UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
August 7, 2008
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):
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.
EXHIBIT INDEX
Interim Results 7 August 2008
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 7, 2008
By: /s/ Patrick Gonsalves
----------------------
Patrick Gonsalves
Deputy Secretary
BARCLAYS BANK PLC
(Registrant)
Date: August 7, 2008
By: /s/ Patrick Gonsalves
----------------------
Patrick Gonsalves
Joint Secretary
|
Barclays Bank PLC – 2008 Interim Results |
|
Barclays
Bank
PLC
Interim Results Announcement
30th June 2008
|
Barclays Bank PLC – 2008 Interim Results |
|
Table of Contents
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Page |
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|
Interim M anagement R eport |
|
|
Performance Highlights |
1 |
|
Group Chief Executive’s Review |
2 |
|
Group Finance Director’s Review |
4 |
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Risk Management |
6 |
|
Statement of Directors’ Responsibilities |
10 |
|
Condensed consolidated interim financial statements |
|
|
Independent Auditors’ Review Report |
11 |
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Accounting Policies |
13 |
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Consolidated Interim Income Statement |
14 |
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Consolidated Interim Balance Sheet |
15 |
|
Condensed Consolidated Interim Statement of Recognised Income and Expense |
17 |
|
Condensed Consolidated Interim Cash Flow Statement |
18 |
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Notes to the Condensed Consolidated Interim Financial Statements |
19 |
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Additional I nformation |
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Other Information |
42 |
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Glossary |
43 |
BARCLAYS BANK PLC, 1 CHURCHILL PLACE, LONDON, E14 5HP, UNITED KINGDOM. TELEPHONE: +44 (0) 20 7116 1000. COMPANY NO. 1026167
This interim report does not contain detailed disclosures
reflecting the impact of recent market turmoil as recommended by the Financial Stability
Forum in its report on ‘Enhancing Market and Institutional Resilience’
published in April 2008 and the Committee of European Banking Supervisors in its report on
‘Banks’ Transparency on Activities and Products affected by the Recent Market
Turmoil’ published in June 2008. This report contains disclosure on credit market
exposures held by Barclays Capital on page 9
and more extensive disclosures are contained in the Barclays
PLC Interim Results Announcement
for the half year ended 30th June 2008. The data presented in
the Barclays PLC Interim Results Announcement
relating to credit market exposures is identical to that
reportable for the Barclays Bank PLC Group.
Unless otherwise stated, the income statement analyses compare the six months to 30th June
2008 to the corresponding six months of 2007 (as restated on 22nd July 2008). Balance sheet
comparisons, unless otherwise stated, relate to the corresponding position at 31st December
2007.
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, UK domestic and global
economic and business conditions, the effects of continued volatility in credit markets and
of further writedowns and credit exposures, market related risks such as changes in
interest rates and exchange rates, the policies and actions of governmental and regulatory
authorities including classification of financial instruments for regulatory capital
purposes, changes in legislation, the further development of standards and interpretations
under International Financial Reporting Standards (IFRS) applicable to past, current and
future periods, evolving practices with regard to the interpretation and application of
standards under IFRS, the outcome of pending and future litigation, the success of future
acquisitions and other strategic transactions 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. Additional risks
and factors are identified in this document in
“principal risks and uncertainties” and in
our filings with the US Securities and Exchange Commission
(the ‘SEC’) including in our annual report on form 20-F for the fiscal year
ended 31st December 2007 which is available on the SEC website at http://www.sec.gov.
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.
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Barclays Bank PLC – 2008 Interim Results |
|
“In the difficult environment of the first half of 2008, Barclays remained solidly
profitable, albeit at levels below the record performance achieved last year.
We were helped by the earnings diversification that we have created across the Group and by
our improved ability to flex both costs and balance sheet. This enabled us to absorb the
cost of the credit market dislocation while seeking opportunities in areas of
long term growth.”
John Varley, Group Chief Executive
|
— |
Income in line with record prior year despite challenging conditions |
|
— |
Costs decreased 3%, leading to a one percentage point improvement in the cost:income ratio |
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Group profit before tax of £2.78bn, reflecting lower profits from Investment Banking and Investment Management as a consequence of the credit market dislocation and an increased contribution from Global Retail and Commercial Banking: |
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– |
Improved profitability, tight cost control and strong mortgage book growth in UK Retail Banking |
|
– |
Stable performance in Barclays Commercial Bank, consistent with cautious lending approach |
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– |
Very strong profit growth at Barclaycard with good progress both internationally and in the UK |
|
– |
Accelerated investment in Barclays international retail and commercial banking network reflected in very strong income growth |
|
– |
Barclays Capital profitable after a further £1bn of net losses in the second quarter due to credit market dislocation, in addition to the £1bn already announced in the first quarter; costs and credit market exposures significantly reduced |
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– |
Solid income growth at Barclays Global Investors and selective support for liquidity products |
|
– |
Broadly based income growth in Barclays Wealth |
Group Chief Executive’s Review
The conditions in the market that we have seen over the course of the last twelve months
are as difficult as we have experienced in many years. Although I take some comfort from
our relative performance in managing our risks and in generating income, a decline in
profit of 33% is acutely disappointing. Profit before tax of £2.78 billion for the
period reflects stable income year on year; an improvement of one percentage point in our
cost:income ratio; and substantial investment in our distribution channels in retail and
commercial banking outside the United Kingdom in pursuit of future growth.
We have experienced significant write-downs. We have been alert to the changing risk
environment, and because of that we were reducing our risk exposures in many business areas
throughout 2007 and have continued to do that during the first half of 2008. That has
certainly had the effect of mitigating the impact on our profits, as has the significant
diversification of the business by geography and by business line over the last years. But
it would be wrong in this review to suggest that the market conditions over the foreseeable
future will be anything other than tough, not least because we are now seeing the impact of
slowing economies around the world and that means that we must remain very vigilant to
managing risk. In some areas of our business, it may take quite some time for volumes to be
restored to those we have seen in the past: we see patterns of deleveraging by both
companies and personal customers around the world, and this will continue to have an impact
on activity levels.
The combination of turbulent markets and slowing economies requires us to be agile in managing business performance. But for all the impact of the difficult environment, the medium term drivers of growth in the global financial services industry are substantially unchanged: the privatisation of welfare provision, wealth management and wealth transfer; the growth of retail banking in the developing world; the increasing use of capital markets for financing and risk management; the pursuit of yield by investors; and the demands on capital markets to fund infrastructure development – these sources of growth endure. Our strategy is to align Barclays with those opportunities. That is why we have continued during the half to invest in the broadening of our physical footprint in Global Retail and Commercial Banking; and in origination and coverage in Investment Banking and Investment Management. And we see advantage in the fact that the competitive landscape has changed significantly over the last twelve months because the market dislocation has reduced the ability or determination of some hitherto strong market participants to compete aggressively.
Barclays strategy is to achieve superior growth through time by diversifying its profit
base and increasing its presence in markets and segments that are growing rapidly. In
executing our strategy, we continue to focus on our four strategic priorities which are:
building the best bank in the United Kingdom; accelerating the growth of our global
businesses; developing retail and commercial banking activities in selected countries
outside the United Kingdom; and enhancing operational excellence.
I will consider each of these strategic priorities in turn.
In UK Retail Banking we have achieved market leading shares of new business in the
core product areas of current accounts, savings and mortgages. The improvement in market
positioning here is substantial – most obviously in mortgages, where our share of net
new business in the first half of 2008 was 26% compared with 6% in the equivalent period of
last year. Meanwhile, we have improved the cost:income ratio of the business (and maintain
our target of improving the annual ratio by three percentage points from 57% in 2007 to 54%
in 2010). Our financial performance in the first half benefited from these trends.
In Barclays Commercial Bank profit was affected by significant investment directed
at increasing the number of product specialists and relationship managers and the
supporting risk and operations infrastructure. Loan balances continued to grow during the
half, but we have been careful to ensure that our assets are appropriately diversified in
advance of a normalisation of loan loss rates that we have predicted for some time. For
example, property and construction comprises 13% of our UK commercial loan book, a
significantly lower proportion than would be seen generally across the UK market.
Group Chief Executive’s Review
In Barclaycard we have made substantial progress in sustaining our UK leadership position whilst significantly improving profitability. As well as acquiring the Goldfish business at an attractive price, we recruited about 200,000 net new UK customers during the first half of 2008 but maintained a selective approach to new business that saw us continue to reject about half of the applications that we receive. We see credit cards as one of our global businesses and we have made further substantial steps in the development of Barclaycard outside the UK. Barclaycard International contributed over a quarter of Barclaycard’s profits in the first half and over 75% of Barclaycard’s new customers during the period. We continue to expect Barclaycard US to contribute US$150m in profit before tax this year, thereby achieving the target that we set following the acquisition of the business at the end of 2004.
Investment Banking and Investment Management, which is the home of the other
businesses in the Group that we think of as “global”, was confronted during the
first half of the year with very testing trading conditions. Although the profits of both
Barclays Capital and Barclays Global Investors suffered from the consequences
of the credit market dislocation, the impact on the performance of both businesses was
mitigated by the investments in asset class diversification that we have made in recent
years. This helped generate record income levels in Barclays Capital in interest rate
products, commodities, prime services and emerging markets and continuing brisk growth at
BGI in the income from our exchange traded funds business iShares. In Barclays Capital we
made progress in reducing US sub-prime and other credit market exposures. In BGI we took
further steps to provide selective support of liquidity products; whilst this has had the
effect of reducing profits in the first half, it has been an important source of
reassurance to our clients. We have continued to see flows of new assets into BGI during
the period. We see Barclays Capital and Barclays Global Investors as engines of future
growth for Barclays, and have made further selective new hires in both businesses.
