Final Results - Part 1

19th Feb 2008 07:00

Barclays PLC19 February 2008 Results Announcement BARCLAYS PLC RESULTS ANNOUNCEMENT FOR 2007 TABLE OF CONTENTS PAGEPerformance highlights 2Summary of key information 3Financial highlights 4Group Chief Executive's Review 5Group Finance Director's Review 8Consolidated income statement 11Consolidated balance sheet 12Results by business 14Notes to the accounts 41Consolidated statement of recognised income and expense 82Summary consolidated cash flow statement 83Performance management 84Additional information 92Appendix 1- Absa Group Limited results 98Appendix 2- Profit before business disposals 100Index 102 BARCLAYS PLC, 1 CHURCHILL PLACE, LONDON, E14 5HP, ENGLAND, UNITED KINGDOM. TELEPHONE: +44 (0) 20 7116 1000. COMPANY NO. 48839 BARCLAYS PLC The information in this announcement, which was approved by the Board ofDirectors on 18th February 2008, does not comprise statutory accounts for theyears ended 31st December 2007 or 31st December 2006, within the meaning ofSection 240 of the Companies Act 1985 (the 'Act'). Statutory accounts for theyear ended 31st December 2007, which also include certain information requiredfor the Joint Annual Report on Form 20-F of Barclays PLC and Barclays Bank PLCto the US Securities and Exchange Commission (SEC), will be delivered to theRegistrar of Companies in accordance with Section 242 of the Act. Statutoryaccounts for the year ended 31st December 2006 have been delivered to theRegistrar of Companies and the Group's auditors have reported on those accountsand have given an unqualified report which does not contain a statement underSection 237(2) or (3) of the Act. The 2007 Annual Review and Summary FinancialStatement will be posted to shareholders together with the Group's full AnnualReport for those shareholders who request it. Forward-looking statements This document contains certain forward-looking statements within the meaning ofSection 21E of the US Securities Exchange Act of 1934, as amended, and Section27A of the US Securities Act of 1933, as amended, with respect to certain of theGroup's plans and its current goals and expectations relating to its futurefinancial condition and performance. These forward-looking statements can beidentified by the fact that they do not relate only to historical or currentfacts. 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-lookingstatements include, among others, statements regarding the Group's futurefinancial position, income growth, impairment charges, business strategy,projected levels of growth in the banking and financial markets, projectedcosts, estimates of capital expenditures, and plans and objectives for futureoperations. By their nature, forward-looking statements involve risk anduncertainty because they relate to future events and circumstances, including,but not limited to, UK domestic and global economic and business conditions, theeffects of continued volatility in credit markets, market related risks such aschanges in interest rates and exchange rates, the policies and actions ofgovernmental and regulatory authorities, changes in legislation, the furtherdevelopment of standards and interpretations under International FinancialReporting Standards (IFRS) applicable to past, current and future periods,evolving practices with regard to the interpretation and application ofstandards under IFRS, progress in the integration of Absa into the Group'sbusiness and the achievement of synergy targets related to Absa, the outcome ofpending and future litigation, the success of future acquisitions and otherstrategic transactions and the impact of competition - a number of which factorsare beyond the Group's control. As a result, the Group's actual future resultsmay differ materially from the plans, goals, and expectations set forth in theGroup's forward-looking statements. Any forward-looking statements made by or on behalf of Barclays speak only as ofthe date they are made. Barclays does not undertake to update forward-lookingstatements to reflect any changes in Barclays expectations with regard theretoor any changes in events, conditions or circumstances on which any suchstatement is based. The reader should, however, consult any additionaldisclosures that Barclays has made or may make in documents it has filed or mayfile with the SEC. Absa Definitions 'Absa Group Limited' refers to the consolidated results of the South Africangroup of which the parent company is listed on the Johannesburg Stock Exchange(JSE Limited) in which Barclays owns a controlling stake. 'Absa' refers to the results for Absa Group Limited as consolidated into theresults of Barclays PLC; translated into Sterling with adjustments foramortisation of intangible assets, certain head office adjustments, transferpricing and minority interests. 'International Retail and Commercial Banking-Absa' is the portion of Absa'sresults that is reported by Barclays within the International Retail andCommercial Banking business. 'Absa Capital' is the portion of Absa's results that is reported by Barclayswithin the Barclays Capital business. Glossary of terms 'Income' refers to total income net of insurance claims, unless otherwisespecified. Profit before business disposals' represents profit before tax and disposal ofsubsidiaries, associates and joint ventures. Details of the impact on eachbusiness and the Group can be found in Appendix 2 on page 100. 'Cost:income ratio' is defined as operating expenses compared to total incomenet of insurance claims. 'Cost:net income' ratio is defined as operating expenses compared to totalincome net of insurance claims less impairment charges. 'Compensation:net income ratio' is defined as staff compensation based costscompared to total income net of insurance claims less impairment charges. 