiums from insurance 536 524 385
contracts
Premiums ceded to reinsurers (26) (23) (14)
-------- -------- --------
Net premiums from insurance contracts 510 501 371
-------- -------- --------
Net premiums from insurance contracts increased 37% (GBP139m) to GBP510m (2005:
GBP371m). The inclusion of Absa increased net premiums from insurance contracts
by GBP124m in the first half of 2006. Group net premiums from insurance
contracts excluding Absa increased 4% reflecting growth in UK consumer lending.
Other income
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
(Decrease)/increase in fair value of
assets held in respect of linked
liabilities to customers under
investment contracts (2,960) 2,349 6,885
Decrease/(increase) in liabilities
held in respect of linked liabilities
to customers under investment contracts 2,960 (2,349) (6,885)
Property rentals 28 29 25
Other 33 69 24
-------- -------- --------
Other income 61 98 49
-------- -------- --------
Certain asset management products offered to institutional clients by Barclays
Global Investors are recognised as investment contracts. Accordingly the
invested assets and the related liabilities to investors are held at fair value
and changes in those fair values are reported within Other income.
Net claims and benefits paid on insurance contracts
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Gross claims and benefits paid on
insurance contracts 235 398 296
Reinsurers' share of claims paid (2) (40) (9)
-------- -------- --------
Net claims and benefits paid on
insurance contracts 233 358 287
-------- -------- --------
Net claims and benefits paid on insurance contracts decreased 19% (GBP54m) to
GBP233m (2005: GBP287m). The inclusion of Absa increased net claims and benefits
by GBP54m. Net claims and benefits paid on insurance contracts excluding Absa
decreased 38%, principally reflecting lower claims and benefits in Wealth
Management - closed life assurance activities due to market conditions in the
period.
Impairment charges
Half-year ended
30.06.06 31.12.05 30.06.05
Impairment charges on loans and GBPm GBPm GBPm
advances
- New and increased impairment
allowances 1,257 1,184 945
- Releases (151) (199) (134)
- Recoveries (125) (124) (98)
-------- -------- --------
Impairment charges on loans and
advances (see note 5) 981 861 713
Credit provisions
Charges for the period in respect of
provision for undrawn
contractually committed facilities and
guarantees provided (7) - (7)
-------- -------- --------
Impairment charges on loans and
advances and credit provisions 974 861 706
Impairment on available for sale
assets 83 4 -
-------- -------- --------
Total impairment charges 1,057 865 706
-------- -------- --------
Total impairment charges increased 50% (GBP351m) to GBP1,057m (2005: GBP706m).
Impairment charges on loans and advances and credit provisions
Impairment charges on loans and advances and credit provisions increased 38%
(GBP268m) to GBP974m (2005: GBP706m). Excluding Absa, the increase was 30% and
reflected the continued challenging credit environment in UK unsecured retail
lending. Steady conditions in the wholesale sector persisted, with a low level
of corporate defaults.
In the UK, consumers faced continued pressure on household cash flows. High debt
levels and changing social attitudes to bankruptcy and debt default contributed
to increased impairment charges. In UK credit cards, the quality of new business
continued to improve, reflecting a continued tightening of underwriting
standards. Despite these improvements, the value of debt in arrears rose because
of an increase in the average value of debt per customer whilst the number of
customers in delinquency decreased. In unsecured loans, delinquency rates were
steady in the first half of 2006 and customers in delinquency decreased but the
higher rate of bankruptcy has increased the level of charge-offs. Impairment on
unsecured loans grew but at a slower rate than seen in UK Cards.
In UK Home Finance, delinquencies were flat and amounts charged-off remained
low. Smaller business continued to see some deterioration in delinquency rates
from a historically low base.
Group impairment charges on loans and advances on an annualised basis amounted
to 0.61% (2005: 0.52%), as a percentage of period-end total loans and advances
of GBP320,831m (30th June 2005: GBP275,188m).
Retail impairment charges increased to GBP839m (2005: GBP582m), including GBP39m
in respect of Absa. Retail impairment charges on loans and advances on an
annualised basis amounted to 1.25% (2005: 1.06%) of period end loans and
advances of GBP134,534m (30th June 2005: GBP109,566m).
In the wholesale and corporate businesses, impairment charges on loans and
advances increased to GBP142m (2005: GBP131m), including GBP13m in respect of
Absa. The increase occurred primarily in UK Business Banking and reflected the
growth in lending balances and the inclusion of Iveco Finance. The wholesale and
corporate impairment charge on an annualised basis amounted to 0.15% (2005:
0.16%) as a percentage of period end total loans and advances of GBP186,297m
(30th June 2005: GBP165,622m).
Impairment on available for sale assets
Impairment charges of GBP83m related to losses on assets in the available for
sale portfolio where an intention to sell caused the losses to be treated as
other than temporary in nature. This impairment charge arose from interest rate
movements rather than credit deterioration. There was a corresponding gain which
was recognised in net trading income.
Operating expenses
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Staff costs (refer to page 52) 4,147 3,464 2,854
Administrative expenses 1,916 2,061 1,382
Depreciation 207 210 152
Impairment loss - property and
equipment 6 - -
- intangible assets - 9 -
Operating lease rentals 168 179 137
Gains on sale and leaseback of
property (238) - -
Amortisation of intangible assets 63 62 17
-------- -------- --------
Operating expenses 6,269 5,985 4,542
-------- -------- --------
Operating expenses increased 38% (GBP1,727m) to GBP6,269m (2005: GBP4,542m). The
inclusion of Absa added operating expenses of GBP781m. Group operating expenses
excluding Absa grew 21%, reflecting a higher level of business activity and an
increase in performance related pay.
Operating expenses were reduced by gains from the sale and leaseback of property
of GBP238m (2005: GBPnil) as the Group took advantage of historically low yields
on property to realise gains on some of its freehold portfolio. The gains within
UK Banking of GBP145m were largely offset by incremental investment.
Administrative expenses increased 39% (GBP534m) to GBP1,916m (2005: GBP1,382m).
The inclusion of Absa added administrative expenses of GBP314m in the first half
of 2006. Group administrative expenses excluding Absa grew 16% principally as a
result of higher business activity in Barclays Global Investors, Barclays
Capital and Barclaycard International.
Operating lease rentals increased 23% (GBP31m) to GBP168m (2005: GBP137m). The
inclusion of Absa added operating lease rentals of GBP43m in the first half of
2006 which more than offset the absence of double occupancy costs incurred in
2005, associated with the head office relocation to Canary Wharf.
The increase in the amortisation of intangible assets primarily arises following
the acquisition of Absa Group Limited on 27th July 2005.
The Group cost:income ratio remained flat at 57% (2005: 57%). This reflected
improved productivity across all businesses, which was offset by the inclusion
of Absa. The Group cost:net income ratio was 63% (2005: 63%).
Staff costs
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Salaries and accrued incentive payments 3,364 2,780 2,256
Social security costs 292 215 197
Pension costs
- defined contribution plans 55 36 40
- defined benefit plans 142 115 156
Other post retirement benefits 15 14 13
Other 279 304 192
-------- -------- --------
Staff costs 4,147 3,464 2,854
-------- -------- --------
Staff costs increased 45% (GBP1,293m) to GBP4,147m (2005: GBP2,854m). The
inclusion of Absa added staff costs of GBP347m. Excluding the impact of Absa,
staff costs increased 33%.
Salaries and accrued incentive payments rose 49% (GBP1,108m) to GBP3,364m (2005:
GBP2,256m). The inclusion of Absa added GBP316m. Excluding Absa, salaries and
accrued incentive payments rose 35%, principally due to performance related
payments in Barclays Capital and Barclays Global Investors.
Pension costs comprise all UK and international pension schemes. Included in
pension costs is a charge of GBP147m (2005: GBP155m) in respect of the Group's
main UK pension schemes.
Staff numbers
As at
30.06.06 31.12.05 30.06.05
Staff numbers:
UK Banking 41,500 39,800 40,600
-------- -------- --------
UK Retail Banking 33,600 32,000 33,000
UK Business Banking 7,900 7,800 7,600
-------- -------- --------
Barclaycard 8,400 7,800 7,200
International Retail and Commercial Banking 47,000 45,400 12,400
-------- -------- --------
International Retail and Commercial
Banking-ex Absa 13,300 12,700 12,400
International Retail and Commercial
Banking-Absa 33,700 32,700 -
-------- -------- --------
Barclays Capital 10,500 9,900 8,400
Barclays Global Investors 2,400 2,300 2,100
Wealth Management 7,500 7,200 7,200
Head office functions and other operations 1,000 900 900
Total Group permanent and fixed term
contract staff worldwide 118,300 113,300 78,800
Agency staff worldwide 8,700 7,000 4,300
-------- -------- --------
Total including agency staff 127,000 120,300 83,100
-------- -------- --------
Staff numbers are shown on a full-time equivalent basis. Total Group permanent
and contract staff comprised 61,900 (31st December 2005: 59,100) in the UK and
56,400 (31st December 2005: 54,200) internationally.
UK Banking staff numbers increased by 1,700 to 41,500 (31st December 2005:
39,800), primarily reflecting the inclusion in UK Retail Banking of mortgage
processing staff involved in activities previously outsourced.
Barclaycard staff numbers rose by 600 to 8,400 (31st December 2005: 7,800),
reflecting growth of 200 in Barclaycard US, and increases in operations and
customer facing staff in the UK.
International Retail and Commercial Banking increased staff numbers by 1,600 to
47,000 (31st December 2005: 45,400). International Retail and Commercial Banking
- excluding Absa increased staff numbers by 600 to 13,300 (31st December 2005:
12,700), mainly due to growth in continental Europe. International Retail and
Commercial Banking - Absa increased staff numbers by 1,000 to 33,700 (31st
December 2005: 32,700), reflecting continued growth in the business.
Barclays Capital staff numbers rose by 600 to 10,500 (31st December 2005:
9,900). Growth was broadly based across all regions and reflected investments in
the front office, systems development and control functions to support greater
business volumes. The growth year on year includes the impact of Absa Capital
staff, which were included from July 2005.
Barclays Global Investors increased staff numbers by 100 to 2,400 (31st December
2005: 2,300) reflecting investment to support strategic initiatives.