Barclays Wealth has similar growth characteristics, and although impacted by lower
market levels, we have achieved profit growth and continued during the half year to invest
in the recruitment of client-facing staff.
We have made the biggest changes to the future growth opportunity in Barclays by the focus
we are directing at developing our retail and commercial banking activities outside the
United Kingdom. Most of this activity has been organic. We have expanded our distribution
points in all areas of the business; opening 191 new branches or sales outlets in
GRCB - Western Europe, 321 in GRCB - Emerging
Markets and 160 in GRCB - Absa during the first six months of the
year. This distribution-led growth is transforming the scale and prospects of the business.
We saw particularly strong income growth during the half in two markets that we have
recently entered – India and United Arab Emirates. At the same time we have acquired
Expobank as a first step to increasing our presence in Russia, and we will soon launch our
business in Pakistan. We expect to have opened 250 further branches and sales outlets
outside the UK by the end of 2008.
The focus of our work in the area of “operational excellence” is
directed at the management of risk, cost and capital. In risk management, we have sought to
position our major books of business conservatively in the expectation of the cyclical
downturn in countries where we have large presences – the United Kingdom, Spain and
South Africa. Although our performance in these markets will be affected by economic
slowdown, we hope that we will outperform as a result of actions that we have already
taken. Meanwhile, we have managed our costs aggressively, achieving substantial reductions
in costs in Barclays Capital and an improved cost:income ratio for the Group as a whole. In
the area of capital, we intend to direct just over half of the new capital raised in July
at maintaining ratios ahead of target for the foreseeable future, and half to support
future growth. We have directed a lot of attention during 2008 at managing the level of
risk weighted assets across the Group.
It is important to be both realistic about the outlook – which remains tough –
and confident about the direction of our strategy and our ability to implement it. I draw
confidence from our performance over the last twelve months. Our focus in the months ahead
will be on executing our strategy.
John Varley
Group Chief Executive
Group Finance Director’s Review
Group Performance
In the first half of 2008 Barclays delivered profit before tax of £2,784m, a decline of 33% on the record performance of 2007.
Income was in line with 2007 at £11,873m. Income grew in all businesses apart from
Barclays Capital, and growth was particularly strong in retail and commercial banking
businesses outside the UK. Net income, after impairment charges, of £9,425m was 14%
lower than 2007, and included net losses of £1,979m on credit market exposures, net
of gains of £852m arising from the fair valuation of notes issued by Barclays
Capital.
Impairment charges and other credit provisions of £2,448m included charges related to
US sub-prime mortgages and other credit market exposures of £1,108m. Excluding these
sub-prime related charges, impairment charges increased 40%. In UK Retail Banking,
impairment charges increased slightly as a result of higher balances. UK mortgage
impairment charges remained very low as our book is conservatively positioned. In
Barclaycard UK impairment charges decreased. The UK wholesale and corporate charge was
higher than the first half of 2007 but remained relatively low and within expectations in a
generally steady wholesale environment. Significant growth in impairment charges in our
international retail and commercial banking businesses reflected: very strong book growth
and a changed asset mix in emerging markets; the impact on consumers of the macroeconomic
backdrop in South Africa; and a deteriorating property market in Spain.
Operating expenses decreased 3% to £6,664m. We continued to invest in our
distribution network in our international retail and commercial banking businesses. Costs
were flat in UK Retail Banking and significantly lower in Barclays Capital. Gains from
property disposals were £120m (2007: £147m). The Group cost:income ratio
improved one percentage point to 56%.
Business Performance – Global Retail and Commercial Banking
UK Retail Banking profit before tax grew 7% to £690m. Income grew 3% to £2,176m, reflecting growth in Personal Customer Savings Accounts and Local Business and lower settlements on overdraft fees. We achieved a share of net new mortgage lending of 26%. Operating expenses were in line with 2007. Impairment charges increased 4%, and mortgage impairment remained low.
Barclays Commercial Bank profit before tax decreased 1% to £702m. Income growth of 7% reflected increased sales of treasury products. Costs increased 17% as we invested in operations infrastructure, product specialists and sales capability. Impairment charges increased 19% due to higher charges from certain Larger Business exposures.
Barclaycard profit before tax increased 30% to £388m, including £100m from Barclaycard International. Income growth of 13% reflected strong growth in Barclaycard International and the acquisition of Goldfish. Costs increased 6% reflecting continued international growth. Impairment charges increased 10% reflecting the inclusion of Goldfish and increased charges in Barclaycard International, offset by a £62m reduction in impairment in the UK businesses.
Global Retail and Commercial Banking - Western Europe profit before tax grew 10% to £115m. Income growth of 46% was driven by very strong growth in loans and advances and deposits. Costs increased 38% reflecting expansion of the retail distribution network across all geographies by 191 distribution points, and expansion in SMEs and Premier. Impairment charges increased £71m to £103m, primarily reflecting a deteriorating property market in Spain.
Global Retail and Commercial Banking - Emerging Markets profit before tax decreased 13%. Income and operating expenses almost doubled. Income growth was driven by retail expansion in India, and strong performances in the Africa businesses and UAE cards. Operating expense growth reflected the continued expansion of distribution points by 321 to a total of 871. Impairment charges increased £54m to £66m reflecting asset growth, particularly in India, and increased wholesale impairment in Africa.
Global Retail and Commercial Banking - Absa profit before tax increased 10% to £298m. Income growth of 9% included a gain of £46m relating to the Visa IPO. Distribution points increased 160 to 1,161 and operating expenses decreased 1%, leading to a six percentage point improvement in the cost:income ratio to 60%. Impairment charges rose £69m to £125m, mainly due to the impact of successive interest rate rises and high inflation rates on consumers in South Africa.
Group Finance Director’s Review
Business Performance – Investment Banking and Investment Management
Barclays Capital profit before tax was £524m in a very challenging market, down 68% relative to the record result in 2007. Net income fell 47% to £2,185m as growth in interest rate products, commodities, emerging markets, private equity and foreign exchange was more than offset by net losses of £1,979m due to credit market dislocation, net of gains of £852m from the fair valuation of notes issued by Barclays Capital. There was very strong growth in continental Europe, Asia and Africa, and modest growth in the UK. The US was adversely affected by the market conditions although there was significant growth in commodities, prime services and foreign exchange. Operating expenses were tightly controlled and reduced 32%. The compensation cost:net income ratio increased to 53%. Risk weighted assets were actively managed and declined in the period. Headcount increased 100 to 16,300 as we continued to invest selectively in key areas.
Barclays Global Investors profit before tax decreased 32% to £265m reflecting income growth of 5% to £987m; the impact of strong cost control; and charges of £196m related to selective support of liquidity products. Total assets under management were US$1,967bn, reflecting net new assets of US$25bn and negative market moves of US$147bn.
Barclays Wealth profit before tax grew 5% to £182m. Income growth of 5% to £668m reflected strong growth in customer deposits and lending partially offset by the impact of lower equity markets on fee income. Operating expenses grew 3% as cost efficiencies were reinvested in technology and operating platforms, and continued hiring of client-facing staff. Total client assets remained at £132.5bn as good asset inflows offset the impact of lower equity markets.
Business Performance - Head office functions and Other Operations
Head office functions and other operations loss before tax increased £252m to £432m. This was driven by increased fees paid to Barclays Capital for debt and equity raising, a reduction in interest earned owing to the reduction of the centrally held capital surplus, and increased costs related to an internal review of Barclays compliance with US economic sanctions.
Related Parties
Related party transactions, including salary and benefits provided to directors and key management, were not material to the financial position or performance of the Group during the period. There were no changes to the type and nature of the related party transactions disclosed in the 2007 annual report that could have a material effect on the financial position and performance of the Group in the first six months. Related party transactions are set out on page 31.
Chris Lucas
Group Finance Director
Risk Management
There have been no material changes to the risk management processes as described in the Annual Report and Accounts for the year ended 31st December 2007.
Principal risks and uncertainties
The overall risk environment remains challenging for broad areas of the financial services industry. The continued dislocation in the wholesale credit markets, with wider credit spreads and constrained market liquidity, is exacerbated by slower economic growth in many parts of the world.
Wholesale Credit Risk
As we entered 2008, the wholesale credit environment reflected concerns about weakening economic conditions in our major markets. That environment led to a more cautious approach to credit assessment, pricing and ongoing control in the financial services industry, which we expect to continue in the second half of the year. At the half-year stage, our assessment of our wholesale credit risk is broadly unchanged. Wholesale credit market conditions remain difficult, with reduced liquidity in cash and securitised products.
Overall, our wholesale credit impairment for 2008 is at a level broadly commensurate with
our wholesale models’ prediction for a stress level that might occur once in twenty
years. The key driver of impairment continues to be losses seen in US RMBS and related
exposures, where the value of the underlying collateral has continued to deteriorate
through 2008. This reflects the high levels of default seen in the US mortgage market,
particularly in the sub-prime and Alt-A segments. There have also been some industry losses
from exposure to a number of hedge fund counterparties where extreme market turbulence led
to sudden loss of value of collateral, which ultimately proved insufficient to cover
exposure in full.
Our corporate banking portfolios are generally performing in line with expectations.
However, our portfolio in Spain is affected by the rapid cooling of the housing market and
the impact on a range of counterparties in the residential development and construction
sectors. Some signs of strain are being seen in Barclays Commercial Bank in the UK with an
increased flow of cases into our Business Support turnaround and recovery team. Our Risk
Tendency in this area has increased since the year-end, partly reflecting more difficult
credit conditions.
In Absa, the wholesale portfolios have continued to perform well, reflecting the focus on
the property, agriculture and sovereign sectors. This is in line with other banks in the
region and contrasts with the declining performance of retail portfolios.