'Return on average economic capital' is defined as attributable profit comparedto average economic capital. 'Average net income generated per member of staff' is defined as total operatingincome compared to the average of staff numbers for the reporting period. 'Risk Tendency' is a statistical estimate of the average loss for each loanportfolio for a 12-month period, taking into account the size of the portfolioand its risk characteristics under current economic conditions, and is used totrack the change in risk as the portfolio of loans changes over time. 'Economic profit' is defined as profit after tax and minority interests lesscapital charge (average shareholders' equity excluding minority interestsmultiplied by the Group cost of capital). 'Daily Value at Risk (DVaR)' is an estimate of the potential loss which mightarise from unfavourable market movements, if the current positions were to beheld unchanged for one business day, measured to a confidence level of 98%. PERFORMANCE HIGHLIGHTS • Resilient performance for the year with results in line with Q3 trading update • Group profit before tax £7.1bn, demonstrating the benefits of increasing business diversification • Group profit before business disposals 3% ahead of prior year - Barclays Capital profit ahead of record 2006 performance, including £1.6bn of net losses from credit market turbulence - Barclays Global Investors and Barclays Wealth both benefiting from significant asset inflows - Improved profit and productivity in UK Banking - Strong profit growth at Barclaycard driven by returns on international investments and improved UK impairment - Very strong income growth in International Retail and Commercial Banking and significant investment for future growth • Tier 1 capital ratio well ahead of target at 7.8% • Final dividend increased 10% to 22.5p, making 34.0p for the full year (2006: 31.0p) John Varley, Group Chief Executive commented: "Barclays delivered a resilient performance in 2007, with profits broadly inline with the record prior year results. Investment Banking and InvestmentManagement performed well in the tough market conditions of 2007. Global Retailand Commercial Banking is showing good momentum in the UK, in Western Europe andespecially in Emerging Markets. The strength of our diversified businesses givesus confidence for the period ahead." SUMMARY OF KEY INFORMATION Group Results 2007 2006 % Change £m £m Total income net of insurance claims 23,000 21,595 7 Impairment charges and other credit provisions (2,795) (2,154) 30 Operating expenses (13,199) (12,674) 4 Profit before tax 7,076 7,136 (1) Profit before business disposals 7,048 6,813 3 Profit attributable to minority interests 678 624 9 Profit attributable to equity holders of the parent 4,417 4,571 (3) Economic profit 2,290 2,704 (15) p p Earnings per share 68.9 71.9 (4)Diluted earnings per share 66.7 69.8 (4)Dividend per share 34.0 31.0 10 % % Tier 1 Capital ratio(1) 7.8 7.7 Return on average shareholders' equity 20.3 24.7 Profit before tax by business(2) £m £m % ChangeUK Banking 2,653 2,546 4 -------- --------UK Retail Banking 1,282 1,181 9Barclays Commercial Bank 1,371 1,365 0 -------- --------Barclaycard 540 458 18International Retail and Commercial Banking 935 1,216 (23)Barclays Capital 2,335 2,216 5Barclays Global Investors 734 714 3Barclays Wealth 307 245 25 (1) Tier 1 Capital ratio is calculated under Basel I FSA requirements.(2) Summary excludes Head office functions and other operations. FINANCIAL HIGHLIGHTS 2007 2006RESULTS £m £mNet interest income 9,610 9,143Net fee and commission income 7,708 7,177Principal transactions 4,975 4,576Net premiums from insurance contracts 1,011 1,060Other income 188 214 --------- ---------Total income 23,492 22,170Net claims and benefits incurred under insurance contracts (492) (575) --------- ---------Total income net of insurance claims 23,000 21,595Impairment charges and other credit provisions (2,795) (2,154) --------- ---------Net income 20,205 19,441Operating expenses (13,199) (12,674)Share of post-tax results of associates and joint ventures 42 46Profit on disposal of subsidiaries, associates and joint ventures 28 323 --------- ---------Profit before tax 7,076 7,136 --------- ---------Profit attributable to equity holders of the parent 4,417 4,571Economic profit 2,290 2,704 PER ORDINARY SHARE p pEarnings 68.9 71.9Diluted earnings 66.7 69.8Dividend 34.0 31.0Net asset value 353 303 PERFORMANCE RATIOS % %Return on average shareholders' equity 20.3 24.7Cost:income ratio 57 59Cost:net income ratio 65 65 2007 2006BALANCE SHEET £m £mShareholders' equity excluding minority interests 23,291 19,799Minority interests 9,185 7,591 --------- ---------Total shareholders' equity 32,476 27,390Subordinated liabilities 18,150 13,786 --------- ---------Total capital resources 50,626 41,176 --------- ---------Total assets 1,227,361 996,787Risk weighted assets 353,476 297,833 CAPITAL RATIOS(1) % %Tier 1 ratio 7.8 7.7Risk asset ratio 12.1 11.7 (1) Capital ratios are calculated under Basel I FSA requirements. GROUP CHIEF EXECUTIVE'S REVIEW Barclays delivered a resilient financial performance in 2007 in a year ofcontrasting market conditions. The excellent results of the first half wereachieved in a relatively benign environment; in the second half we were notimmune from the impact of the credit market turbulence, but profit beforebusiness disposals for the year still increased 3 per cent. I am pleased toreport profits again above £7bn, which is well ahead of the average level of theprevious three years. At a time of significant market turbulence, it is important to be clear andconfident about strategy. The strategy of Barclays is to achieve superior growththrough time by