Wealth Management staff numbers rose by 300 to 7,500 (31st December 2005: 7,200)
to support the expansion of the business.
Head office functions and other operations staff numbers grew 100 to 1,000 (31st
December 2005: 900).
Agency staff numbers rose by 1,700 to 8,700 (31st December 2005: 7,000), largely
due to an increase in Absa.
Share of post-tax results of associates and joint ventures
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Profit from associates 29 38 15
Profit/(loss) from joint ventures 1 (9) 1
-------- -------- --------
Share of post-tax results of
associates and joint ventures 30 29 16
-------- -------- --------
The share of post-tax results of associates and joint ventures increased 88%
(GBP14m) to GBP30m (2005: GBP16m). The increase in profit from associates
primarily reflects the addition of the Absa associates.
Tax
The charge for the period is based upon a UK corporation tax rate of 30% for the
calendar year 2006 (full-year 2005: 30%). The effective rate of tax for the
first half of 2006, based on profit before tax, was 29.2% (2005: 26.6%). The
effective tax rate differs from 30% as it takes account of the different tax
rates which are applied to the profits earned outside the UK, disallowable
expenditure, tax-free income and adjustments to prior year tax provisions. The
effective tax rate for 2006 is higher than in the prior period principally due
to the higher tax rates applicable to international operations. The tax charge
for the first half of the year includes GBP640m (2005: GBP477m) arising in the
UK and GBP432m (2005: GBP238m) arising overseas.
Profit attributable to minority interests
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Absa Group Limited minority interests 122 116 -
Preference shares 85 80 33
Reserve capital instruments 47 28 65
Upper tier 2 instruments 7 4 7
Barclays Global Investors minority
interests 26 22 19
Other minority interests 7 10 10
-------- -------- --------
Profit attributable to minority
interests 294 260 134
-------- -------- --------
Profit attributable to minority interests increased GBP160m to GBP294m (2005:
GBP134m) largely reflecting the acquisition of Absa Group Limited on 27th July
2005 and the associated preference share funding.
Earnings per share
Half-year ended
30.06.06 31.12.05 30.06.05
Profit attributable to equity holders
of the parent GBP2,307m GBP1,606m GBP1,841m
Dilutive impact of convertible options (GBP17m) (GBP29m) -
-------- -------- --------
Profit attributable to equity holders
of the parent including dilutive
impact of convertible options GBP2,290m GBP1,577m GBP1,841m
Basic weighted average number of
shares in issue 6,353m 6,335m 6,337m
Number of potential ordinary shares(1) 177m 156m 141m
-------- -------- --------
Diluted weighted average number of
shares 6,530m 6,491m 6,478m
-------- -------- --------
Basic earnings per ordinary share 36.3p 25.4p 29.1p
Diluted earnings per ordinary share 35.1p 24.3p 28.4p
The calculation of basic earnings per share is based on the profit attributable
to equity holders of the parent and the weighted average number of shares
excluding own shares held in employee benefit trusts, currently not vested and
shares held for trading.
When calculating the diluted earnings per share, the profit attributable to
equity holders of the parent is adjusted for the conversion of outstanding
options into shares within certain subsidiary entities. The weighted average
number of ordinary shares excluding own shares held in employee benefit trusts
currently not vested and shares held for trading, is adjusted for the effects of
all dilutive potential ordinary shares, totalling 177 million (2005: 141
million).
(1) Potential ordinary shares reflect the dilutive impact of share options
outstanding.
Dividends on ordinary shares
The Board has decided to pay, on 2nd October 2006, an interim dividend for the
year ended 31st December 2006 of 10.5p per ordinary share for shares registered
in the books of the Company at the close of business on 18th August 2006. The
interim dividend of 9.2p per ordinary share for the year ended 31st December
2005 was paid on 3rd October 2005 and the final dividend for the year ended 31st
December 2005 of 17.4p per ordinary share was paid on 28th April 2006.
Shareholders who have their dividends paid direct to their bank or building
society account will receive a consolidated tax voucher detailing the dividends
paid in the 2006-2007 tax year in mid-October 2006.
The amount payable for the 2006 interim dividend is GBP667m (half-year ended
31st December 2005: GBP1,105m; half-year ended 30th June 2005: GBP582m). This
amount excludes GBP16m payable on Barclays shares held by employee benefit
trusts (half year ended 31st December 2005: GBP24m; half year ended 30th June
2005: GBP12m).
For qualifying US and Canadian resident ADR holders, the interim dividend of
10.5p per ordinary share becomes 42p per ADS (representing four shares). The ADR
depositary will mail the dividend on 2nd October 2006 to ADR holders on the
record on 18th August 2006.
For qualifying Japanese shareholders, the final dividend of 10.5p per ordinary
share will be distributed in mid-October to shareholders on the record on 18th
August 2006.
Shareholders may have their dividends reinvested in Barclays PLC shares by
participating in the Barclays Dividend Reinvestment Plan. The plan is available
to all shareholders, including members of Barclays Sharestore, provided that
they do not live in or are subject to the jurisdiction of any country where
their participation in the plan would require Barclays or The Plan Administrator
to take action to comply with local government or regulatory procedures or any
similar formalities. Any shareholder wishing to obtain details and a form to
join the plan should contact The Plan Administrator by writing to: The Plan
Administrator to Barclays, Share Dividend Team, The Causeway, Worthing, West
Sussex, BN99 6DA; or, by telephoning 0870 609 4535. The completed form should be
returned to The Plan Administrator on or before 8th September 2006 for it to be
effective in time for the payment of the interim dividend on 2nd October 2006.
Shareholders who are already in the plan need take no action unless they wish to
change their instructions in which case they should write to The Plan
Administrator.
Analysis of amounts included in the balance sheet
Capital resources
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Shareholders' equity excluding
minority interests 17,988 17,426 16,099
-------- -------- --------
Preference shares 3,435 2,977 2,971
Reserve capital instruments 1,922 1,868 1,929
Upper tier 2 instruments 586 581 586
Absa minority interests 1,397 1,351 -
Other minority interests 211 227 200
-------- -------- --------
Minority interests 7,551 7,004 5,686
-------- -------- --------
Total shareholders' equity 25,539 24,430 21,785
Subordinated liabilities 13,629 12,463 11,309
-------- -------- --------
Total capital resources 39,168 36,893 33,094
-------- -------- --------
The authorised share capital of Barclays PLC is GBP2,500m (31st December 2005:
GBP2,500m) comprising 9,996 million (31st December 2005: 9,996 million) ordinary
shares of 25p shares and 1 million (31st December 2005: 1 million) staff shares
of GBP1 each. Called up share capital comprises 6,509 million (31st December
2005: 6,490 million) ordinary shares of 25p each and 1 million (31st December
2005: 1 million) staff shares of GBP1 each.
Total capital resources increased GBP2,275m to GBP39,168m since 31st December
2005.
Shareholders' equity, excluding minority interests, increased GBP562m since 31st
December 2005. The current period increase reflects profits attributable to
equity holders of the parent of GBP2,307m, increases in share capital and share
premium of GBP75m and other increases in retained reserves of GBP120m.
Offsetting these movements were dividends paid of GBP1,105m, decreases in the
available for sale and cash flow hedging reserves of GBP216m and GBP242m
respectively, a GBP332m decrease in the translation reserve and a GBP45m
decrease due to changes in treasury and ESOP shares.
Subordinated liabilities rose GBP1,166m since 31st December 2005 reflecting
capital raisings of GBP1,926m and accrued interest of GBP15m; offset by exchange
rate movements of GBP352m, redemptions of GBP129m, fair value adjustments of
GBP280m and amortisation of issue expenses of GBP14m.
Minority interests increased GBP547m since 31st December 2005. The increase
primarily reflected the issue, during April 2006, of 30,000,000 preference
shares of US$25 each (US$750m; GBP419m) with a 6.625% dividend.
Capital ratios
Risk weighted assets and capital resources, as defined for supervisory purposes
by the Financial Services Authority, comprised:
As at
30.06.06 31.12.05 30.06.05
Risk weighted assets: GBPm GBPm GBPm
Banking book
On-balance sheet 190,979 180,808 159,927
Off-balance sheet 33,010 31,351 30,090
Associated undertakings
and joint ventures 6,351 3,914 3,299
-------- -------- --------
Total banking book 230,340 216,073 193,316
-------- -------- --------
Trading book
Market risks 27,477 23,216 26,432
Counterparty and settlement risks 33,107 29,859 22,658
-------- -------- --------
Total trading book 60,584 53,075 49,090
-------- -------- --------
Total risk weighted assets 290,924 269,148 242,406
-------- -------- --------
Capital resources:
Tier 1
Called up share capital 1,628 1,623 1,616
Eligible reserves 18,061 16,837 15,544
Minority interests(1) 7,629 6,634 5,237
Tier one notes(2) 941 981 957
Less: intangible assets (7,242) (7,180) (4,880)
-------- -------- --------
Total qualifying tier 1 capital 21,017 18,895 18,474
-------- -------- --------
Tier 2
Revaluation reserves 25 25 25
Available for sale-equity gains 188 223 -
Collectively assessed impairment allowances 2,593 2,306 2,067
Minority Interests 479 515 494
Qualifying subordinated liabilities(3)
Undated loan capital 3,200 3,212 3,210
Dated loan capital 8,157 7,069 6,560
-------- -------- --------
Total qualifying tier 2 capital 14,642 13,350 12,356
-------- -------- --------
Less: Supervisory deductions:
Investments not consolidated for supervisory
purposes (946) (782) (696)
Other deductions (998) (961) (713)
-------- -------- --------
(1,944) (1,743) (1,409)
-------- -------- --------
Total net capital resources 33,715 30,502 29,421
-------- -------- --------
Tier 1 ratio 7.2% 7.0% 7.6%
Risk asset ratio 11.6% 11.3% 12.1%
(1) Includes reserve capital instruments of GBP2,158m (31st December 2005:
GBP1,735m; 30th June 2005: GBP1,679m). Minority interests include an issue of
GBP500m of reserve capital instruments raised during the first half of 2006
which is eligible for inclusion in tier 1 capital. This issue is classified
within subordinated liabilities on the balance sheet.