In response to the weakening environment in some of our core markets, we have reduced our risk profile in a number of areas. Examples of steps taken include reducing portfolio concentration limits in key sectors such as leveraged finance and property, as well as tightening underwriting criteria. We have taken actions across major business areas with the intention to reduce losses if the environment continues to weaken.
As we enter the second half of 2008, the principal uncertainties relating to the
performance of the wholesale portfolios are:
|
— |
Performance of the underlying collateral supporting US RMBS and related positions, which may deteriorate further |
|
— |
The impact of a deeper or more prolonged downturn on our businesses in the UK, US, Spain and South Africa |
|
— |
The potential for idiosyncratic losses in different sectors and geographies where credit positions are sensitive to economic downturn |
|
— |
The potential for losses in respect of other market related exposures to counterparties in the financial services industry |
Risk Management
Retail Credit Risk
Retail credit risk conditions in a number of Barclays major markets have deteriorated since
the start of 2008 as a rise in consumer prices and weaker housing markets have accompanied
the effects of dislocation in the wholesale credit markets and slower economic growth.
In the UK, impairment charges in our credit card portfolio reduced. Average credit scores
and vintage analysis indicate continued improvement in the quality of business written in
during 2007. Overall delinquencies and charge-offs are lower than a year ago, although
there is some evidence of deterioration in the second quarter. In the UK unsecured loan
portfolios, overall delinquencies have been stable and charge-offs have declined slightly
as a result of tighter underwriting criteria.
Home Finance delinquency and possession rates remain well below the Council of Mortgage
Lenders industry average and losses remain contained by conservative loan to value (LTV)
ratios. The average LTV on business written in the first half of the year was 51% and the
average current valuation LTV on our stock of mortgages was 35%. For our residential Home
Finance portfolio, 4% of our loans are above 85% LTV on an indexed basis. While there has
been some increase in Home Finance delinquency following deterioration in the UK housing
market, it remains low relative to historical levels at 0.97%. Our other secured lending
portfolios are operating as expected, and are being managed to reduce exposure.
In response to the worsening economic environment in Spain, we have tightened lending criteria and increased collections activities. In the Home Finance portfolio, which comprises the large majority of retail balances, the average LTV on new business written in the first half of the year was 64% and we estimate the average current LTV on our mortgage stock to be 45%.
While delinquency in US credit cards has been affected by the weakening economy, credit
actions taken towards the end of 2007 have raised new customer quality and improved recent
vintage performance.
In Absa, credit conditions remain challenging, given the prolonged series of interest rate
rises and inflationary pressures. The arrears rates for recent vintages of the cards
portfolio have improved after the introduction of tighter controls during the past year.
Delinquency in the secured portfolios has risen as the economy continues to weaken. In
order to stabilise delinquency rates, underwriting criteria have been significantly
tightened and collections investment increased. The average mark to market LTV on our
mortgage stock stood at 44%.
As we enter the second half of the year, the principal uncertainties relating to the
performance of the retail portfolios are:
|
— |
The impact of global inflationary pressure on household disposable income and the ability of consumers to service debt |
|
— |
The possibility of rises in unemployment and a marked slowdown in the UK, US, Spanish and South African economies |
|
— |
The impact of further, sustained falls in house prices in the UK, Spain and South Africa |
|
— |
The reduced availability of credit in mortgage markets, leading to further declines in property values |
Risk Management
The second half outlook for the South African and Spanish retail credit environments is expected to be challenging with macroeconomic indicators suggesting further weakening. The US portfolio will also be affected by a more difficult environment. While we expect the less favourable economic environment in the UK to continue in the second half of the year, the credit market dislocation has constrained the competitive position of some other financial institutions and Barclays is well-positioned to continue to provide financing to customers.
Market Risk
Volatility across financial markets increased due to the continuation of the credit market
dislocation, high global inflation brought on by higher commodity prices, especially oil,
and recessionary concerns for the western economies.
Against this background, Barclays Capital's market risk exposure, as measured by average
total Daily Value at Risk (DVaR), increased 30% to £58m compared with the second half
of 2007 and increased 48% compared with the first half. This was mainly due to increases in
interest rate positions and higher market volatility within the credit spread and interest
rate DVaR. Average daily trading revenue of £26m was 29% higher than the second half
of 2007, in line with the increase in DVaR.
As we enter the second half of the year, the principal uncertainties which may impact our market risk relate to volatility in interest rates, commodities, credit spreads, equity prices and foreign exchange rates. Some of these markets are also experiencing periods of reduced liquidity, creating the potential for significant price adjustments and instability in the historical correlation across risk factors.
Liquidity Risk
Despite a continued lack of term liquidity relative to overall demand, and constrained securitisation and covered bond markets, the Group’s liquidity position has remained strong and stable and we have improved the overall term of our wholesale liabilities due to the diverse range of funding sources in terms of geography, currency and counterparty. Retail and commercial deposits continue to grow. In the UK and Europe, the Group continues to be able to fund its retail and commercial assets without recourse to wholesale markets. Given our limited reliance on securitisation as a source of funding, we do not regard uncertainty over the securitisation markets as likely to impact our liquidity risk profile in the second half of the year.
Legal Risk and Regulatory Compliance Risk
These risks affect the Group through the extensive range of legal obligations, regulations and codes in force in the territories in which the Group operates. The principal uncertainties regarding these risks are further discussed on pages 28 to 30.
Risk Management
Barclays Capital Credit Market Exposures
Barclays Capital’s credit market exposures resulted in net losses of £1,979m in
the first half of 2008, due to continuing dislocation in the credit markets. The net
losses, which included £1,108m in impairment charges, comprised; £875m against
ABS CDO Super Senior exposures; and £1,956m against other credit market exposures;
partially offset by gains of £852m from the general widening of credit spreads on
issued notes measured at fair value through the profit and loss account.
The credit market dislocation resulted in losses in the following categories:
|
Pro-forma 1 |
Net Exposures |
|||
|
As at |
As at |
As at |
||
|
£m |
£m |
£m |
||
|
ABS CDO Super Senior |
3,229 |
4,671 |
7,432 |
|
|
Other US sub-prime |
||||
|
– Other US sub-prime |
3,258 |
5,037 |
6,046 |
|
|
– Whole loan sales post period end |
(828) |
- |
- |
|
|
Net Other US sub-prime |
2,430 |
5,037 |
6,046 |
|
|
Alt-A |
3,510 |
4,916 |
3,760 |
|
|
Monoline insurers |
2,584 |
1,335 |
140 |
|
|
SIVs and SIV-Lites |
429 |
784 |
1,617 |
|
|
Commercial mortgages |
10,988 |
12,399 |
8,282 |
|
|
Leveraged finance |
||||
|
– Net lending and commitments |
7,326 |
7,368 |
7,317 |
|
|
– Contingent repayment |
(2,306) |
- |
- |
|
|
Net Leveraged finance |
5,020 |
7,368 |
7,317 |
|
1 The above table includes net exposures as at 30th June 2008 less reductions to US sub-prime and leveraged finance totalling £3,134m that are expected to complete in the second half of 2008.
Statement of Directors’ Responsibilities
The Directors confirm to the best of their knowledge that the condensed consolidated
interim financial statements set out on pages 13 to 41 have been prepared in accordance
with International Accounting Standards 34, ‘Interim Financial Reporting’, as
adopted by the European Union, and that the interim management report herein includes a
fair review of the information required by Disclosure and Transparency Rules 4.2.7 and
4.2.8 namely:
|
— |
an indication of important events that have occurred during the six months ended 30th June 2008 and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and |
|
— |
material related-party transactions in the six months ended 30th June 2008 and any material changes in the related party transactions described in the last annual report. |
On behalf of the Board
|
John Varley Group Chief Executive |
Chris Lucas Group Finance Director |
Independent Auditors’ Review Report
Independent Review Report to Barclays Bank PLC
Introduction
We have been engaged by Barclays Bank PLC to review the condensed consolidated interim financial statements in the interim results announcement for the six months ended 30th June 2008, which comprises the consolidated interim income statement, consolidated interim balance sheet, condensed consolidated interim statement of recognised income and expense, condensed consolidated interim cash flow statement and related notes. We have read the other information contained in the interim results announcement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial statements.
Directors’ Responsibilities
The interim results announcement is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the interim results announcement in
accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial
Services Authority.
As disclosed in section ‘Accounting Policies’, the annual financial statements
of the group are prepared in accordance with IFRSs as adopted by the European Union. The
condensed consolidated interim financial statements included in this interim results
announcement have been prepared in accordance with International Accounting Standard 34,
"Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial statements in the interim results announcement based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of Review
We conducted our review in accordance with the International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Independent Auditors’ Review Report
Independent Review Report to Barclays Bank PLC (continued)
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements in the interim results announcement for the six months ended 30th June 2008 are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
London, United Kingdom
7 August 2008
Notes:
a) The maintenance and integrity of the Barclays website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website, and
b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Accounting Policies
Basis of Preparation
The condensed consolidated interim financial statements for the half year ended 30th June 2008 on pages 13 to 41 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, ‘Interim financial reporting’ as published by the International Accounting Standards Board (IASB). They are also in accordance with IAS 34 as adopted by the European Union. The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31st December 2007, which have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) as published by the IASB. The annual financial statements are also prepared in accordance with IFRS as published by the IASB and IFRIC interpretations as adopted by the European Union.
The accounting policies adopted are consistent with those of the accounting policies described in the 2007 Annual report, except IFRS 8 ‘Operating Segments’ has been adopted as at 1st January 2008. The standard was issued in November 2006 and excluding early adoption would first be required to be applied to the Group’s accounting period beginning on 1st January 2009. The standard replaces IAS 14 ‘Segmental Reporting’ and aligns operating segmental reporting with segments reported to senior management as well as requiring amendments and additions to the existing segmental reporting disclosures. The standard does not change the recognition, measurement or disclosure of specific transactions in the condensed consolidated interim financial statements but has impacted the segmental reporting as set out in note 19 on page 36.