diversifying our profit base. The precondition of successfulgrowth is relevance to customers. We seek to maximise the alignment between thesources of growth in the financial services industry (in particular anticipatingwhat customers want and need) with what we have in Barclays (in terms of brand,capability and physical footprint). We recommit to our strategy following ourbid for ABN AMRO, and in the light of the market volatility and because of ourconfidence that our strategy offers the best route to strong growth in the yearsahead. The structure of the Group, which comprises two business groupings, GlobalRetail and Commercial Banking ("GRCB") and Investment Banking and InvestmentManagement ("IBIM"), is designed both to enable us to be well positioned for thesignificant growth which we anticipate in the global financial services industryand to help us serve customers and clients well. We continued to invest heavilyacross the Group in 2007, increasing the number of employees who serve customersand clients and developing our distribution networks. In IBIM I believe that we handled well the stress test of market turbulence inthe second half of 2007. Both Barclays Capital and Barclays Global Investorsended 2007 with profits ahead of 2006, which was a year of rapid growth andrecord profitability for both. We have benefited significantly from the businessdiversification that we have pursued in recent years: the development ofcapabilities by Barclays Capital in commodities, foreign exchange and equityproducts enabled us to deliver excellent income growth in those areas. The costflexibility that we have built into the business model here has also servedshareholders well, enabling us to reduce expenses year on year, and improve thecost:net income and compensation ratios. In Barclays Global Investors, iShares'assets under management grew over $100bn to $408bn, and this growth illustratesthe significant diversification of Barclays Global Investors earnings base thatwe have engineered in recent years. Meanwhile Barclays Wealth is making goodprogress towards the achievement of its profit goal of £500m in the medium term,benefiting as it is from proximity to the structuring and manufacturingcapabilities of Barclays Capital and Barclays Global Investors. We are building significant momentum in GRCB. In particular, we have beengrowing distribution to create a much broader business base for the years ahead.During 2007, we opened over 600 new branches and sales centres outside theUnited Kingdom, increasing by over one third the number of distribution pointsacross these parts of our GRCB business. This growth is feeding throughpowerfully into activity levels. Income increased 28% in International Retailand Commercial Banking - excluding Absa in 2007. Absa performed well, includingdelivering on its synergy target 18 months ahead of schedule. In UK Banking, we delivered a further two percentage points improvement in ourcost:income ratio, excluding the impact of the settlement on overdraft fees,bringing the total to eight percentage points improvement over three yearscompared with our target of six percentage points. The turnaround of UK RetailBanking continued during 2007, with strong income growth in core product areas,including mortgages. We have announced today our intention to reduce UK RetailBanking's cost:income ratio by a further three percentage points over the nextthree years. In Barclaycard, we have made excellent progress towards our goal ofre-establishing a leadership position in the United Kingdom and in theaggressive expansion of our International Cards business. Profits in Barclaycardgrew strongly in 2007 as we reduced the impairment charge in the UK, and movedBarclaycard International, including Barclaycard US, into profit. In reviewing our use of capital and assets, our principal focus has been on therisk weighted balance sheet rather than the nominal balance sheet. Whilst wemonitor internally a range of different ratios, our publicly expressed targethas been to maintain a ratio of tier 1 capital to risk weighted assets of 7.25%.At the end of 2007 we were comfortably ahead of that target under both Basel Iand Basel II measurement bases. Risk weighted asset growth in 2007 was 19%, abrisker rate than in recent years reflecting in part the syndication constraintsof the second half of the year. We expect the rate of growth in risk weightedassets in 2008 to be slower than that of 2007. We have increased the dividend by 10 per cent to 34p (2006: 31p), which includesa final dividend of 22.5p (2006: 20.5p). The maintenance of our policy ofgrowing dividends broadly in line with the rate of underlying earnings over timereflects the Board's confidence in the future. Our dividend remains more thantwice covered by earnings, which we believe is consistent with the fundingrequirements of our organic growth plans. We have today announced new multi-year performance goals. These are designed tostretch us, and we see them as reflective of the potential that exists withinour businesses and our people. As in 2003, when we last set new goals, we aim toachieve significant growth in economic profit over the next four years andthereby to deliver top quartile Total Shareholder Return (TSR) relative to ourcompetitor peer group. Over the last four years Barclays achieved a cumulative total of £8.3bn ofeconomic profit, against a target range of £6.5bn to £7.0bn. Despite exceedingour economic profit goal by some way, we ranked in the third quartile of ourpeer group in terms of TSR which was a disappointing outcome. Our new goal is to generate a cumulative total of between £9.3bn and £10.6bn ofeconomic profit between 2008 and 2011. This represents an annual growth rate ineconomic profit of 5 to10 per cent. We