(2) Tier one notes are included in subordinated liabilities in the consolidated
balance sheet.
(3) Subordinated liabilities are included in tier 2, subject to limits laid down
in the supervisory requirements.
At 30th June 2006, the Tier 1 capital ratio was 7.2% and the risk asset ratio
was 11.6%. From 31st December 2005, net total capital resources rose GBP3.2bn
and risk weighted assets increased GBP21.8bn.
Tier 1 capital rose GBP2.1bn, including GBP1.2bn arising from profits
attributable to equity holders net of dividends paid. Minority interests within
Tier 1 capital increased GBP1.0bn primarily due to the issuance of GBP0.5bn of
Reserve Capital Instruments and GBP0.6bn of preference shares. Tier 2 capital
increased GBP1.3bn mainly as a result of the issuance of GBP1.4bn of loan
capital.
The weakening of the Rand against Sterling had a positive impact on capital
ratios for the first half of 2006.
Reconciliation of regulatory capital
Capital is defined differently for accounting and regulatory purposes. A
reconciliation of shareholders' equity for accounting purposes to called up
share capital and eligible reserves for regulatory purposes, is set out below:
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Shareholders' equity excluding minority
interests 17,988 17,426 16,099
Available for sale reserve (9) (225) (374)
Cash flow hedging reserve 172 (70) (328)
Retained earnings
Defined benefit pension scheme 1,302 1,215 1,401
Additional companies in regulatory consolidation
and non-consolidated companies (101) (145) 5
Foreign exchange on RCIs and upper tier
2 loan stock 398 289 390
Other adjustments (61) (30) (33)
-------- -------- --------
Called up share capital and eligible
reserves for regulatory purposes 19,689 18,460 17,160
-------- -------- --------
Total assets and risk weighted assets
Total assets increased 7% to GBP986.1bn (31st December 2005: GBP924.4bn). Risk
weighted assets increased 8% to GBP290.9bn (31st December 2005: GBP269.1bn).
UK Retail Banking total assets increased 1% to GBP70.9bn (31st December 2005:
GBP70.4bn). Risk weighted assets increased 3% to GBP33.8bn (31st December 2005:
GBP32.8bn), due to asset growth, small changes in the asset weighting mix and a
reduced benefit from credit mitigation transactions in mortgages.
UK Business Banking total assets increased 6% to GBP63.5bn (31st December 2005:
GBP59.9bn), reflecting strong growth in loans and advances to customers. Risk
weighted assets increased 8% to GBP50.8bn (31st December 2005: GBP47.1bn),
broadly in line with total asset growth.
Barclaycard total assets increased 3% to GBP26.6bn (31st December 2005:
GBP25.8bn) driven by growth in lending balances. Risk weighted assets increased
by 10% to GBP24.0bn (31st December 2005: GBP21.8bn) primarily due to balance
sheet growth and a reduction in securitised balances.
International Retail and Commercial Banking - excluding Absa total assets
increased 5% to GBP35.8bn (31st December 2005: GBP34.2bn) primarily reflected
strong volume growth in continental European mortgages. Risk weighted assets
increased 5% to GBP21.4bn (31st December 2005: GBP20.4bn), reflecting the
balance sheet growth.
International Retail and Commercial Banking - Absa total assets were GBP29.3bn
(31st December 2005: GBP29.4bn) and risk weighted assets GBP20.7bn (31st
December 2005: GBP20.8bn). In Rand terms assets grew 21% to R386bn (31st
December 2005: R319bn) and risk weighted assets grew 20% to R273bn (31st
December 2005: R226bn). Growth in Rand terms was more than offset by the
depreciation in the Rand exchange rate against Sterling.
Barclays Capital total assets increased 10% to GBP659.3bn (31st December 2005:
GBP601.2bn). This was mainly attributable to increases in debt and equity
securities held in the trading portfolio and in reverse repurchase agreements,
as the business continued to grow in Europe, the US and Asia. Settlement
balances were also higher compared to December as a result of seasonal
fluctuations in trading related activity. Risk weighted assets increased 12% to
GBP130.5bn (31st December 2005: GBP116.7bn). This increase reflected the growth
in the business.
Barclays Global Investors total assets decreased 4% to GBP77.3bn (31st December
2005: GBP80.9bn). The substantial majority of total assets related to asset
management products where equal and offsetting balances are reflected within
liabilities to customers. Risk weighted assets decreased 5% to GBP1.4bn (31st
December 2005: GBP1.5bn).
Wealth Management total assets increased 12% to GBP6.8bn (31st December 2005:
GBP6.1bn) principally reflecting good growth in lending balances. Risk weighted
assets increased 21% to GBP4.9bn (31st December 2005: GBP4.1bn).
Head office functions and other operations total assets remained flat at
GBP9.3bn (31st December 2005: GBP9.3bn). Risk weighted assets decreased 15% to
GBP3.4bn (31st December 2005: GBP4.0bn).
Economic capital
Barclays assesses capital requirements by measuring the Group risk profile using
both internally and externally developed models. The Group assigns economic
capital primarily within seven risk categories: Credit Risk, Market Risk,
Business Risk, Operational Risk, Insurance Risk, Fixed Assets and Private
Equity.
The Group regularly enhances its economic capital methodology and benchmarks
outputs to external reference points. The framework has been enhanced to reflect
default probabilities during average credit conditions, rather than those
prevailing at the balance sheet date, thus seeking to remove cyclicality from
the economic capital calculation. The framework also adjusts economic capital to
reflect time horizon, correlation of risks and risk concentrations.
Economic capital is allocated on a consistent basis across all of Barclays
businesses and risk activities. A single cost of equity is applied to calculate
the cost of risk. Economic capital allocations reflect varying levels of risk.
The total average economic capital required by the Group, as determined by risk
assessment models and after considering the Group's estimated portfolio effects,
is compared with the supply of economic capital to evaluate economic capital
utilisation. Supply of economic capital is calculated as the average available
shareholders' equity after adjustment and including preference shares.
The economic capital methodology will form the basis of the Group's submission
for the Basel II Internal Capital Adequacy Assessment Process (ICAAP).
Economic capital demand(1)
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
UK Banking 5,000 4,900 4,800
-------- -------- --------
UK Retail Banking 2,400 2,400 2,300
UK Business Banking 2,600 2,500 2,500
-------- -------- --------
Barclaycard 3,000 2,950 2,650
International Retail and Commercial
Banking 1,850 1,700 1,100
-------- -------- --------
International Retail and Commercial
Banking-ex Absa 1,150 1,150 1,100
International Retail and Commercial
Banking-Absa(2) 700 550 -
-------- -------- --------
Barclays Capital 3,600 3,100 2,700
Barclays Global Investors 150 150 150
Wealth Management 350 400 400
Wealth Management - closed life
assurance activities 50 50 50
Head office functions and other
operations(3) 250 300 250
-------- -------- --------
Business unit economic capital 14,250 13,550 12,100
Capital held at Group centre(4) 900 950 1,600
-------- -------- --------
Economic capital requirement
(excluding goodwill) 15,150 14,500 13,700
Average historic goodwill and
intangible assets(5) 7,900 7,150 5,800
-------- -------- --------
Total economic capital requirement(6) 23,050 21,650 19,500
-------- -------- --------
UK Retail Banking economic capital allocation remained unchanged at GBP2,400m.
UK Business Banking economic capital allocation increased GBP100m to GBP2,600m
as asset growth was offset by changes to estimates of risk correlation.
Barclaycard economic capital allocation increased GBP50m to GBP3,000m,
reflecting portfolio growth in the UK and Barclaycard US.
International Retail and Commercial Banking - excluding Absa economic capital
remained unchanged at GBP1,150m as portfolio growth in primarily in Africa,
Italy and Spain was offset by changes to estimates of risk correlation.
International Retail and Commercial Banking - Absa economic capital increased
GBP150m to GBP700m, after excluding the risk borne by the minority interest. The
allocation reflects six months of ownership, compared to the five months held in
the second half of 2005.
(1) Calculated using a five point average over the year. For the half-year a
three point average is used.
(2) For the second half of 2005 average economic capital demand for Absa relates
to 5 months.
(3) Includes Transition Businesses and capital for central function risks.
(4) The Group's practice is to maintain an appropriate level of excess capital,
held at Group centre, which is not allocated to business units. This variance
arises as a result of capital management timing and includes capital held to
cover pension contribution risk.
(5) Average goodwill relates to purchased goodwill and intangible assets from
business acquisitions and (with effect from 2006) capitalised software. Absa
goodwill is included for 5 months of the second-half of 2005. As at 30th June
2006 Absa goodwill and intangibles amounted to GBP1,800m and total goodwill and
intangibles was GBP8,100m.
(6) Total period-end economic capital requirement as at 30th June 2006 stood at
GBP24,100m (31st December 2005: GBP21,850m; 30th June 2005: GBP20,750m).
Barclays Capital economic capital allocation increased GBP500m to GBP3,600m,
reflecting underlying growth in derivative and loan portfolios and a methodology
enhancement to include specific market risk not previously measured in DVaR and
growth in Private Equity investments.
Wealth Management economic capital allocation decreased GBP50m to GBP350m
following changes in estimates of risk correlation.
Capital held at the Group centre decreased GBP50m to GBP900m as a result of
growth in the businesses being partially offset by an increase in available
funds to support economic capital (see Economic capital supply on page 65).
Economic capital supply
The capital resources to support economic capital comprise adjusted
shareholders' equity including preference shares but excluding other minority
interests. Preference shares have been issued to optimise the long-term capital
base of the Group.
The capital resources to support economic capital are impacted by a number of
factors arising from the application of IFRS and are modified in calculating
available funds for economic capital. This applies specifically to:
- Cashflow hedging reserve - to the extent that the Group undertakes the hedging
of future cash flows, shareholders' equity will include gains and losses which
will be offset against the gain or loss on the hedged item when it is recognised
in the income statement at the conclusion of the future hedged transaction.
Given the future offset of such gains and losses, they are excluded from
shareholders' equity when calculating economic capital.