Consolidated Interim Income Statement (Unaudited)
|
Continuing Operations |
Half Year Ended |
||
|
30.06.08 |
30.06.07 |
||
|
Notes |
£m |
£m |
|
|
Interest income |
|
13,356 |
12,037 |
|
Interest expense |
(8,195) |
(7,450) |
|
|
Net interest income |
|
5,161 |
4,587 |
|
Fee and commission income |
4,463 |
4,292 |
|
|
Fee and commission expense |
(548) |
(480) |
|
|
Net fee and commission income |
|
3,915 |
3,812 |
|
Net trading income |
1,782 |
2,810 |
|
|
Net investment income |
345 |
396 |
|
|
Principal transactions |
1 |
2,127 |
3,206 |
|
|
|||
|
Net premiums from insurance contracts |
568 |
442 |
|
|
Other income |
203 |
130 |
|
|
Total income |
|
11,974 |
12,177 |
|
Net claims and benefits incurred on insurance contracts |
(101) |
(248) |
|
|
Total income net of insurance claims |
|
11,873 |
11,929 |
|
Impairment charges and other credit provisions |
2 |
(2,448) |
(959) |
|
Net income |
|
9,425 |
10,970 |
|
Staff costs |
|
(3,888) |
(4,581) |
|
Administration and general expenses |
(2,408) |
(1,952) |
|
|
Depreciation of property, plant and equipment |
(274) |
(227) |
|
|
Amortisation of intangible assets |
(94) |
(87) |
|
|
Operating expenses |
3 |
(6,664) |
(6,847) |
|
Share of post-tax results of associates and joint ventures |
23 |
- |
|
|
Profit on disposal of subsidiaries, associates and joint ventures |
- |
5 |
|
|
Profit before tax |
|
2,784 |
4,128 |
|
Tax |
4 |
(620) |
(1,158) |
|
Profit after tax |
|
2,164 |
2,970 |
|
Attributable To |
|||
|
Minority interests |
|
196 |
167 |
|
Equity holders of the parent |
1,968 |
2,803 |
|
|
|
|
2,164 |
2,970 |
The notes on pages 19 to 41 form an integral part of this condensed consolidated interim financial information.
Consolidated Interim Balance Sheet (Unaudited)
|
Assets |
As at |
As at |
|
|
Notes |
£m |
£m |
|
|
Cash and balances at central banks |
|
6,432 |
5,801 |
|
Items in the course of collection from other banks |
2,478 |
1,836 |
|
|
Trading portfolio assets |
177,630 |
193,726 |
|
|
Financial assets designated at fair value: |
|
||
|
– held on own account |
46,697 |
56,629 |
|
|
– held in respect of linked liabilities to customers under investment contracts |
79,486 |
90,851 |
|
|
Derivative financial instruments |
400,009 |
248,088 |
|
|
Loans and advances to banks |
5 |
54,514 |
40,120 |
|
Loans and advances to customers |
6 |
395,467 |
345,398 |
|
Available for sale financial investments |
42,858 |
43,256 |
|
|
Reverse repurchase agreements and cash collateral on securities borrowed |
139,955 |
183,075 |
|
|
Other assets |
6,015 |
5,153 |
|
|
Current tax assets |
808 |
518 |
|
|
Investments in associates and joint ventures |
316 |
377 |
|
|
Goodwill |
6,932 |
7,014 |
|
|
Intangible assets |
1,200 |
1,282 |
|
|
Property, plant and equipment |
2,991 |
2,996 |
|
|
Deferred tax assets |
1,964 |
1,463 |
|
|
Total assets |
|
1,365,752 |
1,227,583 |
The notes on pages 19 to 41 form an integral part of this condensed consolidated interim financial information.
Consolidated Interim Balance Sheet (Unaudited)
|
Liabilities |
As at |
As at |
|
|
Notes |
£m |
£m |
|
|
Deposits from banks |
|
89,944 |
90,546 |
|
Items in the course of collection due to other banks |
2,791 |
1,792 |
|
|
Customer accounts |
319,547 |
295,849 |
|
|
Trading portfolio liabilities |
56,067 |
65,402 |
|
|
Financial liabilities designated at fair value |
86,162 |
74,489 |
|
|
Liabilities to customers under investment contracts |
80,949 |
92,639 |
|
|
Derivative financial instruments |
396,357 |
248,288 |
|
|
Debt securities in issue |
115,739 |
120,228 |
|
|
Repurchase agreements and cash collateral on securities lent |
146,895 |
169,429 |
|
|
Other liabilities |
8,998 |
10,514 |
|
|
Current tax liabilities |
1,532 |
1,311 |
|
|
Insurance contract liabilities, including unit-linked liabilities |
3,679 |
3,903 |
|
|
Subordinated liabilities |
8 |
21,583 |
18,150 |
|
Deferred tax liabilities |
655 |
855 |
|
|
Provisions |
624 |
830 |
|
|
Retirement benefit liabilities |
9 |
1,603 |
1,537 |
|
Total liabilities |
|
1,333,125 |
1,195,762 |
|
Shareholders' Equity |
|||
|
Called up share capital |
10 |
2,397 |
2,382 |
|
Share premium account |
10 |
12,063 |
10,751 |
|
Available for sale reserve |
(462) |
111 |
|
|
Cash flow hedging reserve |
(419) |
26 |
|
|
Other shareholders’ funds |
2,849 |
2,687 |
|
|
Translation reserve |
(427) |
(307) |
|
|
Retained earnings |
14,800 |
14,222 |
|
|
Shareholders' equity excluding minority interests |
|
30,801 |
29,872 |
|
Minority interests |
1,826 |
1,949 |
|
|
Total shareholders' equity |
|
32,627 |
31,821 |
|
Total liabilities and shareholders' equity |
|
1,365,752 |
1,227,583 |
The notes on pages 19 to 41 form an integral part of this condensed consolidated interim financial information.
Condensed Consolidated Interim Statement of Recognised Income and Expense (Unaudited)
|
Half Year Ended |
||
|
30.06.08 |
30.06.07 |
|
|
Consolidated Statement of Recognised Income and Expense |
£m |
£m |
|
Net movements in available for sale reserve |
(716) |
63 |
|
Net movements in cash flow hedging reserve |
(573) |
(280) |
|
Net movements in currency translation reserve |
(500) |
(48) |
|
Tax |
381 |
37 |
|
Other movements |
22 |
23 |
|
Amounts included directly in equity |
(1,386) |
(205) |
|
Profit after tax |
2,164 |
2,970 |
|
Total recognised income and expense |
778 |
2,765 |
|
Attributable To |
||
|
Minority interests |
(45) |
110 |
|
Equity holders of the parent |
823 |
2,655 |
|
|
778 |
2,765 |
A detailed analysis of the Statement of Recognised Income and Expense is provided in note 11.
The notes on pages 19 to 41 form an integral part of this condensed consolidated interim financial information.
Condensed Consolidated Interim Cash Flow Statement (Unaudited)
|
Half Year Ended |
||
|
30.06.08 |
31.12.07 |
|
|
Reconciliation of Profit Before Tax to Net Cash Flows From Operating Activities |
£m |
£m |
|
Profit before tax |
2,784 |
2,979 |
|
Adjustment for non-cash items |
(170) |
1,124 |
|
Changes in operating assets and liabilities |
1,584 |
(16,612) |
|
Tax paid |
(986) |
(623) |
|
Net cash from operating activities |
3,212 |
(13,132) |
|
Net cash from investing activities |
812 |
6,026 |
|
Net cash from financing activities |
3,346 |
2,757 |
|
Effects of exchange rate on cash and cash equivalents |
(407) |
(458) |
|
Net increase/(decrease) in cash and cash equivalents |
6,963 |
(4,807) |
|
Cash and cash equivalents at beginning of period |
33,078 |
37,885 |
|
Cash and cash equivalents at end of period |
40,041 |
33,078 |
The notes on pages 19 to 41 form an integral part of this condensed consolidated interim financial information.
Notes to the Condensed Consolidated Interim Financial Statements
1. Principal Transactions
|
Half Year Ended |
||
|
30.06.08 |
30.06.07 |
|
|
£m |
£m |
|
|
Rates related business |
2,778 |
2,001 |
|
Credit related business |
(996) |
809 |
|
Net trading income |
1,782 |
2,810 |
|
Net gain from disposal of available for sale assets |
119 |
159 |
|
Dividend income |
5 |
18 |
|
Net gain from financial instruments designated at fair value |
125 |
102 |
|
Other investment income |
96 |
117 |
|
Net investment income |
345 |
396 |
|
Principal transactions |
2,127 |
3,206 |
2. Impairment Charges and Other Credit Provisions
|
Half Year Ended |
||
|
30.06.08 |
30.06.07 |
|
|
£m |
£m |
|
|
Impairment charges on loans and advances |
1,933 |
963 |
|
Charges/(release) in respect of undrawn facilities and guarantees |
328 |
(4) |
|
Impairment charges on loans and advances and other credit provisions |
2,261 |
959 |
|
Impairment charges on reverse repurchase agreements |
103 |
- |
|
Impairment charges on available for sale assets |
84 |
- |
|
Impairment charges and other credit provisions |
2,448 |
959 |
Impairment charges and other credit provisions on ABS CDO Super Senior and other credit market exposures included above:
|
Half Year Ended |
||
|
30.06.08 |
30.06.07 |
|
|
£m |
£m |
|
|
Impairment charges on loans and advances |
663 |
- |
|
Charges in respect of undrawn facilities |
322 |
- |
|
Impairment charges on loans and advances and other credit provisions on ABS CDO Super Senior and other credit market exposures |
985 |
- |
|
Impairment charges on reverse repurchase agreements |
53 |
- |
|
Impairment charges on available for sale assets |
70 |
- |
|
Impairment charges and other credit provisions on ABS CDO Super Senior and other credit market exposures |
1,108 |
- |
Notes to the Condensed Consolidated Interim Financial Statements
3. Operating Expenses
|
Half Year Ended |
||
|
30.06.08 |
30.06.07 |
|
|
£m |
£m |
|
|
Staff costs |
3,888 |
4,581 |
|
Administrative expenses |
2,353 |
1,893 |
|
Depreciation |
274 |
227 |
|
Impairment loss - property and equipment and intangible assets |
30 |
2 |
|
Operating lease rentals |
234 |
204 |
|
Gain on property disposals |
(120) |
(147) |
|
Amortisation of intangible assets |
94 |
87 |
|
Gain on acquisition |
(89) |
- |
|
Operating expenses |
6,664 |
6,847 |
4. Tax
The tax charge for the period is based upon a UK corporation tax rate of 28.5% for the calendar year 2008 (2007: 30%). The effective rate of tax for the first half of 2008, based on profit before tax, was 22% (2007: 28%). The effective tax rate differs from 28.5% primarily due to the different tax rates which are applied to the profits earned outside the UK, disallowable expenditure, non-taxable gains and income, and the release of prior year tax provisions and a deferred tax liability no longer required. The effective tax rate for this interim period is lower than the 2007 full year and anticipated 2008 full year rate principally because of the release of prior year tax provisions and a deferred tax liability no longer required.