estimate that if we achieve the upper endof the range, we will also achieve our goal of top quartile TSR relative to ourpeer group. I am pleased to report that our strategic collaboration with China DevelopmentBank is off to a good start. This is an important part of our long term plans todevelop a more significant presence in emerging markets, particularly Asia wheregroup profits more than doubled in 2007, and I look forward to reporting toshareholders on the growing returns that we will generate from this relationshipin the coming years. This has been a challenging year for our staff, and we have them to thank fordelivering the results we have achieved despite multiple distractions indifficult market circumstances. I am proud of their commitment to putting ourcustomers first and I am confident that we enter our new goal period with a teamas good as any in the banking industry. What is the outlook for 2008? We see another year in which global economicgrowth will be 4%, or something close to that. The emerging economies accountfor about a third of global GDP, but they account for two thirds of global GDPgrowth and they continue to perform strongly. However, in many economies of thedeveloped world, there will be a slow-down, and in particular we expect economicgrowth in the UK and the US to be below the trend of recent years. In anenvironment such as this we will have to be disciplined in our risk managementand rigorous in our approach to lending. But our experience of 2007 gives usconfidence, and we enter 2008 with a strong capital base, a consistent strategicdirection, a well diversified set of businesses and significant opportunitiesfor growth in the medium term. John VarleyGroup Chief Executive GROUP FINANCE DIRECTOR'S REVIEW Group Performance Barclays financial performance in 2007 demonstrated the benefits of thesuccessful execution of our strategic priorities in recent years. We deliveredprofit before tax of £7,076m, broadly in line with the record results of 2006and up 3% excluding gains from business disposals. Earnings per share were 68.9pand we increased the full year dividend payout to 34p, a rise of 10%. Income grew 7% to £23,000m, well ahead of expense growth. Growth was well spreadby business, with strong contributions from International Retail and CommercialBanking, Barclays Global Investors and Barclays Wealth. Net income, afterimpairment charges, grew 4% and included net losses of £1,635m relating tocredit market turbulence, net of £658m of gains arising from the fair valuationof notes issued by Barclays Capital and settlements on overdraft fees inrelation to prior years of £116m in UK Retail Banking. Impairment charges and other credit provisions rose 30% to £2,795m. Impairmentcharges relating to US sub-prime mortgages and other credit market exposureswere £782m. Excluding these sub-prime related charges, impairment chargesimproved 7% to £2,013m. In UK Retail Banking and Barclaycard, impairment chargesimproved significantly, as a consequence of reductions in flows into delinquencyand arrears balances in UK cards and unsecured loans. UK mortgage impairmentcharges remained negligible, with low levels of defaults, and the wholesale andcorporate sector remained stable. The significant increase in impairment chargesin International Retail and Commercial Banking was driven by very strong bookgrowth. Operating expenses increased 4% to £13,199m. We invested in growing the branchnetwork and distribution channels in International Retail and Commercial Bankingand in infrastructure development in Barclays Global Investors. Costs were lowerin UK Banking and broadly flat in Barclays Capital. Gains from propertydisposals were £267m (2006: £432m). The Group cost:income ratio improved twopercentage points to 57%. Business Performance - Global Retail and Commercial Banking In UK Banking we improved the cost:income ratio a further two percentage pointsto 48%, excluding settlements on overdraft fees in relation to prior years. Onthis basis we have delivered a cumulative eight percentage point improvement inthe past three years, well ahead of our target of six percentage points. UK Retail Banking profit before tax grew 9% to £1,282m. Income grew 2% excludingsettlements on overdraft fees in relation to prior years, reflecting a verystrong performance in Personal Customer Retail Savings and good performances inCurrent Accounts, Local Business and Home Finance, partially offset by lowerincome from loan protection insurance. Enhancements in product offering andcontinued improvements in processing capacity enabled a strong performance inmortgage origination, with a share of net new lending of 8%. Operating expenseswere well controlled and improved 3%. Impairment charges improved 12% reflectinglower charges in unsecured consumer lending and Local Business. This was drivenby improvements in the collection process which led to reduced flows intodelinquency, lower levels of arrears and stable charge-offs. Mortgage impairmentcharges remained negligible. Barclays Commercial Bank delivered profit before tax of £1,371m. Profit beforebusiness disposals improved 5%. Income improved 7% driven by very strong growthin fees and commissions and steady growth in net interest income. Non-interestincome increased to 32% of total income reflecting continuing focus on crosssales and efficient balance sheet utilisation. Operating expenses rose 6%,reflecting increased investment in product development and support, sales forcecapability and operational efficiency. Impairment charges increased £38m as aresult of asset growth and higher charges in Larger Business. Barclaycard profit before tax increased to £540m, 18% ahead of the prior year.Steady income relative to 2006 reflected strong growth in