- Available for sale reserve - unrealised gains and losses on such securities
are included in shareholders' equity until disposal or impairment. Such gains
and losses are excluded from shareholders' equity for the purposes of
calculating economic capital. Realised gains and losses, foreign exchange
translation differences and any impairment charges recorded in the income
statement will impact economic profit.
- Retirement benefits liability - the Group has recorded a deficit with a
consequent reduction in shareholders' equity. This represents a non-cash
reduction in shareholders' equity. For the purposes of calculating economic
capital, the Group will not deduct the pension deficit from shareholders'
equity.
The average supply of capital to support the economic capital framework is set
out below(1):
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Shareholders' equity excluding 10,750 10,650 11,000
minority
interests less goodwill(2)
Retirement benefits liability 1,300 1,350 1,500
Cashflow hedging reserve 50 (200) (250)
Available for sale reserve (50) (250) (300)
Preference shares 3,100 2,950 1,750
-------- -------- --------
Available funds for economic capital
excluding goodwill 15,150 14,500 13,700
Average historic goodwill and
intangible assets(2) 7,900 7,150 5,800
-------- -------- --------
Available funds for economic capital(3) 23,050 21,650 19,500
-------- -------- --------
(1) Averages for the period will not correspond to period-end balances disclosed
in the balance sheet. Numbers are rounded to the nearest GBP50m for
presentational purposes only.
(2) Average goodwill relates to purchased goodwill and intangible assets from
business acquisitions, and (with effect from 2006) capitalised software.
(3) Available funds for economic capital as at 30th June 2006 stood at
GBP24,100m (31st December 2005: GBP21,850m; 30th June 2005: GBP20,750m).
Economic profit
Economic profit comprises:
- Profit after tax and minority interests; less
- Capital charge (average shareholders' equity excluding minority interests
multiplied by the Group cost of capital).
The Group cost of capital has been applied at a uniform rate of 9.5%(1). The
costs of servicing preference shares are included in minority interests.
The economic profit performance in 2006 and 2005 is shown below:
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Profit after tax and minority 2,307 1,606 1,841
interests -------- -------- --------
Addback of amortisation charged on
acquired intangible assets(2) 23 22 7
-------- -------- --------
Profit for economic profit purposes 2,330 1,628 1,848
-------- -------- --------
Average shareholders' equity excluding
minority interests (3), (4) 10,750 10,650 11,000
Adjust for unrealised loss/(gains) on
cashflow hedge reserve(4) 50 (200) (250)
Adjust for unrealised gains on
available for sale financial
instruments (4) (50) (250) (300)
Add: retirements benefits liability 1,300 1,350 1,500
Goodwill and intangible assets arising
on acquisitions (4),(5) 7,900 7,150 5,800
-------- -------- --------
Average shareholders' equity for
economic profit purposes (3),(4) 19,950 18,700 17,750
-------- -------- --------
Capital charge at 9.5% (945) (880) (844)
-------- -------- --------
Economic profit 1,385 748 1,004
-------- -------- --------
(1) The Group's cost of capital for 2006 is unchanged from 2005 at 9.5%.
(2) Amortisation charged for purchased intangibles only, adjusted for tax and
minority interests.
(3) Average ordinary shareholders' equity for Group economic profit calculation
is the sum of adjusted equity and reserves plus goodwill and intangible assets
arising on acquisition, but excludes preference shares.
(4) Averages for the period will not correspond exactly to period end balances
disclosed in the balance sheet. Numbers are rounded to the nearest GBP50m for
presentation purposes only.
(5) Absa goodwill is included for 5 months for the second half of 2005. As at
30th June 2006 Absa goodwill and intangibles amounted to GBP1,800m (31st
December 2005: GBP1,800m).
Economic profit generated by business
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
UK Banking 641 577 553
-------- -------- --------
UK Retail Banking 314 316 270
UK Business Banking 327 261 283
-------- -------- --------
Barclaycard 55 68 115
International Retail and Commercial
Banking 187 135 70
-------- -------- --------
International Retail and Commercial
Banking-ex Absa 94 45 70
International Retail and Commercial
Banking-Absa 93 90 -
-------- -------- --------
Barclays Capital 671 323 383
Barclays Global Investors 195 170 129
Wealth Management 77 60 49
Wealth Management - closed life
assurance activities 4 1 (8)
Head office functions and other
operations (143) (323) (17)
-------- -------- --------
1,687 1,011 1,274
Historic goodwill and intangibles
arising on acquisition (376) (340) (275)
Variance to average shareholders'
funds (excluding minority interest) 74 77 5
-------- -------- --------
Economic profit 1,385 748 1,004
-------- -------- --------
Economic profit for the Group increased 38% (GBP381m) to GBP1,385m (2005:
GBP1,004m). The rise in economic profit was greater than the increase in both
profit before tax and earnings per share. This was due to the efficient use of
capital across the Group more than offsetting the increased share of minority
interests.
Barclaycard economic profit decreased 52% (GBP60m) to GBP55m (2005: GBP115m),
comprising a 14% decrease in profit before tax and a 14% increase in the
economic capital charge, arising from the impact of portfolio growth on average
economic capital.
International Retail and Commercial Banking - excluding Absa economic profit
increased 34% (GBP24m) to GBP94m (2005: GBP70m), comprising a 28% increase in
profit before tax and an increase in the economic capital charge of 5%. The
increase in economic capital charge reflects the impact of portfolio growth in
Africa and Spain on economic capital, partly offset by changes to estimates of
risk correlation.
Barclays Capital economic profit increased 75% (GBP288m) to GBP671m (2005:
GBP383m), comprising a 66% increase in profit before tax and a 36% increase in
the economic capital charge. The increase in economic capital charge reflects
the impact of portfolio growth in loan and derivative portfolios on economic
capital, partly offset by methodology enhancements.
Wealth Management economic profit increased 57% (GBP28m) to GBP77m (2005:
GBP49m), comprising a 31% increase in profit before tax and a decrease in the
economic capital charge of 8%, reflecting the benefit of changes to estimates of
risk correlation on average economic capital.
Group performance management
Performance relative to the 2004 to 2007 goal period
Barclays will continue to use goals to drive performance. At the end of 2003,
Barclays established a new set of four year performance goals for the period
2004-2007 inclusive. The primary goal is to achieve top quartile Total
Shareholder Return (TSR) relative to a peer group(1) of financial services
companies and is unchanged from the prior goal period. TSR is defined as the
value created for shareholders through share price appreciation, plus
re-invested dividend payments. The peer group is regularly reviewed to ensure
that it remains aligned to our business mix and the direction and scale of our
ambition.
In terms of progress towards Group goals, Barclays delivered Total Shareholder
Return (TSR) of 38% and was positioned 7th within its peer group (third
quartile) for the goal period commencing 1st January 2004. The TSR of the FTSE
100 Index for this period was 42%.
At the time of setting the TSR goal, we estimated that achieving top quartile
TSR would require the achievement of compound annual growth in economic
profit(2) in the range of 10% to 13% per annum (GBP6.5bn to GBP7.0bn of
cumulative economic profit) (3) to support top quartile TSR over the 2004-2007
goal period.
Economic Profit for the first half of 2006 was GBP1.4bn, a 38% increase on the
first six months of 2005. This, when added to the GBP1.8bn and GBP1.6bn
generated in 2005 and 2004 respectively, delivers a cumulative total of GBP4.8bn
for the goal period to date which is well ahead of the target range.
(1) Peer group for 2006 remained unchanged from 2005: ABN Amro, BBVA, BNP
Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan, Lloyds TSB, Royal Bank
of Scotland and UBS.
(2) Economic profit is defined on page 66.
(3) Restated for IFRS.
Risk Tendency
As part of its credit risk management system, the Group uses a model-based
methodology to assess the point-in-time expected loss of credit portfolios
across different customer categories. The approach is termed Risk Tendency and
applies to credit exposures in both wholesale and retail sectors. Risk Tendency
provides statistical estimates of losses expected to arise within the next year
based on averages in the ranges of possible losses expected from each of the
current portfolios. This can be contrasted with impairment allowances required
under accounting standards, which are based on objective evidence of impairment
as at the balance sheet date.
Since Risk Tendency and impairment allowances are calculated for different
purposes and on different bases, Risk Tendency does not predict loan impairment.
Risk Tendency is provided to present a view of the evolution of the quality and
scale of the credit portfolios.
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
UK Banking 470 430 400
-------- -------- --------
UK Retail Banking 195 180 170
UK Business Banking 275 250 230
-------- -------- --------
Barclaycard 1,340 1,100 980
International Retail and Commercial Banking 195 175 75
-------- -------- --------
International Retail and Commercial
Banking-ex Absa 70 75 75
International Retail and Commercial
Banking-Absa 125 100 -
-------- -------- --------
Barclays Capital 125 110 80
Wealth Management 10 5 5
Transition Businesses(1) 25 25 35
-------- -------- --------
2,165 1,845 1,575
-------- -------- --------
Risk Tendency increased 17% (GBP320m) to GBP2,165m (31st December 2005:
GBP1,845m).
The principal increase in Risk Tendency occurred in Barclaycard, where Risk
Tendency rose GBP240m to GBP1,340m, reflecting the deterioration of credit
conditions in the UK credit card and unsecured loan market and enhancements to
the methodology. Risk Tendency growth in the other businesses largely reflected
credit conditions and loan growth.
(1) Included within head office functions and other operations.
ADDITIONAL INFORMATION
Group reporting changes in 2006
Barclays announced on 16th June 2006 the impact of certain changes in Group
structure and reporting on 2005 and 2004 results.
Barclays has realigned a number of reportable business segments based on the
reorganisation of certain portfolios better to reflect the type of client
served, the nature of the products offered and the associated risks and rewards.
The Group's policy for the internal cost of funding and the segmental disclosure
of risk weighted assets was also revised with effect from 1st January 2006. The
restatements have no impact on the Group Income Statement or Balance Sheet.
Group structure changes - effective 1st January 2006
UK Retail Banking comprises Personal Customers, Local Business (formerly Small
Business), UK Premier and Home Finance (formerly Mortgages). A number of smaller
business clients previously within UK Business Banking are now managed and
reported within UK Retail Banking.