5. Loans and Advances to Banks
|
As at |
As at |
|
|
By Geographical Area |
£m |
£m |
|
United Kingdom |
9,840 |
5,518 |
|
Other European Union |
16,175 |
11,102 |
|
United States |
16,346 |
13,443 |
|
Africa |
3,409 |
2,581 |
|
Rest of the World |
8,749 |
7,479 |
|
|
54,519 |
40,123 |
|
Less: Allowance for impairment |
(5) |
(3) |
|
Total loans and advances to banks |
54,514 |
40,120 |
Notes to the Condensed Consolidated Interim Financial Statements
6. Loans and Advances to Customers
|
As at |
As at |
|
|
£m |
£m |
|
|
Retail business |
175,397 |
164,062 |
|
Wholesale and corporate business |
224,941 |
185,105 |
|
|
400,338 |
349,167 |
|
Less: Allowances for impairment |
(4,871) |
(3,769) |
|
Total loans and advances to customers |
395,467 |
345,398 |
|
By Geographical Area |
||
|
United Kingdom |
211,132 |
190,347 |
|
Other European Union |
72,519 |
56,533 |
|
United States |
50,444 |
40,300 |
|
Africa |
37,991 |
39,167 |
|
Rest of the World |
28,252 |
22,820 |
|
|
400,338 |
349,167 |
|
Less: Allowance for impairment |
(4,871) |
(3,769) |
|
Total loans and advances to customers |
395,467 |
345,398 |
|
By Industry |
||
|
Financial institutions |
96,829 |
71,160 |
|
Agriculture, forestry and fishing |
3,332 |
3,319 |
|
Manufacturing |
20,509 |
16,974 |
|
Construction |
6,388 |
5,423 |
|
Property |
18,754 |
17,018 |
|
Government |
3,053 |
2,036 |
|
Energy and water |
10,602 |
8,632 |
|
Wholesale and retail distribution and leisure |
19,233 |
17,768 |
|
Transport |
6,736 |
6,258 |
|
Postal and communication |
7,414 |
5,404 |
|
Business and other services |
29,660 |
30,363 |
|
Home loans |
120,971 |
112,087 |
|
Other personal |
46,301 |
41,535 |
|
Finance lease receivables |
10,556 |
11,190 |
|
|
400,338 |
349,167 |
|
Less: Allowance for impairment |
(4,871) |
(3,769) |
|
Total loans and advances to customers |
395,467 |
345,398 |
Notes to the Condensed Consolidated Interim Financial Statements
7. Allowance for Impairment on Loans and Advances
|
As at |
As at |
As at |
|
|
£m |
£m |
£m |
|
|
At beginning of period |
3,772 |
3,277 |
3,335 |
|
Acquisitions and disposals |
97 |
2 |
(75) |
|
Exchange and other adjustments |
(26) |
59 |
(6) |
|
Unwind of discount |
(63) |
(60) |
(53) |
|
Amounts written off |
(911) |
(952) |
(1,011) |
|
Recoveries |
74 |
103 |
124 |
|
Amounts charged against profit |
1,933 |
1,343 |
963 |
|
At end of period |
4,876 |
3,772 |
3,277 |
|
As at |
As at |
As at |
|
|
Allowance |
£m |
£m |
£m |
|
United Kingdom |
2,785 |
2,526 |
2,396 |
|
Other European Union |
449 |
344 |
334 |
|
United States |
1,007 |
356 |
72 |
|
Africa |
552 |
514 |
452 |
|
Rest of the World |
83 |
32 |
23 |
|
At end of period |
4,876 |
3,772 |
3,277 |
Notes to the Condensed Consolidated Interim Financial Statements
8. Subordinated Liabilities
|
Half Year Ended |
||
|
Dated |
30.06.08 |
31.12.07 |
|
£m |
£m |
|
|
Opening balance |
11,519 |
9,371 |
|
Issuances |
1,606 |
1,606 |
|
Redemptions |
(195) |
(11) |
|
Other |
325 |
553 |
|
Closing balance |
13,255 |
11,519 |
|
Issuances |
||
|
6.05% Fixed Rate Subordinated Notes 2017 (US$2.25bn) |
- |
1,098 |
|
Fixed/Floating Rate Callable Subordinated Floating Rate Notes 2023 |
- |
500 |
|
Floating Rate Subordinated Notes 2014 (KES 1,000m) |
- |
8 |
|
6% Fixed Rate Subordinated Notes due 2018 (€1.75bn) |
1,303 |
- |
|
CMS-Linked Subordinated Notes due 2018 (€100m) |
75 |
- |
|
CMS-Linked Subordinated Notes due 2018 (€135m) |
105 |
- |
|
Subordinated Unsecured Fixed Rate Capital Notes 2015 (BWP 90m) |
8 |
- |
|
Subordinated Callable Notes 2018 (ZAR 1,525m) |
115 |
- |
|
|
1,606 |
1,606 |
|
Redemptions |
||
|
Subordinated Floating Rate Notes 2011 (€30m) |
- |
(11) |
|
5.5% Subordinated Notes 2013 (DM 500m) |
(195) |
- |
|
|
(195) |
(11) |
|
Half Year Ended |
||
|
Undated |
30.06.08 |
31.12.07 |
|
£m |
£m |
|
|
Opening balance |
6,631 |
5,696 |
|
Issuances |
2,010 |
618 |
|
Redemptions |
(300) |
- |
|
Other |
(13) |
317 |
|
Closing balance |
8,328 |
6,631 |
|
Issuances |
||
|
7.434% Step-up Callable Perpetual Reserve Capital Instruments (US$1.25bn) |
- |
618 |
|
8.25% Undated Subordinated Notes |
1,000 |
- |
|
7.7% Undated Subordinated Notes (US$2bn) |
1,010 |
- |
|
|
2,010 |
618 |
|
Redemptions |
||
|
9.875% Undated Subordinated Notes |
(300) |
- |
|
|
(300) |
- |
Notes to the Condensed Consolidated Interim Financial Statements
9. Retirement benefit liabilities
The Group's IAS 19 pension surplus across all schemes as at 30th June 2008 was £141m
(31st December 2007: £393m; 30th June 2007: £540m). There are net recognised
liabilities of £1,567m (31st December 2007: £1,501m; 30th June 2007:
£1,804m) and unrecognised actuarial gains of £1,708m (31st December 2007:
£1,894m; 30th June 2007: £2,344m). The net recognised liabilities comprised
retirement benefit liabilities of £1,603m (31st December 2007: £1,537m; 30th
June 2007: £1,840m) and assets of £36m (31st December 2007: £36m; 30th
June 2007: £36m).
The Group's IAS 19 pension surplus in respect of the main UK scheme as at 30th June 2008
was £439m (31st December 2007: £668m; 30th June 2007: £867m). This change
primarily reflects lower investment returns over the period, following general market
movements, which led to a fall in the market value of the scheme assets. This was partially
offset by an increase in the real discount rate used to value the scheme liabilities,
reflecting an increase in AA corporate bond yields which resulted in a higher discount rate
of 6.70% (31st December 2007: 5.82%; 30th June 2007: 5.82%).
Notes to the Condensed Consolidated Interim Financial Statements
10. Share Capital and Share Premium
|
30.06.08 |
31.12.07 |
|
|
Called Up Share Capital, Allotted and Fully Paid |
£m |
£m |
|
At beginning of period |
2,336 |
2,329 |
|
Issued for cash |
2 |
7 |
|
At end of period |
2,338 |
2,336 |
|
Called up Preference Share Capital, Allotted and Fully Paid |
||
|
At beginning of period |
46 |
34 |
|
Issued for cash |
13 |
12 |
|
At end of period |
59 |
46 |
|
|
||
|
Called up share capital |
2,397 |
2,382 |
|
Share Premium |
||
|
At beginning of period |
10,751 |
9,452 |
|
Ordinary shares issued for cash |
16 |
104 |
|
Preference shares issued for cash |
1,296 |
1,195 |
|
At end of period |
12,063 |
10,751 |
Ordinary Shares
The issued ordinary share capital of Barclays Bank PLC at 30th June 2008 comprised 2,338
million (31st December 2007: 2,336 million) ordinary shares of £1 each.
The whole of the issued ordinary share capital of Barclays Bank PLC at 30th June 2008 is
beneficially owned by Barclays PLC.