BarclaycardInternational offset by a reduction in UK card extended credit balances as we re-positioned the UK business and reduced lower credit quality exposures including the sale of the Monument card portfolio. As a result, impairment charges improved 21%, reflecting more selective customer recruitment, client management and improved collections. Operating expenses increased 12%, driven by continued investment in Barclaycard International and the non-recurrence of a property gain included in the 2006 results. Barclaycard US continued to make good progress, and for the first time made a profit for the year. International Retail and Commercial Banking profits declined 23% to £935m.Results in 2006 included a £247m profit on disposals and £41m post tax profitshare from FirstCaribbean International Bank. 2007 results reflected a 12%decline in the average value of the Rand. International Retail and Commercial Banking - excluding Absa delivered a profitbefore tax of £246m. Income rose 28% as we significantly increased the pace oforganic growth across the business, with especially strong growth in EmergingMarkets and Spain. Operating expenses grew 32% as we expanded the distributionfootprint, opening 324 new branches and 157 new sales centres and also investedin rolling out a common technology platform and processes across the business.Impairment increased to £79m including very strong balance sheet growth andlower releases. International Retail and Commercial Banking - Absa Sterling profit fell £9m to£689m after absorbing the 12% decline in the average value of the Rand. AbsaGroup Limited profit before tax grew 23% in Rand terms, reflecting very stronggrowth in retail banking, corporate banking and Absa Capital (reported inBarclays Capital). Retail loans and advances grew 22% and retail deposits grew20%. We delivered synergies of R1,428m, achieving our synergy target 18 monthsahead of schedule. Business Performance - Investment Banking and Investment Management Barclays Capital improved on the record performance of 2006 delivering a 5%increase in profit before tax to £2,335m. Net income was ahead of last year,reflecting very strong performances in most asset classes including interestrates, currencies, equity products and commodities. Results also included netlosses arising from credit market turbulence of £1,635m net of gains from thefair valuation of issued notes of £658m. All geographies outside the US enjoyedsignificant growth in income and profits. Strong cost control led to operatingexpenses declining slightly year on year. The cost:net income ratio improved by1% to 63%. Barclays Global Investors (BGI) profit before tax increased 3% to £734m. Incomegrew 16%, driven by very strong growth in management fees and in securitieslending revenues. Profit and income growth were both affected by the 8%depreciation in the average value of the US Dollar. BGI costs increased 25% aswe continued to build our infrastructure across multiple products and platformsto support future growth. The cost:income ratio rose to 62%. Assets undermanagement grew US$265bn to US$2.1 trillion, including net new assets ofUS$86bn. Barclays Wealth profit before tax rose 25% to £307m. Income growth of 11% wasdriven by increased client funds and greater transaction volumes. Costs werewell controlled as business volumes rose and the cost:income ratio improvedthree percentage points to 76%. We continued to invest in client facing staffand infrastructure. Redress costs declined. Total client assets increased 14% to£133bn. Head Office Functions and Other Operations Head Office functions and other operations loss before tax increased 65% to£428m reflecting higher inter-segment adjustments and lower gains from hedgingactivities. Capital Management At 31st December 2007, our Basel I Tier 1 Capital ratio was 7.8% (2006: 7.7%).We started managing capital ratios under Basel II from 1st January 2008. OurBasel II Tier 1 Capital ratio was 7.6%. Our Equity Tier 1 ratio was 5.0% underBasel I (2006: 5.3%) and 5.1% under Basel II. We have increased the proposed dividend payable to shareholders in respect of2007 by 10%. We maintain our progressive approach to dividends, expectingdividend growth broadly to match earnings growth over time. Chris LucasGroup Finance Director CONSOLIDATED INCOME STATEMENT 2007 2006 £m £m --------- ---------Interest income 25,308 21,805Interest expense (15,698) (12,662) --------- ---------Net interest income 9,610 9,143 --------- ---------Fee and commission income 8,678 8,005Fee and commission expense (970) (828) --------- ---------Net fee and commission income 7,708 7,177 --------- ---------Net trading income 3,759 3,614Net investment income 1,216 962 --------- ---------Principal transactions 4,975 4,576Net premiums from insurance contracts 1,011 1,060Other income 188 214 --------- ---------Total income 23,492 22,170Net claims and benefits incurred under insurance contracts (492) (575) --------- ---------Total income net of insurance claims 23,000 21,595Impairment charges and other credit provisions (2,795) (2,154) --------- ---------Net income 20,205 19,441 --------- ---------Operating expenses excluding amortisation of intangible assets (13,013) (12,538)Amortisation of intangible assets (186) (136) --------- ---------Operating expenses (13,199) (12,674)Share of post-tax results of associates and joint ventures 42 46Profit on disposal of subsidiaries, associates and joint ventures 28 323 --------- ---------Profit before tax 7,076 7,136Tax (1,981) (1,941) --------- ---------Profit after tax 5,095 5,195 --------- --------- Profit attributable to minority interests 678 624Profit attributable to equity holders of the parent 4,417 4,571 --------- --------- 5,095 5,195 --------- --------- p pBasic