UK Business Banking comprises Larger Business and Medium Business including
Asset and Sales Finance. A number of financial institution, large corporate and
property clients previously within UK Business Banking are now managed by and
reported in Barclays Capital. A number of smaller business clients previously
within UK Business Banking are now managed and reported within UK Retail
Banking. Certain portfolios have been reclassified as businesses in transition
and are now managed and reported in Head office functions and other operations.
International Retail and Commercial Banking - Absa. The majority of Absa
Corporate and Merchant Banking has been relaunched as Absa Capital and is being
managed and reported in Barclays Capital.
Barclays Capital has added a number of financial institutions, large corporates
and property companies previously managed within UK Business Banking and
International Retail and Commercial Banking - Absa.
Head office functions and other operations. Certain lending portfolios
previously managed within UK Business Banking have been reclassified as
businesses in transition. These businesses are now centrally managed with the
objective of maximising the recovery from these assets.
The structure remains unchanged for: Barclays Global Investors; Wealth
Management; Wealth Management - closed life assurance activities; Barclaycard
and; International Retail and Commercial Banking excluding - Absa.
Changes to internal cost of funding - effective 1st January 2006
All transactions between the businesses are conducted on an arm's length basis.
Internal charges and transfer pricing adjustments are reflected in the
performance of each business. Head office functions and other operations
contains a centralised Treasury function which manages the Group's capital base,
generating a net interest income. Previously the net interest income was
allocated to the businesses based on the level of economic capital held by each
business as a proportion of that held by the Group, which ensured a nil net
interest income result in Treasury. The allocation is now determined by applying
Treasury's effective rate of return on capital to the average economic capital
held by each business.
Changes to risk weighted assets by business - effective 1st January 2006
Under the Group's securitisation programme, certain portfolios of loans and
advances to customers and other assets subject to securitisation or similar risk
transfer are adjusted in calculating the Group's risk weighted assets. With
effect from 1st January 2006 the costs associated with each securitisation,
which were previously held centrally, will be allocated to the relevant
businesses. The regulatory capital adjustments arising from the securitisation
programme will be attributed to the business which bears the costs.
Acquisitions and disposals
On 1st January 2006 Barclays completed the sale to Absa Group Limited of the
Barclays South African branch business. This business consists of the Barclays
Capital South African operations and Corporate and Business Banking activities
previously carried out by the South African Branch of International Retail and
Commercial Banking - excluding Absa, together with the associated assets and
liabilities.
On 29th June 2006, a wholly-owned subsidiary of Barclays Bank PLC acquired a 16%
minority equity stake in Greenergy International Limited, a UK based fuels and
biofuels company, for a cash consideration of GBP12m.
Basis of Preparation
There have been no significant changes to the accounting policies described in
the 2005 Annual Report. Therefore the information in this announcement has been
prepared using the accounting policies and presentation applied in 2005.
Future accounting developments
IFRS 7 ('Financial Instruments Disclosures') and an amendment to IAS 1
('Presentation of Financial Statements') on capital disclosures were issued by
the IASB in August 2005 for application in accounting periods beginning on or
after 1st January 2007 and have been adopted by the European Commission. The new
or revised disclosures will be adopted by the Group for reporting in 2007.
Consideration will be given during 2006 to the implications, if any, of the
following International Financial Reporting Interpretations Committee (IFRIC)
interpretations issued during 2005 and 2006 which first apply to accounting
periods beginning on or after 1st January 2007:
- Interpretation 7 - Applying the Restatement Approach under IAS 29
Financial Reporting in Hyperinflationary Economies
- Interpretation 8 - Scope of IFRS 2
- Interpretation 9 - Reassessment of Embedded Derivatives
- Interpretation 10 - Interim Financial Reporting and Impairment.
Share capital
The Group manages its debt and equity capital actively. The Group's authority to
buy back ordinary shares was renewed at the 2006 Annual General Meeting.
Group share schemes
The independent trustees of the Group's share schemes may make purchases of
Barclays PLC ordinary shares in the market at any time or times following this
announcement of the Group's results for the purposes of those schemes' current
and future requirements. The total number of ordinary shares purchased would not
be material in relation to the issued share capital of Barclays PLC.
Filings with the SEC
The results will be furnished as a Form 6-K to the US Securities and Exchange
Commission as soon as practicable following the publication of these results.
Competition and regulatory matters
The scale of regulatory change remains challenging, arising in part from the
implementation of some key European Union (EU) directives. Many changes to
financial services legislation and regulation have come into force in recent
years and further changes will take place in the near future. Concurrently,
there is continuing political and regulatory scrutiny of the operation of the
retail banking and consumer credit industries in the UK and elsewhere.
In the EU as a whole, this includes an inquiry into retail banking in all 25
member states by the European Commission's Directorate General for Competition.
The inquiry is looking at retail banking in Europe generally and the Group is
co-operating with the inquiry. The outcome of the inquiry is unclear, but it may
have an impact on retail banking in one or more of the EU countries in which the
Group operates and therefore on the Group's business in that sector.
In the UK, in September 2005 the Office of Fair Trading (OFT) received a
super-complaint from the Citizens Advice Bureau relating to payment protection
insurance (PPI). As a result of its inquiries, the OFT commenced a market study
on PPI in April 2006. The impact of the study is not known at present.
In relation to UK consumer credit:
- The OFT has carried out investigations into Visa and MasterCard credit card
interchange rates. The decision by the OFT in the MasterCard interchange case
was set aside by the Competition Appeals Tribunal in June 2006. The OFT's
investigation in the Visa interchange case is at an earlier stage and a second
MasterCard interchange case is ongoing. The outcome is not known but these
investigations may have an impact on the consumer credit industry in general and
therefore on the Group's business in this sector.
- The OFT also has a continuing investigation into the level of late and
over-limit fees on credit cards. The OFT announced its findings on 5th April
2006 requiring a response from credit card companies by 31st May 2006.
Barclaycard responded by confirming that it will be reducing its late and
over-limit fees on credit cards.
The OFT announced in January 2006 that it would be reviewing the undertakings
given following the conclusion of the Competition Commission Inquiry in 2002
into the supply of banking services to Small and Medium Sized Enterprises. The
OFT commenced the review in April 2006 and anticipates that it will take nine
months. The Group is cooperating fully with that review.
Recent developments
Barclays announced on 13th March 2006, that it had signed a non-binding Letter
of Intent with Canadian Imperial Bank of Commerce (CIBC) for the sale of
Barclays 43.7% stake in FirstCaribbean International Bank (FirstCaribbean) to
CIBC. On 29th June 2006 Barclays announced that it had entered into a definitive
agreement for the sale of the stake to CIBC for approximately US$1.08 billion.
CIBC has the option of paying for the transaction in cash, CIBC common shares,
or a combination of cash and shares, the relative proportions of which CIBC will
determine before completion. Barclays would not intend to be a long term holder
of any CIBC shares it may receive in connection with this transaction. The
transaction, which is subject to a number of conditions, including the receipt
of applicable regulatory approvals, is anticipated to complete in late 2006.
Barclays announced on 22nd June 2006 that it had entered into an agreement to
purchase the US mortgage servicing business of HomEq Servicing Corporation from
Wachovia Corporation for a consideration of US$469 million.
NOTES
1. Assets held in respect of linked liabilities to customers under investment
contracts/liabilities arising from investment contracts
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Non-trading financial instruments fair
valued through profit and loss held in
respect of linked liabilities 79,334 83,193 69,792
Cash and bank balances within the
funds 2,046 2,008 1,816
-------- -------- --------
Assets held in respect of linked
liabilities to customers under
investment contracts 81,380 85,201 71,608
-------- -------- --------
Liabilities arising from investment
contracts (81,380) (85,201) (71,608)
-------- -------- --------
2. Derivative financial instruments
The tables set out below analyse the contract or underlying principal and the
fair value of derivative financial instruments held for trading purposes and for
the purposes of managing the Group's structural exposures. Derivatives are
measured at fair value and the resultant profits and losses from derivatives
held for trading purposes are included in net trading income. Where derivatives
are held for risk management purposes and when transactions meet the criteria
specified in IAS 39, the Group applies hedge accounting as appropriate to the
risks being hedged.
As at 30.06.06
Contract
notional Fair value
amount Assets Liabilities
Derivatives designated as held for GBPm GBPm GBPm
trading
Foreign exchange derivatives 1,407,480 20,865 (20,885)
Interest rate derivatives 17,863,507 80,471 (80,625)
Credit derivatives 897,769 5,473 (5,075)
Equity and stock index and commodity
derivatives 587,142 29,099 (31,721)
-------- -------- --------
Total derivative assets/(liabilities)
held for trading 20,755,898 135,908 (138,306)
-------- -------- --------
Derivatives designated in hedge
accounting relationships
Derivatives designated as cash flow
hedges 31,724 135 (351)
Derivatives designated as fair value
hedges 15,982 267 (313)
Derivatives designated as hedges of net
investments 12,292 591 (12)
-------- -------- --------
Total derivative assets/(liabilities)
designated in hedge accounting
relationships 59,998 993 (676)
-------- -------- --------
Total recognised derivative
assets/(liabilities) 20,815,896 136,901 (138,982)
-------- -------- --------
Total derivative notionals as at 30th June 2006 have grown from 31st December
2005 primarily due to increases in the volume of fixed income derivatives, which
reflects the continued growth in our client base and increased use of electronic
trading platforms in Europe and the US. Credit derivative values have also
increased significantly due to growth in the market for these products.