Preference Shares
The issued preference share capital of Barclays Bank PLC at 30th June 2008 comprised £59m (31st December 2007: £46m) of preference shares of the following denominations:
|
30.06.08 |
31.12.07 |
|
|
‘000 |
‘000 |
|
|
Issued and fully paid shares of £1 each |
1 |
1 |
|
Issued and fully paid shares of £100 each |
75 |
75 |
|
Issued and fully paid shares of US$0.25 each |
237,000 |
131,000 |
|
Issued and fully paid shares of US$100 each |
100 |
100 |
|
Issued and fully paid shares of €100 each |
240 |
240 |
Notes to the Condensed Consolidated Interim Financial Statements
11. Statement of Recognised Income and Expense
|
30.06.08 |
30.06.07 |
|
|
Available for Sale Reserve |
£m |
£m |
|
- Net (losses)/gains from changes in fair value |
(685) |
168 |
|
- Losses transferred to net profit due to impairment |
84 |
- |
|
- Net gains transferred to net profit on disposal |
(120) |
(161) |
|
- Net losses transferred to net profit due to fair value hedging |
5 |
56 |
|
Net movements in available for sale reserve |
(716) |
63 |
|
Cash Flow Hedging Reserve |
||
|
- Net losses from changes in fair value |
(638) |
(420) |
|
- Net losses transferred to net profit |
65 |
140 |
|
Net movements in cash flow hedging reserve |
(573) |
(280) |
|
Net movements in currency translation reserve |
(500) |
(48) |
|
Tax |
381 |
37 |
|
Other movements |
22 |
23 |
|
Amounts included directly in equity |
(1,386) |
(205) |
|
Profit after tax |
2,164 |
2,970 |
|
Total recognised income and expense |
778 |
2,765 |
The consolidated statement of recognised income and expense reflects all items of income
and expense for the period, including items taken directly to equity. Movements in
individual reserves are shown including amounts which relate to minority interests; the
impact of such amounts is then reflected in the amount attributable to such interests.
Movements in individual reserves are also shown on a pre-tax 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 until disposal. The exceptions to reflect fair
value movements through the income statement are impairment losses, gains or losses
transferred to the income statement due to fair value hedge accounting and foreign exchange
gains or losses on monetary items such as debt securities. 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 the income statement. The loss of £685m
(2007: gain of £168m) from changes in fair value reflects the downturn across the US
sub-prime market and increases in European and Japanese interest rates. The decrease in net
gains transferred to net profit is primarily due to the lower levels of disposals.
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 fair value gain
or loss associated with the effective portion of the hedge is initially recognised in
shareholders’ equity, and recycled to the income statement in the periods when the
hedged item will affect profit or loss. Any ineffective portion of the gain or loss on the
hedging instrument is recognised in the income statement immediately. The current period
movement in the cash flow hedge reserve relates to a reduction in the fair value of
interest rate swaps used in cash flow hedging due to increases in interest rates.
Exchange differences arising on the net investments in foreign operations and effective
hedges of net investments are recognised in the currency translation reserve and
transferred to the income statement on the disposal of the net investment. The movement in
the first half of 2008 primarily reflects the impact of changes in the value of the Rand,
Yen, Euro and Swiss Franc against Sterling. These movements reflect both the Group and
minority interests in Absa Group Limited, the value of other currency movements on net
investments which are hedged on a post-tax basis and net investments which are economically
hedged through preference share capital that is not revalued for accounting purposes.
Notes to the Condensed Consolidated Interim Financial Statements
12. Dividends
|
Half Year Ended |
||
|
30.06.08 |
30.06.07 |
|
|
Dividends Paid During the Period |
£m |
£m |
|
Ordinary shares |
1,030 |
995 |
Ordinary dividends were paid to enable Barclays PLC to fund its dividend to shareholders.
|
Preference shares |
147 |
74 |
|
Other equity instruments |
55 |
54 |
13. Contingent Liabilities and Commitments
|
As at |
As at |
|
|
£m |
£m |
|
|
Acceptances and endorsements |
473 |
365 |
|
Guarantees and letters of credit pledged as collateral security |
51,439 |
35,692 |
|
Other contingent liabilities |
9,804 |
9,717 |
|
Contingent liabilities |
61,716 |
45,774 |
|
Documentary credits and other short-term trade related transactions |
843 |
522 |
|
Undrawn note issuance and revolving underwriting facilities: |
||
|
Forward asset purchases and forward deposits placed |
204 |
283 |
|
Standby facilities, credit lines and other |
209,512 |
191,834 |
|
Commitments |
210,559 |
192,639 |
Notes to the Condensed Consolidated Interim Financial Statements
14. 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. On 4th December 2006 the Court stayed Barclays
dismissal from the proceedings and allowed the plaintiffs to file a supplemental complaint.
On 19th March 2007 the United States Court of Appeals for the Fifth Circuit issued its
decision on an appeal by Barclays and two other financial institutions contesting a ruling
by the District Court allowing the Newby litigation to proceed as a class action. The Court
of Appeals held that because no proper claim against Barclays and the other financial
institutions had been alleged by the plaintiffs, the case could not proceed against them.
The plaintiffs applied to the United States Supreme Court for a review of this decision. On
22nd January 2008, the United States Supreme Court denied the plaintiffs’ request for
review. Following the Supreme Court’s decision, the District Court ordered a further
briefing concerning the status of the plaintiffs’ claims. Barclays is seeking the
dismissal of the plaintiffs’ claims.
Barclays considers that the Enron related 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 they 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 investigations of transactions
between Barclays and Enron. Barclays does not expect that the amount of any settlement with
the Commission would have a significant adverse effect on its financial position or
operating results.
Like other UK financial services institutions, Barclays faces numerous County Court claims
and complaints by customers who allege that its unauthorised overdraft charges either
contravene the Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCR") or are
unenforceable penalties or both. In July 2007, by agreement with all parties, the OFT
commenced proceedings against seven banks and one building society including Barclays, to
resolve the matter by way of a "test case" process (the “test case”).
Preliminary issues hearings took place in January / February and July 2008. In relation to
the January / February hearing the Judge found in favour of the banks on the issue of the
penalty doctrine, and in favour of the OFT on the issue of the applicability of the UTCCR.
The OFT is not pursuing an appeal in relation to the penalty doctrine. The banks have been
granted permission to appeal the decision in relation to the applicability of the UTCCR.
The Court of Appeal proceedings are likely to be heard in the Autumn of 2008 and this will
dictate the further course of the action. There are likely to be further hearings and the
proceedings may take a significant period of time to conclude. Pending resolution of the
test case process, existing and new claims in the County Courts remain stayed, and there is
an FSA waiver of the complaints handling process and a standstill of Financial Ombudsman
Service decisions. Barclays is defending the test case vigorously. It is not practicable to
estimate Barclays possible loss in relation to these matters, nor the effect that they may
have upon operating results in any particular financial period.
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.
Notes to the Condensed Consolidated Interim Financial Statements
15. 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. The
nature and impact of future changes in policies and regulatory action are not predictable
and beyond the Group’s control but could have an impact on the Group’s
businesses and earnings. In June 2005, an inquiry into retail banking in all of the then 25
Member States was launched by the European Commission’s Directorate General for
Competition. The inquiry looked at retail banking in Europe generally. In January 2007, the
European Commission announced that the inquiry had identified barriers to competition in
certain areas of retail banking, payment cards and payment systems in the EU. The European
Commission indicated it will use its powers to address these barriers, and will encourage
national competition authorities to enforce European and national competition laws where
appropriate. Any action taken by the European Commission and national competition
authorities could have an impact on the payment cards and payment systems businesses of the
Group and on its retail banking activities in the EU countries in which it operates.
In September 2005, the OFT received a super-complaint from the Citizens Advice Bureau
relating to payment protection insurance (“PPI”). As a result, the OFT
commenced a market study on PPI in April 2006. In October 2006 the OFT announced the
outcome of the market study and the OFT referred the PPI market to the UK Competition
Commission for an in-depth inquiry in February 2007. The Competition Commission published
its provisional findings on 5th June 2008 in which it indicated that there was a lack of
competition in the UK PPI market. The commission will now consult on the provisional
findings and remedies and intends to publish its final report at the end of 2008. In
October 2006, the FSA also published the outcome of its broad industry thematic review of
PPI sales practices in which it concluded that some firms fail to treat customers fairly.
The Group has cooperated fully with these investigations and will continue to do so.
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. In February 2007 the OFT announced that it was expanding its investigation into
interchange rates to include debit cards.
In April 2007, the UK consumer interest association known as Which? submitted a
super-complaint to the OFT pursuant to the Enterprise Act 2000. The super-complaint
criticises the various ways in which credit card companies calculate interest charges on
credit card accounts. In June 2007, the OFT announced a new programme of work with the
credit card industry and consumer bodies in order to make the costs of credit cards easier
for consumers to understand. This OFT decision follows the receipt by the OFT of the
super-complaint from Which?. This new work will explore the issues surrounding the costs of
credit for credit cards including purchases, cash advances, introductory offers and payment
allocation. On 11th February 2008, the OFT announced its recommendations, which include the
introduction of an FSA price comparison website, improvements to customer information in
summary boxes and the use of standard terminology.
In September 2006, the OFT announced that it had decided to undertake a fact find on the application of its statement on credit card fees to current account unauthorised overdraft fees. The fact find was completed in March 2007. On 29th March 2007, the OFT announced its decision to conduct a formal investigation into the fairness of bank current account charges. The OFT initiated a market study into personal current accounts (“PCAs”) in the UK on 26th April 2007. The study’s focus was PCAs but it also included an examination of other retail banking products, in particular savings accounts, credit cards, personal loans and mortgages in order to take into account the competitive dynamics of UK retail banking. On 16th July 2008, the OFT published its market study report, in which it concluded that certain features of the UK PCA market were not working well for consumers. The OFT reached the provisional view that some form of regulatory intervention is necessary in the UK PCA market. On 16th July 2008 the OFT also announced a consultation to seek views on the findings and possible measures to address the issues raised in its report. Barclays has participated fully in the market study process and will continue to do so. The consultation period closes on 31st October 2008.