earnings per ordinary share 68.9 71.9Diluted earnings per ordinary share 66.7 69.8 Dividends per ordinary share:Interim dividend 11.5 10.5Final dividend proposed 22.5 20.5 --------- ---------Total dividend 34.0 31.0 --------- --------- £m £mInterim dividend paid 768 666Final dividend proposed 1,485 1,307 --------- ---------Total dividend 2,253 1,973 --------- --------- CONSOLIDATED BALANCE SHEET 2007 2006 £m £mAssetsCash and balances at central banks 5,801 7,345Items in the course of collection from other banks 1,836 2,408Trading portfolio assets 193,691 177,867Financial assets designated at fair value:held on own account 56,629 31,799held in respect of linked liabilities to customers under investment contracts 90,851 82,798Derivative financial instruments 248,088 138,353Loans and advances to banks 40,120 30,926Loans and advances to customers 345,398 282,300Available for sale financial investments 43,072 51,703Reverse repurchase agreements and cash collateral on securities borrowed 183,075 174,090Other assets 5,150 5,850Current tax assets 518 557Investments in associates and joint ventures 377 228Goodwill 7,014 6,092Intangible assets 1,282 1,215Property, plant and equipment 2,996 2,492Deferred tax assets 1,463 764 ----------- ---------Total assets 1,227,361 996,787 ----------- --------- CONSOLIDATED BALANCE SHEET 2007 2006 £m £mLiabilitiesDeposits from banks 90,546 79,562Items in the course of collection due to other banks 1,792 2,221Customer accounts 294,987 256,754Trading portfolio liabilities 65,402 71,874Financial liabilities designated at fair value 74,489 53,987Liabilities to customers under investment contracts 92,639 84,637Derivative financial instruments 248,288 140,697Debt securities in issue 120,228 111,137Repurchase agreements and cash collateral on securities lent 169,429 136,956Other liabilities 10,499 10,337Current tax liabilities 1,311 1,020Insurance contract liabilities, including unit-linked liabilities 3,903 3,878Subordinated liabilities 18,150 13,786Deferred tax liabilities 855 282Provisions 830 462Retirement benefit liabilities 1,537 1,807 ----------- ---------Total liabilities 1,194,885 969,397 ----------- ---------Shareholders' equityCalled up share capital 1,651 1,634Share premium account 56 5,818Other reserves 874 390Retained earnings 20,970 12,169Less: treasury shares (260) (212) ----------- ---------Shareholders' equity excluding minority interests 23,291 19,799Minority interests 9,185 7,591 ----------- ---------Total shareholders' equity 32,476 27,390 ----------- ---------Total liabilities and shareholders' equity 1,227,361 996,787 ----------- --------- RESULTS BY BUSINESS The following section analyses the Group's performance by business. Formanagement and reporting purposes, Barclays is organised into the followingbusiness groupings: Global Retail and Commercial Banking • UK Banking, comprising - UK Retail Banking - Barclays Commercial Bank (formerly UK Business Banking) • Barclaycard • International Retail and Commercial Banking, comprising - International Retail and Commercial Banking - excluding Absa - International Retail and Commercial Banking - Absa Investment Banking and Investment Management • Barclays Capital • Barclays Global Investors • Barclays Wealth Head office functions and other operations UK Banking UK Banking delivers banking solutions to Barclays UK retail and business bankingcustomers. It offers a range of integrated products and services and access tothe expertise of other Group businesses. Customers are served through a varietyof channels comprising the branch network, automated teller machines, telephonebanking, online banking and relationship managers. UK Banking is managed throughtwo business areas, UK Retail Banking and Barclays Commercial Bank. UK Retail Banking UK Retail Banking comprises Personal Customers, Home Finance, Local Business,Consumer Lending and Barclays Financial Planning. This cluster of businessesaims to build broader and deeper relationships with its Personal and LocalBusiness customers through providing a wide range of products and financialservices. Personal Customers and Home Finance provide access to current accountand savings products, Woolwich branded mortgages and general insurance. ConsumerLending provides unsecured loan and protection products and Barclays FinancialPlanning provides investment advice and products. Local Business providesbanking services, including money transmission, to small businesses. Barclays Commercial Bank Barclays Commercial Bank provides banking services to organisations with anannual turnover of more than £1m. Customers are served via a network ofrelationship and industry sector specialists, which provides solutionsconstructed from a comprehensive suite of banking products, support, expertiseand services, including specialist asset financing and leasing facilities.Customers are also offered access to the products and expertise of otherbusinesses in the Barclays Group, particularly Barclays Capital, Barclaycard andBarclays Wealth. Barclaycard Barclaycard is a multi-brand credit card and consumer lending business whichalso processes card payments for retailers and merchants and issues credit andcharge cards to corporate customers and the UK Government. It is one of Europe'sleading credit card businesses and has an increasing presence in the UnitedStates. In the UK, Barclaycard comprises Barclaycard UK Cards, Barclaycard Partnerships(SkyCard, Thomas Cook, Argos and Solution Personal Finance), Barclays PartnerFinance (formerly CFS) and FirstPlus. Outside the UK, Barclaycard provides credit cards in the United States, Germany,Spain, Italy and Portugal. In the Nordic region, Barclaycard operates throughEntercard, a joint venture with Swedbank. Barclaycard works closely with