As at 31.12.05
Contract
notional Fair value
amount Assets Liabilities
Derivatives designated as held for GBPm GBPm GBPm
trading
Foreign exchange derivatives 1,184,074 18,485 (17,268)
Interest rate derivatives 15,374,057 81,028 (79,701)
Credit derivatives 609,381 4,172 (4,806)
Equity and stock index and commodity
derivatives 637,452 32,481 (35,128)
-------- -------- --------
Total derivative assets/(liabilities)
held for trading 17,804,964 136,166 (136,903)
-------- -------- --------
Derivatives designated in hedge
accounting relationships
Derivatives designated as cash flow
hedges 40,080 232 (483)
Derivatives designated as fair value
hedges 33,479 423 (331)
Derivatives designated as hedges of
net investments 5,919 2 (254)
-------- -------- --------
Total derivative assets/(liabilities)
designated in
hedge accounting relationships 79,478 657 (1,068)
-------- -------- --------
Total recognised derivative
assets/(liabilities) 17,884,442 136,823 (137,971)
-------- -------- --------
As at 30.06.05
Contract
notional Fair value
amount Assets Liabilities
Derivatives designated as held for GBPm GBPm GBPm
trading
Foreign exchange derivatives 1,031,529 17,912 (17,174)
Interest rate derivatives 13,362,136 93,435 (91,197)
Credit derivatives 398,126 3,110 (2,897)
Equity and stock index and commodity
derivatives 376,436 18,492 (20,815)
-------- --------- --------
Total derivative assets/
(liabilities) held for trading 15,168,227 132,949 (132,083)
-------- --------- --------
Derivatives designated in hedge
accounting relationships
Derivatives designated as cash flow
hedges 22,839 283 (300)
Derivatives designated as fair value
hedges 38,857 694 (401)
Derivatives designated as hedges of
net investments 313 6 -
-------- --------- --------
Total derivative assets/
(liabilities) designated
in hedge accounting relationships 62,009 983 (701)
-------- --------- --------
Total recognised derivative
assets/(liabilities) 15,230,236 133,932 (132,784)
-------- --------- --------
3. Loans and advances to banks
As at
30.06.06 31.12.05 30.06.05
By geographical area GBPm GBPm GBPm
United Kingdom 7,848 4,624 6,026
Other European Union 10,209 5,423 11,992
United States 10,888 13,267 9,180
Africa 1,375 880 409
Rest of the World 5,014 6,915 7,630
-------- -------- --------
35,334 31,109 35,237
Less: Allowance for impairment (4) (4) (12)
-------- -------- --------
Total loans and advances to banks 35,330 31,105 35,225
-------- -------- --------
Of the total loans and advances to banks, placings with banks were GBP18.1bn
(2005: GBP21.1bn).
4. Loans and advances to customers
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Retail business 134,534 144,039 109,566
Wholesale and corporate business 150,963 128,303 130,385
-------- -------- --------
285,497 272,342 239,951
Less: Allowances for impairment (3,400) (3,446) (2,828)
-------- -------- --------
Total loans and advances to customers 282,097 268,896 237,123
-------- -------- --------
By geographical area
United Kingdom 164,417 163,759 165,382
Other European Union 43,528 38,923 35,479
United States 26,523 22,925 22,588
Africa 29,694 33,221 3,046
Rest of the World 21,335 13,514 13,456
-------- -------- --------
285,497 272,342 239,951
Less: Allowance for impairment (3,400) (3,446) (2,828)
-------- -------- --------
Total loans and advances to customers 282,097 268,896 237,123
-------- -------- --------
By industry
Financial institutions 56,616 43,102 44,791
Agriculture, forestry and fishing 3,449 3,785 2,426
Manufacturing 13,951 13,779 12,717
Construction 4,430 5,020 4,478
Property 16,929 16,325 7,797
Energy and water 5,527 6,891 4,976
Wholesale and retail distribution and
leisure 16,902 17,760 13,844
Transport 5,252 5,960 5,169
Postal and communication 1,394 1,313 1,164
Business and other services 29,453 24,247 28,721
Home loans(1) 89,001 89,529 75,435
Other personal 31,865 35,543 30,287
Finance lease receivables 10,728 9,088 8,146
-------- -------- --------
285,497 272,342 239,951
Less: Allowance for impairment (3,400) (3,446) (2,828)
-------- -------- --------
Total loans and advances to customers 282,097 268,896 237,123
-------- -------- --------
The industry classifications have been prepared at the level of the borrowing
entity. This means that a loan to the subsidiary of a major corporation is
classified by the industry in which that subsidiary operates even though the
parent's predominant business may be a different industry.
Loans and advances grew 5% (GBP13,201m) to GBP282,097m (31st December 2005:
GBP268,896m).
(1) Excludes commercial property mortgages.
5. Allowance for impairment on loans and advances
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
At beginning of period 3,450 2,840 2,637
Acquisitions and disposals (3) 532 23
Exchange and other adjustments (105) 62 63
Unwind of discount (48) (46) (30)
Amounts written off (see below) (996) (923) (664)
Recoveries (see below) 125 124 98
Amounts charged against profit (see
below) 981 861 713
-------- -------- --------
At end of period 3,404 3,450 2,840
-------- -------- --------
Amounts written off
United Kingdom (751) (682) (620)
Other European Union (54) (40) (16)
United States (18) (119) (24)
Africa (167) (77) (4)
Rest of the World (6) (5) -
-------- -------- --------
(996) (923) (664)
-------- -------- --------
Recoveries
United Kingdom 80 95 65
Other European Union 10 9 4
United States 13 9 6
Africa 17 15 1
Rest of the World 5 (4) 22
-------- -------- --------
125 124 98
-------- -------- --------
Impairment charged against profit:
New and increased impairment
allowances
United Kingdom 1,042 936 827
Other European Union 56 68 45
United States 44 68 37
Africa 102 92 17
Rest of the World 13 20 19
-------- -------- --------
1,257 1,184 945
-------- -------- --------
Less: Releases of impairment allowance
United Kingdom (84) (124) (97)
Other European Union (25) (15) (10)
United States (16) 9 (23)
Africa (15) (52) (4)
Rest of the World (11) (17) -
-------- -------- --------
(151) (199) (134)
-------- -------- --------
Recoveries (125) (124) (98)
-------- -------- --------
Total impairment charges on loans and
advances(1) 981 861 713
-------- -------- --------
(1) This excludes other credit provisions and impairment on available for sale
assets detailed on page 50.
Half-year ended
30.06.06 31.12.05 30.06.05
Allowance GBPm GBPm GBPm
United Kingdom 2,428 2,266 2,174
Other European Union 259 284 282
United States 128 130 149
Africa 474 647 76
Rest of the World 115 123 159
-------- -------- --------
3,404 3,450 2,840
-------- -------- --------
6. Potential credit risk loans
The following tables present an analysis of potential credit risk loans
(non-performing and potential problem loans).
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Potential credit risk loans
Summary
Impaired loans(1) 4,630 4,550 3,735
Accruing loans which are contractually
overdue 90 days or more as to principal
or interest 618 609 613
-------- -------- --------
5,248 5,159 4,348
Restructured loans 46 51 23
-------- -------- --------
Total non-performing loans 5,294 5,210 4,371
Potential problem loans 935 929 731
-------- -------- --------
Total potential credit risk loans 6,229 6,139 5,102
-------- -------- --------
Geographical split
Impaired loans(1):
United Kingdom 3,164 2,965 2,870
Other European Union 461 345 305
United States 172 230 237
Africa 657 831 122
Rest of the World 176 179 201
-------- -------- --------
Total 4,630 4,550 3,735
-------- -------- --------
Accruing loans which are contractually
overdue 90 days or more as to principal
or interest
United Kingdom 528 539 576
Other European Union 67 53 31
United States 2 - 1
Africa 21 17 5
Rest of the World - - -
-------- -------- --------
Total 618 609 613
-------- -------- --------
(1) Impaired loans are non-performing loans where, in general, an impairment
allowance has been raised. This classification may also include non-performing
loans which are fully collateralised or where the indebtedness has already been
written down to the expected realisable value.
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Restructured loans
United Kingdom 2 5 -
Other European Union 10 7 7
United States 17 16 16
Africa 17 23 -
Rest of the World - - -
-------- -------- --------
Total 46 51 23
-------- -------- --------
Total non-performing loans
United Kingdom 3,694 3,509 3,446
Other European Union 538 405 343
United States 191 246 254
Africa 695 871 127
Rest of the World 176 179 201
-------- -------- --------
Total 5,294 5,210 4,371
-------- -------- --------
Potential problem loans
United Kingdom 599 640 561
Other European Union 51 26 58
United States 35 12 43
Africa 248 248 66
Rest of the World 2 3 3
-------- -------- --------
Total 935 929 731
-------- -------- --------
Total potential credit risk loans
United Kingdom 4,293 4,149 4,007
Other European Union 589 431 401
United States 226 258 297
Africa 943 1,119 193
Rest of the World 178 182 204
-------- -------- --------
Total 6,229 6,139 5,102
-------- -------- --------
Allowance coverage of non-performing % % %
loans
United Kingdom 65.7 64.6 63.1
Other European Union 48.1 70.1 82.2
United States 67.0 52.8 58.7
Africa 68.2 74.3 59.8
Rest of the World 65.3 68.7 79.1
-------- -------- --------
Total 64.3 66.2 65.0
-------- -------- --------
Allowance coverage of total potential % % %
credit risk loans
United Kingdom 56.6 54.6 54.3
Other European Union 44.0 65.9 70.3
United States 56.6 50.4 50.2
Africa 50.3 57.8 39.3
Rest of the World 64.6 67.6 77.9
-------- -------- --------
Total 54.6 56.2 55.7
-------- -------- --------
As at
30.06.06 31.12.05 30.06.05
Allowance coverage of non-performing % % %
loans:
Retail 63.2 62.3 64.3
Wholesale and corporate 66.8 74.2 66.3
--------- --------- ---------
Total 64.3 66.2 65.0
--------- --------- ---------
Allowance coverage of total potential
credit risk loans:
Retail 56.9 57.1 59.2
Wholesale and corporate 50.4 54.4 49.8
--------- --------- ---------
Total 54.6 56.2 55.7
--------- --------- ---------
In the half year to 30th June 2006, Group non-performing loans (NPLs) increased
2% to GBP5,294m (31st December 2005: GBP5,210m). Retail NPLs increased 3% and
wholesale and corporate NPLs were broadly flat.
Potential problem loans (PPLs) were broadly flat at GBP935m (31st December 2005:
GBP929m). Retail PPLs increased 25% and wholesale and corporate PPLs declined
12%.
Potential Credit Risk Loans (PCRLs) increased 1% from 31st December 2005 to
GBP6,229m (31st December 2005: GBP6,139m). Retail PCRLs increased 5% and
wholesale and corporate PCRLs declined 5%.