Notes to the Condensed Consolidated Interim Financial Statements
15. Competition and Regulatory Matters (continued)
US laws and regulations require compliance with US economic sanctions, administered by the Office of Foreign Assets Control, against designated foreign countries, nationals and others. HM Treasury regulations similarly require compliance with sanctions adopted by the UK government. The Group has been conducting an internal review of its conduct with respect to US dollar payments involving countries, persons and entities subject to these sanctions and has been reporting to governmental authorities about the results of that review. The Group received inquiries relating to these sanctions and certain US dollar payments processed by its New York branch from the New York County District Attorney’s Office and the US Department of Justice, which along with other authorities, has been reported to be conducting investigations of sanctions compliance by non-US financial institutions. The Group has responded to those inquiries and is cooperating with the regulators, the Department of Justice and the District Attorney’s Office in connection with their investigations of Barclays conduct with respect to sanctions compliance. Barclays has also been keeping the FSA informed of the progress of these investigations and Barclays internal review. Barclays review is ongoing. It is currently not possible to predict the ultimate resolution of the issues covered by Barclays review and the investigations, including the timing and potential financial impact of any resolution, which could be substantial.
16. Acquisitions and Disposals
Acquisitions
On 31st March 2008, Barclays completed the acquisition of Discover’s UK credit card business, Goldfish, for a cash consideration of £38m (including attributable costs of £3m), for fair value of net assets of £127m, which gave rise to a gain on acquisition of £89m.
On 7th March 2008 Absa acquired, for a consideration of £5m a further 24% of Meeg Bank Limited, bringing Absa’s shareholding up to 74%. Meeg Bank is based in South Africa.
Disposals
On 31st January 2008 Barclays completed the sale of Barclays Global Investors Japan Trust & Banking Co. Ltd, a Japanese trust administration and custody operation.
Notes to the Condensed Consolidated Interim Financial Statements
17. Related Party Transactions
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions, or one other party controls both. The definition includes subsidiaries, associates, joint ventures and the Group’s pension schemes, as well as other persons.
Subsidiaries
Transactions between Barclays Bank PLC and subsidiaries also meet the definition of related party transactions. Where these are eliminated on consolidation, they are not disclosed in the Group financial statements.
Associates, Joint Ventures and Other Entities
The Group provides banking services to its associates, joint ventures and Group pension funds (principally the UK Retirement Fund), providing loans, overdrafts, interest and non-interest bearing deposits and current accounts to these entities as well as other services. Group companies, principally within Barclays Global Investors, also provides investment management and custodian services to the Group pension schemes. The Group also provides banking services for unit trusts and investment funds managed by Group companies and are not individually material.
Key Management Personnel
The Group provides banking services to Directors and other key management personnel and persons connected to them. No related parties transactions have taken place in the first six months of the current financial year that have materially affected the financial position or the performance of the Group during that period; and there were no material changes in the related parties transactions described in the last Annual Report that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.
Notes to the Condensed Consolidated Interim Financial Statements
17. Related Party Transactions (continued)
All of these transactions are conducted on the same terms to third-party transactions and are not individually material.
Amounts included, in aggregate, by category of related party entity are as follows:
|
Six months ending 30th June 2008 |
Associates |
Joint ventures |
Entities under common directorship |
Pension funds, unit trusts and investment funds |
Total |
|
Income statement |
£m |
£m |
£m |
£m |
£m |
|
Interest received |
- |
60 |
- |
- |
60 |
|
Interest paid |
(1) |
(22) |
- |
- |
(23) |
|
Fees received for services rendered (including investment management and custody and commissions) |
1 |
9 |
- |
4 |
14 |
|
Fees paid for services provided |
(32) |
(67) |
- |
- |
(99) |
|
Principal transactions |
5 |
19 |
(44) |
- |
(20) |
|
Assets |
|||||
|
Loans and advances to banks and customers |
129 |
1,512 |
67 |
- |
1,708 |
|
Derivative transactions |
- |
4 |
38 |
- |
42 |
|
Other assets |
220 |
124 |
5 |
8 |
357 |
|
Liabilities |
|||||
|
Deposits from banks |
- |
- |
- |
- |
- |
|
Customer accounts |
- |
142 |
102 |
11 |
255 |
|
Derivative transactions |
- |
11 |
87 |
- |
98 |
|
Other liabilities |
3 |
16 |
- |
25 |
44 |
The amounts reported in prior periods have been restated to reflect new related parties.
Notes to the Condensed Consolidated Interim Financial Statements
17. Related Party Transactions (continued)
|
Six months ending 31st December 2007 |
Associates |
Joint ventures |
Entities under common directorship |
Pension funds, unit trusts and investment funds |
Total |
|
Income statement: |
£m |
£m |
£m |
£m |
£m |
|
Interest received |
4 |
44 |
1 |
- |
49 |
|
Interest paid |
- |
(28) |
(1) |
- |
(29) |
|
Fees received for services rendered (including investment management and custody and commissions) |
- |
26 |
- |
18 |
44 |
|
Fees paid for services provided |
(25) |
(20) |
- |
- |
(45) |
|
Principal transactions |
(24) |
47 |
(10) |
- |
13 |
|
Assets |
|||||
|
Loans and advances to banks and customers |
142 |
1,285 |
40 |
- |
1,467 |
|
Derivative transactions |
- |
4 |
36 |
- |
40 |
|
Other assets |
213 |
106 |
- |
14 |
333 |
|
Liabilities |
|||||
|
Deposits from banks |
11 |
- |
- |
- |
11 |
|
Customer accounts |
- |
61 |
33 |
12 |
106 |
|
Derivative transactions |
- |
10 |
50 |
- |
60 |
|
Other liabilities |
4 |
125 |
- |
- |
129 |
The amounts reported in prior periods have been restated to reflect new related parties.
Notes to the Condensed Consolidated Interim Financial Statements
17. Related Party Transactions (continued)
|
Six months ending 30th June 2007 |
Associates |
Joint ventures |
Entities under common directorship |
Pension funds, unit trusts and investment funds |
Total |
|
Income statement |
£m |
£m |
£m |
£m |
£m |
|
Interest received |
1 |
44 |
- |
- |
45 |
|
Interest paid |
(1) |
(30) |
- |
- |
(31) |
|
Fees received for services rendered (including investment management and custody and commissions) |
1 |
8 |
- |
8 |
17 |
|
Fees paid for services provided |
(27) |
(58) |
- |
- |
(85) |
|
Principal transactions |
(3) |
(2) |
(6) |
- |
(11) |
|
Assets |
|||||
|
Loans and advances to banks and customers |
629 |
461 |
69 |
- |
1,159 |
|
Derivative transactions |
- |
- |
- |
484 |
484 |
|
Other assets |
90 |
138 |
- |
12 |
240 |
|
Liabilities |
|||||
|
Deposits from banks |
6 |
- |
- |
- |
6 |
|
Customer accounts |
16 |
10 |
2 |
41 |
69 |
|
Derivative transactions |
3 |
- |
8 |
- |
11 |
|
Other liabilities |
6 |
16 |
- |
- |
22 |
No guarantees, pledges or commitments have been given or received in respect of these
transactions for the periods ending 30th June 2008, 31st December 2007 and 30th June
2007.
There are no leasing transactions between related parties for the periods ending 30th June
2008, 31st December 2007 and 30th June 2007.
Derivatives transacted on behalf of the Pensions Funds Units Trusts and Investment Funds
amounted to £nil (2007: £484m).
During the period Barclays paid £1m (2007: £2m) charitable donations through
the Charities Aid Foundation, a registered charitable organisation, in which a Director of
the Company is a Trustee.
The amounts reported in prior periods have been restated to reflect new related parties.
Notes to the Condensed Consolidated Interim Financial Statements
18. Events Occurring after the Balance Sheet Date
In July 2008 a capital injection of approximately £4.4bn was made by Barclays PLC into Barclays Bank PLC.
On 1st July 2008 Barclays acquired 100% of the shares of the Russian Bank, Expobank, for a
consideration of approximately $745m (£373m).
On 8th July 2008 Barclays announced it would close its FirstPlus unit to new business in
August 2008.
On 5th August 2008 Barclays announced a sale of Barclays Life Assurance Company Limited to Swiss Reinsurance Company for a consideration of approximately £753m.
Notes to the Condensed Consolidated Interim Financial Statements
19. Segmental Reporting
The following section analyses the Group's performance by business. For management and reporting purposes, Barclays is organised into the following business groupings:
Global Retail and Commercial Banking
|
— |
UK Retail Banking |
|
— |
Barclays Commercial Bank |
|
— |
Barclaycard |
|
— |
Global Retail and Commercial Banking - Western Europe |
|
— |
Global Retail and Commercial Banking - Emerging Markets |
|
— |
Global Retail and Commercial Banking - Absa |
Investment Banking and Investment Management
|
— |
Barclays Capital |
|
— |
Barclays Global Investors |
|
— |
Barclays Wealth |
Head Office Functions and Other Operations
UK Retail Banking
UK Retail Banking comprises Personal Customers, Home Finance, Local Business, Consumer Lending and Barclays Financial Planning. This cluster of businesses aims to build broader and deeper relationships with its Personal and Local Business customers through providing a wide range of products and financial services. Personal Customers and Home Finance provide access to current account and savings products, Woolwich branded mortgages and general insurance. Consumer Lending provides unsecured loan and protection products and Barclays Financial Planning provides investment advice and products. Local Business provides banking services, including money transmission, to small businesses.