other parts of the Group, including UK RetailBanking, Barclays Commercial Bank and International Retail and CommercialBanking, to leverage their distribution capabilities. International Retail and Commercial Banking International Retail and Commercial Banking provides banking services toBarclays personal and corporate customers outside the UK. The products andservices offered to customers are tailored to meet customer needs and theregulatory and commercial environments within each country. For reportingpurposes the operations are grouped into two components: International Retailand Commercial Banking - excluding Absa and International Retail and CommercialBanking - Absa. International Retail and Commercial Banking works closely withall other parts of the Group to leverage synergies from product and servicepropositions. International Retail and Commercial Banking - excluding Absa International Retail and Commercial Banking - excluding Absa provides a range ofbanking services to retail and corporate customers in Western Europe andEmerging Markets, including current accounts, savings, investments, mortgagesand loans. Barclays Western Europe business includes Spain, Italy, France andPortugal. Emerging Markets includes operations in Africa, India and the MiddleEast. International Retail and Commercial Banking - Absa International Retail and Commercial Banking - Absa represents Barclaysconsolidation of Absa, excluding Absa Capital which is included as part ofBarclays Capital. Absa Group Limited is one of South Africa's largest financialservices organisations serving personal, commercial and corporate customerspredominantly in South Africa. International Retail and Commercial Banking -Absa serves retail customers through a variety of distribution channels andoffers a full range of banking services, including current and deposit accounts,mortgages, instalment finance, credit cards, bancassurance products and wealthmanagement services. It also offers customised business solutions for commercialand large corporate customers. Barclays Capital Barclays Capital is a leading global investment bank which provides largecorporate, institutional and government clients with solutions to theirfinancing and risk management needs. Barclays Capital services a wide variety of client needs, from capital raisingand managing foreign exchange, interest rate, equity and commodity risks,through to providing technical advice and expertise. Activities are organisedinto three principal areas: Rates, which includes fixed income, foreignexchange, commodities, emerging markets, money markets, prime services andequity products; Credit, which includes primary and secondary activities forloans and bonds for investment grade, high yield and emerging market credit, aswell as hybrid capital products, asset based finance, mortgage backedsecurities, credit derivatives, structured capital markets and large assetleasing; and Private Equity. Barclays Capital includes Absa Capital, theinvestment banking business of Absa. Barclays Capital works closely with allother parts of the Group to leverage synergies from client relationships andproduct capabilities. Barclays Global Investors Barclays Global Investors (BGI) is one of the world's largest asset managers anda leading global provider of investment management products and services. BGI offers structured investment strategies such as indexing, global assetallocation and risk controlled active products including hedge funds andprovides related investment services such as securities lending, cash managementand portfolio transition services. In addition, BGI is the global leader inassets and products in the exchange traded funds business, with over 320 fundsfor institutions and individuals trading globally. BGI's investment philosophyis founded on managing all dimensions of performance: a consistent focus oncontrolling risk, return and cost. BGI collaborates with the other Barclaysbusinesses, particularly Barclays Capital and Barclays Wealth, to develop andmarket products and leverage capabilities to better serve the client base. Barclays Wealth Barclays Wealth serves high net worth, affluent and intermediary clientsworldwide, providing private banking, asset management, stockbroking, offshorebanking, wealth structuring and financial planning services and manages theclosed life assurance activities of Barclays and Woolwich in the UK. Barclays Wealth works closely with all other parts of the Group to leveragesynergies 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 • 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 arerecharged to them. Businesses in transition principally relate to certain lending portfolios thatare centrally managed with the objective of maximising recovery from the assets. Consolidation adjustments largely reflect the elimination of inter-segmenttransactions. UK Banking 2007 2006Income Statement Information £m £mNet interest income 4,596 4,467Net fee and commission income 1,932 1,874 -------- --------Net trading income 9 2Net investment income 47 28 -------- --------Principal transactions 56 30Net premiums from insurance contracts 252 342Other income 58 63 -------- --------Total income 6,894 6,776Net claims and benefits incurred under insurance contracts (43) (35) -------- --------Total income net of insurance claims 6,851 6,741Impairment charges (849) (887) -------- --------Net income 6,002 5,854 -------- --------Operating expenses excluding amortisation of intangible assets (3,358) (3,387)Amortisation of intangible assets (12) (2) -------- --------Operating expenses (3,370) (3,389)Share of post-tax results of associates and joint ventures 7 5Profit on disposal of subsidiaries, associates and joint ventures 14 76 -------- --------Profit before tax 2,653 2,546 -------- -------- Balance Sheet InformationLoans and advances to customers £145.3bn £131.0bnCustomer accounts £147.9bn £139.7bnTotal assets £161.8bn £147.6bn Performance RatiosReturn on average economic capital(1) 29% 32%Cost:income ratio(1) 49% 50%Cost:net income ratio(1) 56% 58% Other Financial MeasuresRisk Tendency(1),(2) £775m £790mEconomic profit(1) £1,272m £1,327mRisk weighted assets £99.8bn £93.0bn Key FactNumber of UK branches 1,733 2,014 (1) Defined on page iv.