7. Available for sale financial investments
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Debt securities 49,908 50,024 59,227
Equity securities 1,400 1,258 848
Treasury bills and other eligible
bills 2,498 2,223 1,068
--------- --------- ---------
53,806 53,505 61,143
Less: Allowance for impairment (90) (8) -
--------- --------- ---------
Available for sale financial
investments 53,716 53,497 61,143
--------- --------- ---------
8. Other assets
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Sundry debtors 3,980 3,569 2,789
Prepayments 962 722 530
Accrued income 834 329 172
Insurance assets, including unit
linked assets 90 114 107
-------- -------- --------
Other assets 5,866 4,734 3,598
-------- -------- --------
9. Other liabilities
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Obligations under finance leases payable 102 289 338
Sundry creditors 5,772 6,131 5,477
Accruals and deferred income 4,893 4,711 3,834
-------- -------- --------
Other liabilities 10,767 11,131 9,649
-------- -------- --------
10. Other provisions for liabilities
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Redundancy and restructuring 90 74 70
Undrawn contractually committed facilities
and guarantees 50 55 48
Onerous contracts 44 79 42
Sundry provisions 290 309 226
-------- -------- --------
Other provisions for liabilities 474 517 386
-------- -------- --------
11. Other reserves
As at
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Available for sale reserve 9 225 374
Cash flow hedging reserve (172) 70 328
Capital redemption reserve 309 309 309
Other capital reserve 617 617 617
Translation reserve (176) 156 (35)
-------- -------- --------
Other reserves 587 1,377 1,593
-------- -------- --------
Movements in other reserves reflect the relevant amounts recorded in the
consolidated statement of recognised income and expense on page 88.
The movements include related tax impacts but exclude amounts attributable to
minority interests.
12. Retirement benefit liabilities
The Group's IAS 19 pension deficit across all schemes as at 30th June 2006 was
GBP1,843m (31st December 2005: GBP2,879m). This comprises net recognised
liabilities of GBP1,893m (31st December 2005: GBP1,737m) and unrecognised
actuarial gains of GBP50m (31st December 2005: GBP1,142m unrecognised actuarial
loss). The net recognised liabilities comprises retirement benefit liabilities
of GBP1,976m (31st December 2005: GBP1,823m) and assets of GBP83m (31st December
2005: GBP86m).
The Group's IAS 19 pension deficit in respect of the main UK scheme as at 30th
June 2006 was GBP1,469m (31st December 2005: GBP2,535m). The primary reason for
this change was the increase in the discount rate from 4.83% pa at 31st December
2005 to 5.32% pa at 30th June 2006, reflecting the increase in AA corporate bond
yields over the period. This change in assumptions had the effect of decreasing
the liabilities measured for IAS19 purposes by GBP1,738m and more than offset
the effect of an increase in the inflation assumption to 2.9% (31st December
2005: 2.75%).
The actuarial funding position of the main UK pension scheme as at 30th June
2006, estimated from the formal triennial valuation in 2004, was a surplus of
GBP1,300m (31st December 2005: surplus of GBP900m).
The Pensions Protection Fund (PPF) solvency ratio(1) for the main UK scheme as
at 30th June 2006 was estimated to be 116% (31st December 2005: 110%).
(1) The PPF solvency ratio represents the funds assets as a percentage of
pension liabilities calculated using a section 179 valuation model.
13. Legal proceedings
Barclays has for some time been party to proceedings, including a class action,
in the United States against a number of defendants following the collapse of
Enron; the class action claim is commonly known as the Newby litigation. On 20th
July 2006 Barclays received an Order from the United States District Court for
the Southern District of Texas Houston Division which dismissed the claims
against Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. in the Newby
litigation. This Order, unless successfully challenged by the Plaintiffs, ends
the Newby litigation for Barclays.
Barclays considers that the remaining Enron claims against it are without merit
and is defending them vigorously. It is not possible to estimate Barclays
possible loss in relation to these matters, nor the effect that it might have
upon operating results in any particular financial period.
Barclays has been in negotiations with the staff of the US Securities and
Exchange Commission with respect to a settlement of the Commission's
investigation of transactions between Barclays and Enron. Barclays has also been
in negotiations in the Enron bankruptcy proceedings. Barclays does not expect
that the amount of any settlement with the Commission or in the bankruptcy
proceedings would have a significant adverse effect on its financial position or
operating results.
Barclays is engaged in various other litigation proceedings both in the United
Kingdom and a number of overseas jurisdictions, including the United States,
involving claims by and against it, which arise in the ordinary course of
business. Barclays does not expect the ultimate resolution of any of the
proceedings to which Barclays is party to have a significant adverse effect on
the financial position of the Group and Barclays has not disclosed the
contingent liabilities associated with these claims either because they cannot
reasonably be estimated or because such disclosure could be prejudicial to the
conduct of the claims.
14. Contingent liabilities and commitments
As at
30.06.06 31.12.05 30.06.05
Contingent liabilities GBPm GBPm GBPm
Acceptances and endorsements 248 283 271
Guarantees and assets pledged as collateral
for security 33,417 38,035 35,703
Other contingent liabilities 8,354 8,825 8,503
-------- -------- --------
42,019 47,143 44,477
-------- -------- --------
Commitments
Standby facilities, credit lines and other
commitments 204,860 203,785 163,037
-------- -------- --------
Contingent liabilities decreased 11% (GBP5.1bn) to GBP42.0bn (31st December
2005: GBP47.1bn).
Commitments increased 1% (GBP1.1bn) to GBP204.9bn (31st December 2005:
GBP203.8bn).
15. Market risk
Market risk is the risk that the Group's earnings, capital, or ability to meet
its business objectives, will be adversely affected by changes in the level or
volatility of market rates or prices such as interest rates, credit spreads,
foreign exchange rates, equity prices and commodity prices.
Barclays Capital's market risk exposure, as measured by average total Daily
Value at Risk (DVaR), increased in the first half of 2006 to GBP36.2m. This was
mainly due to an increase in non-interest rate trading risk. Total DVaR as at
30th June 2006 was GBP36.4m (31st December 2005: GBP37.6m(1)).
(1) This was previously reported as GBP37.4m. The increase is due to the
inclusion of Absa Capital.
Analysis of Barclays Capital's market risk exposures
The daily average, maximum and minimum values of DVaR were calculated as below:
DVaR
Half-year ended
30th June 2006
-------------------
Average High(1) Low(1)
GBPm GBPm GBPm
Interest rate risk 20.5 25.2 14.6
Credit spread risk 24.2 27.5 20.9
Foreign exchange risk 4.5 7.7 2.0
Equities risk 7.7 10.0 6.0
Commodities risk 8.4 13.9 5.7
Diversification effect (29.1) - -
------- -------- -------
Total DVaR 36.2 43.0 31.3
------- -------- -------
Half-year ended
31st December 2005
-------------------
Average High(1) Low(1)
GBPm GBPm GBPm
Interest rate risk 26.2 34.1 18.6
Credit spread risk 22.4 27.6 19.0
Foreign exchange risk 2.7 5.4 1.6
Equities risk 6.8 8.3 3.9
Commodities risk 7.7 11.4 5.4
Diversification effect (32.2) - -
------- -------- -------
Total DVaR 33.6 40.7 27.2
------- -------- -------
Half-year ended
30th June 2005
-------------------
Average High(1) Low(1)
GBPm GBPm GBPm
Interest rate risk 24.6 44.8 15.4
Credit spread risk 23.6 28.3 19.4
Foreign exchange risk 2.9 5.3 1.6
Equities risk 5.2 7.3 3.9
Commodities risk 5.8 7.6 4.5
Diversification effect (31.7) - -
------- ------- -------
Total DVaR 30.4 37.4 25.4
------- ------- -------
(1) The high (and low) DVaR figures reported for each category did not
necessarily occur on the same day as the high (and low) DVaR reported as a
whole. Consequently a diversification effect number for the high (and low) DVaR
figures would not be meaningful and it is therefore omitted from the above
table.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED)
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net movements in available for sale
reserve (313) (195) 86
Net movements in cash flow hedging
reserve (419) (147) 28
Currency translation differences
arising during the period (595) 277 23
Tax 267 168 (118)
Other movements 30 (112) 10
-------- -------- --------
Amounts included directly in equity (1,030) (9) 29
Profit for the period 2,601 1,866 1,975
-------- -------- --------
Total recognised income and expense
for the period 1,571 1,857 2,004
-------- -------- --------
Attributable to:
Equity holders of the parent 1,561 1,506 1,873
Minority interests 10 351 131
-------- -------- --------
1,571 1,857 2,004
-------- -------- --------
The consolidated statement of recognised income and expense reflects all items
of income and expense for the period, including items taken directly to equity
in accordance with IFRS. Movements in individual reserves include amounts which
relate to minority interests; the impact of such amounts is then reflected in
the amount attributable to such interests. Income and expense recognised
directly in equity is recorded on a gross basis with any related tax recorded on
the separate tax line.
The available for sale reserve reflects gains or losses arising from the change
in fair value of available for sale financial assets except for impairment
losses and foreign exchange gains or losses on monetary items such as debt
securities, which are recognised in the income statement. When an available for
sale asset is impaired or derecognised, the cumulative gain or loss previously
recognised in the available for sale reserve is transferred to income. The
movement in the first half of 2006 reflects net unrealised losses from changes
in fair value and the transfer of net realised gains to the income statement on
disposal of assets.
Cash flow hedging aims to minimise exposure to variability in cash flows that is
attributable to a particular risk associated with a recognised asset or
liability or a highly probable forecast transaction that could affect profit or
loss. The portion of the gain or loss on the hedging instrument that is deemed
to be an effective hedge is recognised in the cash flow hedging reserve. The
movement in the first half of 2006 primarily reflects net unrealised losses from
changes in the fair value of the hedging instruments. The gains and losses
deferred in this reserve will be transferred to the income statement in the same
period or periods during which the hedged item is recognised in the income
statement.
Exchange differences arising on the net investments in foreign operations and
effective hedges of net investments are recognised in the translation reserve
and transferred to income on the disposal of the net investment. The movement in
the period primarily reflects the impact of changes in the value of the Rand on
the minority interest in Absa Group Limited and changes in the value of the US
Dollar on net investments which are economically hedged through
dollar-denominated preference share capital, but where the hedging item is not
revalued for accounting purposes.