Barclays Commercial Bank
Barclays Commercial Bank provides banking services to organisations with an annual turnover of more than £1m. Customers are served via a network of relationship and industry sector specialists, which provides solutions constructed from a comprehensive suite of banking products, support, expertise and services, including specialist asset financing and leasing facilities. Customers are also offered access to the products and expertise of other businesses in the Group, particularly Barclays Capital, Barclaycard and Barclays Wealth.
Notes to the Condensed Consolidated Interim Financial Statements
19. Segmental Reporting (continued)
Barclaycard
Barclaycard is a multi-brand credit card and consumer lending business which also processes card payments for retailers and merchants and issues credit and charge cards to corporate customers and the UK Government. It is one of Europe's leading credit card businesses and has an increasing presence in the United States.
In the UK, Barclaycard comprises Barclaycard UK Cards, Barclaycard Partnerships (SkyCard,
Thomas Cook, Argos and Solution Personal Finance), Barclays Partner Finance and
FirstPlus.
Outside the UK, Barclaycard provides credit cards in the United States, Germany, South
Africa (through management of the Absa credit card portfolio) and in the Nordic region,
where Barclaycard operates through Entercard, a joint venture with Swedbank.
Barclaycard works closely with other parts of the Group, including UK Retail Banking,
Barclays Commercial Bank and Global Retail and Commercial Banking - Western Europe and
Global Retail and Commercial Banking - Emerging Markets, to leverage their distribution
capabilities.
Global Retail and Commercial Banking - Western Europe
GRCB - Western Europe encompasses Barclays Global Retail and Commercial Banking as well as Barclaycard operations in Spain, Italy, Portugal, France and Greece. GRCB - Western Europe serves customers through a variety of distribution channels including more than 980 distribution points and over 880 ATMs. GRCB - Western Europe provides a variety of products including retail mortgages, current and deposit accounts, commercial lending, unsecured lending, credit cards, investments, and insurance serving the needs of Barclays retail, mass affluent, and corporate customers.
Global Retail and Commercial Banking - Emerging Markets
GRCB - Emerging Markets encompasses Barclays Global Retail and Commercial Banking, as well as Barclaycard operations, in 14 countries organised in 6 geographic areas: India and Indian Ocean (India, Mauritius and Seychelles); Middle East and North Africa (UAE and Egypt); East and West Africa (Ghana, Tanzania, Uganda and Kenya); Southern Africa (Botswana, Zambia and Zimbabwe); Russia; and Pakistan (from 23rd July 2008). GRCB - Emerging Markets serves its customers through a network of over 870 branches and sales centres, and more than 890 ATMs. GRCB - Emerging Markets provides a variety of traditional retail and commercial products including retail mortgages, current and deposit accounts, commercial lending, unsecured lending, credit cards, treasury and investments. In addition to this, it provides specialist services such as Sharia compliant products and mobile banking.
Global Retail and Commercial Banking – Absa
GRCB - Absa represents Barclays consolidation of Absa, excluding Absa Capital which is included as part of Barclays Capital and Absa Card which is included as part of Barclaycard. Absa Group Limited is one of South Africa's largest financial services organisations serving personal, commercial and corporate customers predominantly in South Africa. GRCB - Absa serves retail customers through a variety of distribution channels and offers a full range of banking services, including current and deposit accounts, mortgages, instalment finance, credit cards, bancassurance products and wealth management services. It also offers customised business solutions for commercial and large corporate customers.
Notes to the Condensed Consolidated Interim Financial Statements
19. Segmental Reporting (continued)
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,
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, 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
Capital works closely with all other parts of the Group to leverage synergies from client
relationships and product capabilities.
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 and 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 335 funds for institutions and individuals trading globally. BGI's
investment philosophy is founded on managing all dimensions of performance: a consistent
focus on controlling risk, return and cost. BGI collaborates with the other Barclays
businesses, particularly Barclays Capital and Barclays Wealth, to develop and market
products and leverage capabilities to better serve the client base.
Barclays Wealth
Barclays Wealth serves high net worth, affluent and intermediary clients worldwide,
providing private banking, asset management, stockbroking, offshore banking, wealth
structuring and financial planning services and manages the closed life assurance
activities of Barclays and Woolwich in the UK.
Barclays Wealth works closely with all other parts of the Group to leverage synergies from
client relationships and product capabilities.
Head Office Functions and Other Operations
Head Office Functions and Other Operations comprises head office and central support functions, businesses in transition and consolidation adjustments.
Head office and central support functions comprises 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.
Notes to the Condensed Consolidated Interim Financial Statements
19. Segmental Reporting (continued)
Group Reporting Changes In 2008
Barclays announced on 22nd July 2008 the impact of certain changes in Group structure and
reporting on the 2007 results. There was no impact on the Group income statement or balance
sheet.
The businesses previously managed and reported as International Retail and Commercial
Banking - excluding Absa are now reported and managed separately as Global Retail and
Commercial Banking - Western Europe and Global Retail and Commercial Banking - Emerging
Markets going forward.
Barclays Commercial Bank. The Marine Finance business, previously part of Barclaycard, is now managed and reported within Barclays Commercial Bank.
Barclaycard. The Absa credit card portfolio, previously part of International Retail and Commercial Banking - Absa is now managed and reported within Barclaycard. Certain credit card portfolios previously part of Barclaycard are now managed and reported as part of Global Retail and Commercial Banking - Western Europe. The Marine Finance business, previously part of Barclaycard is now managed and reported within Barclays Commercial Bank.
Global Retail and Commercial Banking - Western Europe. Certain credit card portfolios previously part of Barclaycard are now managed and reported as part of Global Retail and Commercial Banking - Western Europe.
International Retail and Commercial Banking - Absa. This business will be known going
forward as Global Retail and Commercial Banking - Absa. The Absa credit card portfolio
previously part of Global Retail and Commercial Banking – Absa is now managed and
reported within Barclaycard.
Certain expenses, assets and staff previously reported within International Retail and
Commercial Banking - excluding Absa have been allocated across UK Retail Banking, Barclays
Commercial Bank, Barclaycard, Global Retail and Commercial Banking - Western Europe, Global
Retail and Commercial Banking - Emerging Markets and Global Retail and Commercial Banking
– Absa.
Certain pension assets and liabilities have been reclassified from Head Office and Other
Operations to the other businesses in the Group.
UK Banking which previously reflected UK Retail Banking and Barclays Commercial Bank
combined is no longer reported as a separate segment.
The structure remains unchanged for Barclays Capital, Barclays Global Investors, Barclays
Wealth and Head Office and Other Operations.
Notes to the Condensed Consolidated Interim Financial Statements
19. Segmental Reporting (continued)
|
UK Retail Banking |
Barclays Commercial Bank |
Barclaycard |
GRCB - |
|
|
Six months ending 30th June 2008 |
£m |
£m |
£m |
£m |
|
Income from external customers, net of insurance claims |
2,204 |
1,316 |
1,377 |
643 |
|
Inter-segment income |
(28) |
33 |
41 |
(2) |
|
Total income net of insurance claims |
2,176 |
1,349 |
1,418 |
641 |
|
Business segment performance before tax |
690 |
702 |
388 |
115 |
|
UK Retail Banking |
Barclays Commercial Bank |
Barclaycard |
GRCB - |
|
|
Six months ending 30th June 2007 |
£m |
£m |
£m |
£m |
|
Income from external customers, net of insurance claims |
2,167 |
1,249 |
1,179 |
446 |
|
Inter-segment income |
(46) |
8 |
76 |
(6) |
|
Total income net of insurance claims |
2,121 |
1,257 |
1,255 |
440 |
|
Business segment performance before tax |
646 |
706 |
299 |
105 |
Notes to the Condensed Consolidated Interim Financial Statements
19. Segmental Reporting (continued)
|
GRCB - |
GRCB - |
Barclays Capital |
Barclays |
Barclays Wealth |
Head Office |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
410 |
1,032 |
3,288 |
984 |
706 |
(87) |
11,873 |
|
- |
15 |
123 |
3 |
(38) |
(147) |
- |
|
410 |
1,047 |
3,411 |
987 |
668 |
(234) |
11,873 |
|
52 |
298 |
524 |
265 |
182 |
(432) |
2,784 |
|
GRCB - |
GRCB - |
Barclays Capital |
Barclays |
Barclays Wealth |
Head Office |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
221 |
941 |
4,066 |
937 |
659 |
64 |
11,929 |
|
- |
16 |
87 |
6 |
(24) |
(117) |
- |
|
221 |
957 |
4,153 |
943 |
635 |
(53) |
11,929 |
|
60 |
271 |
1,660 |
388 |
173 |
(180) |
4,128 |
Other Information
General Information
The information in this announcement, which was approved by the Board of Directors on 6th August 2008, 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 2007, 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.
Registered Office
1 Churchill Place, London, E14 5HP, United Kingdom. Tel: +44 (0) 20 7116 1000.
Company number: 1026167.
Website
www.barclays.com
Glossary
'Income' refers to total income net of insurance claims,
unless otherwise specified.
'Cost:income ratio' is defined as operating expenses compared to total income net of
insurance claims.
'Cost:net income ratio' is defined as operating expenses compared to total income net of
insurance claims less impairment charges.
'Risk Tendency' is a statistical estimate of the average loss for each loan portfolio for a
12-month period, taking into account the size of the portfolio and its risk characteristics
under current economic conditions, and is used to track the change in risk as the portfolio
of loans changes over time.
‘Daily Value at Risk (DVaR)’ is an estimate of the potential loss which might
arise from unfavourable market movements, if the current positions were to be held
unchanged for one business day, measured to a confidence level of 98%.