Other movements primarily reflect the change in insurance liabilities taken
directly to reserves.
SUMMARY CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Half-year ended
30.06.06 31.12.05 30.06.05
GBPm GBPm GBPm
Net cash inflow/(outflow) from
operating activities 8,280 (28,082) 17,584
Net cash (outflow)/inflow from
investing activities (1,159) 6,213 (11,394)
Net cash inflow from financing
activities 1,837 12,593 2,526
-------- -------- --------
Net (gain)/loss on exchange rate
changes on cash and cash equivalents (386) 301 (539)
-------- -------- --------
Net increase/(decrease) in cash and
cash equivalents 8,572 (8,975) 8,177
Cash and cash equivalents at beginning
of period 20,805 29,780 21,603
-------- -------- --------
Cash and cash equivalents at end of
period 29,377 20,805 29,780
-------- -------- --------
OTHER INFORMATION
Registered office
1 Churchill Place, London, E14 5HP, England, United Kingdom. Tel: +44 (0) 20
7116 1000.
Company number: 48839.
Website
www.barclays.com
Registrar
The Registrar to Barclays PLC, The Causeway, Worthing, West Sussex, BN99 6DA,
England, United Kingdom. Tel: + 44 (0) 870 609 4535.
Listing
The principal trading market for Barclays PLC ordinary shares is the London
Stock Exchange. Ordinary shares are also listed on the New York Stock Exchange
and the Tokyo Stock Exchange. Trading on the New York Stock Exchange is in the
form of ADSs under the ticker symbol 'BCS'. Each ADS represents four ordinary
shares of 25p each and is evidenced by an ADR. The ADR depositary is The Bank of
New York whose international telephone number is +1-212-815-3700, whose domestic
telephone number is 1-888-BNY-ADRS and whose address is The Bank of New York,
Investor Relations, PO Box 11258, Church Street Station, New York, NY
10286-1258.
Filings with the SEC
Statutory accounts for the year ended 31st December 2005, which also include
certain information required for the joint Annual Report on Form 20-F of
Barclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission
(SEC), can be obtained from Corporate Communications, Barclays Bank PLC, 200
Park Avenue, New York, NY 10166, United States of America or from the Director,
Investor Relations at Barclays registered office address, shown above. Copies of
the Form 20-F are also available from the Barclays Investor Relations' website
(details below) and from the SEC's website (www.sec.gov).
Results timetable
Ex-dividend date Wednesday, 16th August 2006
Dividend Record Date Friday, 18th August 2006
Dividend Payment Date Monday, 2nd October 2006
Full Year Trading Update* Tuesday, 28th November 2006
2006 Preliminary Results* Tuesday, 20th February 2006
*Note that these announcement dates are provisional and subject to change.
Economic data
30.06.06 31.12.05 30.06.05
Period end - US$/GBP 1.85 1.72 1.79
Average - US$/GBP 1.79 1.82 1.88
Period end - EUR/GBP 1.45 1.46 1.48
Average - EUR/GBP 1.46 1.46 1.46
Period end - ZAR/GBP 13.19 10.87 11.96
Average - ZAR/GBP 11.31 11.57 11.63
For further information please contact:
Investor Relations Media Relations
-------------------- -----------------
Mark Merson/James S Johnson Jason Nisse/Alistair Smith
+44 (0) 20 7116 5752/2927 +44 (0) 20 7116 6223/6132
More information on Barclays can be found on our website at the following
address: www.investorrelations.barclays.com
APPENDIX
Absa Group Limited results(1)
This appendix summarises the Rand results of Absa Group Limited for the half
year to 30th June 2006, as reported to the Johannesburg Stock Exchange, and
their impact in Sterling on the consolidated interim results of Barclays.
Absa Group Limited's profit before tax increased 16% (R688m) to R4,881m (2005:
R4,193m), reflecting very good performances from banking operations which were
well spread across all business segments. Absa's bancassurance offering was
negatively affected by increased equity market volatility.
Net interest income grew strongly by 28% (R1,575) to R7,163m (2005: R5,588m) as
credit demand remained strong. Loans and advances to customers increased by 14%
to R367bn (31st December 2005: R322bn). Mortgages and credit cards remained the
core drivers of this growth. Margins contracted modestly reflecting an increased
reliance on wholesale funding as well as increased competition.
Non-interest income increased 3% (R183m) to R6,600m (2005: R6,417m). Increased
retail transaction volumes were partially offset by the closure of Absa Group's
international operations outside Africa, and lower fair value gains in respect
of the listed equity portfolio.
Impairment charges increased 5% (R26m) to R594m (2005: R568m). The increase
largely arose in Absa Home Loans and Retail Banking Services. The ratio of
non-performing loans to total advances continued its downward trend and improved
to 1.3% (2005: 2.0%).
Operating expenses increased 15% (R1,091m) to R8,357m (2005: R7,266m),
principally due to the further expansion of the Group's branch and ATM network
and regulatory and compliance expenditure.
Absa Capital has demonstrated very strong growth in profit after tax for the six
months under review of 22% (R111m) to R617m (2005: R506m). Total income
increased by 90% compared with the comparable period.
Absa Group has made good progress with integration and the realisation of
synergy benefits. Included in Absa Group Limited's results for 2006 are R262m
(GBP23m) of integration costs and R197m (GBP17m) of sustainable pre-tax synergy
benefits. Total revenue and cost synergies identified to date are expected to
improve Absa Group Limited's pre-tax profits by approximately R1.4bn per annum
four years after the completion of the transaction. Implementation costs
totalling R1.8bn are expected to be incurred over the first three years.
Absa Group Limited's profit before tax of R4,881m is translated into the
Barclays results at an average exchange rate for the period of R11.31/GBP.
Consolidation adjustments reflect amortisation of intangible assets of GBP42m
and internal funding costs and other adjustments of GBP28m. The resulting profit
before tax of GBP362m is represented within International Retail and Commercial
Banking - Absa (GBP317m) and Barclays Capital (GBP45m).
(1) Absa Group's interim reporting period has changed from the six months ended
30th September to the six months ended 30th June. This change was necessitated
by the need to align Absa's financial reporting with that of Barclays. To
facilitate evaluation and interpretation, these results are compared with
unaudited proforma results for the six months ended 30th June 2005.
Half-year ended
30.06.06 30.06.05
Proforma
-------- --------
Rm Rm
-------- --------
Interest and similar income 17,977 13,977
Interest expense and similar charges (10,814) (8,389)
-------- --------
Net interest income 7,163 5,588
Impairment losses on loans and advances (594) (568)
-------- --------
6,569 5,020
-------- --------
Fee and commission income 5,113 4,881
Fee and commission expense (272) (224)
-------- --------
Net fee and commission income 4,841 4,657
-------- --------
Insurance premium revenue 1,549 1,243
Premiums ceded to reinsurers (141) (169)
-------- --------
Net insurance premium income 1,408 1,074
-------- --------
Gross claims and benefits paid on insurance contracts (622) (508)
Reinsurance recoveries 15 21
-------- --------
Net claims and benefits paid (607) (487)
Changes in insurance and investment liabilities (564) (257)
Gains and losses from banking and trading activities 461 264
Gains and losses from investment activities 629 663
Other operating income 432 503
-------- --------
Net operating income 13,169 11,437
Operating expenses (8,357) (7,266)
Share of profit of associated and joint venture
companies 69 22
-------- --------
Operating profit before income tax 4,881 4,193
-------- --------
--------
Cost:income ratio 61% 61%
Cost:net income ratio 63% 64%
Index of Main Reference Points
Acquisitions and disposals 71
Additional information 72
Allowance for impairment on loans and advances 78
Analysis of profit attributable 16
Appendix 92, 93
Assets held in respect of linked liabilities 74
Available for sale financial investments 82
Balance sheet (consolidated) 10, 11
Barclaycard 13, 24, 25
Barclays Capital 14, 32, 33
Barclays Global Investors 14, 34, 35
Business margins 43
Basis of preparation 72
Business net interest income 44
Capital ratios 59
Capital resources 58
Cash flow statement - summary (consolidated) 89
Changes to internal cost of funding 71
Changes to risk weighted assets by business 71
Chief Executive's Half-year review 5
Competition and regulatory matters 73
Contingent liabilities and commitments 85
Derivative financial instruments 74
Dividends on ordinary shares 57
Daily Value at Risk (DVaR) 87
Earnings per share 56
Economic capital 62
Economic capital demand 63
Economic capital supply 65
Economic data 90
Economic profit 66
- by business 67
Filings with the SEC 72, 90
Financial highlights 4
Future accounting developments 72
Glossary of terms ii
Group performance management 68
Group reporting changes in 2006 70
Group share schemes 72
Group structure changes 70
Head office functions and other operations 15, 40
Impairment charges 49
Income statement (consolidated) 9
International Retail and Commercial Banking 13, 26, 27
- excluding Absa 13, 28, 29
Legal proceedings 85
Loans and advances to banks 76
Loans and advances to customers 77
Margins (business) 43
Market risk 86
Net fee and commission income 46
Net premiums from insurance contracts 48
Net claims and benefits paid on insurance
contracts 48
Net interest income 42
Operating expenses 51
Other assets 83
Other income 48
Other information 90
Other liabilities 83
Other provisions for liabilities 83
Performance summary 2
Potential credit risk loans 80
Principal transactions 47
Profit attributable to minority interests 55
Profit before tax 1
Recent developments 73
Reconciliation of business interest income to
group net interest income 44
Reconciliation of regulatory capital 60
Results by business 12
Results timetable 90
Retirement benefit liabilities 84
Risk asset ratio 4, 59
Risk Tendency 69
Risk weighted assets 17, 59, 61
Share capital 58, 72
Share of post-tax results of associates
and joint ventures 55
Staff costs 52
Staff numbers 53
Statement of recognised income and expense
(consolidated) 88
Summary of key information 1
Tax 55
Tier 1 ratio 4, 59
Total assets 17, 61
UK Banking 12, 18, 19
UK Business Banking 12, 22, 23
UK Retail Banking 12, 20, 21
Wealth Management 14, 36, 37
Wealth Management-closed life assurance
activities 14, 38, 39
- Absa 14, 30, 31 93