(2) Further information on risk tendency is included on page 90. UK Banking profit before tax increased 4% (£107m) to £2,653m (2006: £2,546m)driven principally by solid income growth. Results included gains from the saleand leaseback of properties and property sales of £232m (2006: £313m). The cost:income ratio improved one percentage point to 49%. Excluding the impactof settlements on overdraft fees in relation to prior years, the cost:incomeratio improved two percentage points to 48%, making eight percentage points ofimprovement from 2004 to 2007 compared to the target of six percentage points. UK Retail Banking 2007 2006Income Statement Information £m £mNet interest income 2,858 2,765Net fee and commission income 1,183 1,232Net premiums from insurance contracts 252 342Other income 47 42 -------- --------Total income 4,340 4,381Net claims and benefits incurred under insurance contracts (43) (35) -------- --------Total income net of insurance claims 4,297 4,346Impairment charges (559) (635) -------- --------Net income 3,738 3,711 -------- --------Operating expenses excluding amortisation of intangible assets (2,455) (2,531)Amortisation of intangible assets (8) (1) -------- --------Operating expenses (2,463) (2,532)Share of post-tax results of associates and joint ventures 7 2 -------- --------Profit before tax 1,282 1,181 -------- --------Balance Sheet InformationLoans and advances to customers £82.0bn £74.7bnCustomer accounts £87.1bn £82.3bnTotal assets £87.8bn £81.7bn Performance RatiosReturn on average economic capital(1) 28% 28%Cost:income ratio(1) 57% 58%Cost:net income ratio(1) 66% 68% Other Financial MeasuresRisk Tendency(1),(2) £470m £500mEconomic profit(1) £622m £589mRisk weighted assets £46.0bn £43.0bn Key FactsNumber of UK current accounts(3) 11.3m 11.5mNumber of UK savings accounts 11.1m 11.0mTotal UK mortgage balances £69.8bn £61.7bnNumber of Local Business customers 643,000 630,000 (1) Defined on page iv.(2) Further information on risk tendency is included on page 90.(3) Decrease reflects the consolidation of Woolwich and Barclays current accounts. UK Retail Banking profit before tax increased 9% (£101m) to £1,282m (2006:£1,181m) due to reduced costs and a strong improvement in impairment. Income grew 2% (£67m) before the impact of settlements on overdraft fees inrelation to prior years (£116m). This was driven by very strong growth inPersonal Customer Retail Savings and good growth in Personal Customer CurrentAccounts, Home Finance and Local Business. Including the impact of settlementson overdraft fees, income decreased £49m to £4,297m (2006: £4,346m). Net interest income increased 3% (£93m) to £2,858m (2006: £2,765m). Growth wasdriven by a higher contribution from deposits, through a combination of goodbalance sheet growth and an increased liability margin. Total average customerdeposit balances increased 7% to £81.9bn (2006: £76.5bn), supported by thelaunch of new products. Mortgage volumes increased significantly, driven by an improved mix of longerterm value products for customers, higher levels of retention and continuingimprovements in processing capability. Mortgage balances were £69.8bn at the endof the period (31st December 2006: £61.7bn), an approximate market share of 6%(2006: 6%). Gross advances were 25% higher at £23.0bn (2006: £18.4bn). Netlending was £8.0bn (2006: £2.4bn), representing market share of 8% (2006: 2%).The average loan to value ratio of the residential mortgage book on a currentvaluation basis was 33%. The average loan to value ratio of new residentialmortgage lending in 2007 was 54%. Consumer Lending balances decreased 4% to£7.9bn (2006: £8.2bn), reflecting the impact of tighter lending criteria. Overall asset margins decreased as a result of the increased proportion ofmortgages and contraction in unsecured loans. Net fee and commission income reduced 4% (£49m) to £1,183m (2006: £1,232m).There was strong Current Account income growth in Personal Customers and goodgrowth within Local Business. This was more than offset by settlements onoverdraft fees. Net premiums from insurance underwriting activities reduced 26% (£90m) to £252m(2006: £342m), as there continued to be lower customer take-up of loanprotection insurance. Net claims and benefits on insurance contracts increasedto £43m (2006: £35m). Impairment charges decreased 12% (£76m) to £559m (2006: £635m) reflecting lowercharges in unsecured Consumer Lending and Local Business. This was driven byimprovements in the collection process which led to reduced flows intodelinquency, lower levels of arrears and stable charge-offs. Mortgage impairmentcharges remained negligible. Operating expenses reduced 3% (£69m) to £2,463m (2006: £2,532m), reflectingstrong and active management of all expense lines, targeted processingimprovements and back office consolidation. Gains from the sale of property were£193m (2006: £253m). Increased investment was focused on: improving the overallcustomer experience through converting and improving the branch network;revitalising the product offering; increasing operational and processefficiency; and meeting regulatory requirements. The cost:income ratio improved one percentage point to 57%. Excluding the impactof settlements on overdraft fees, the cost:income ratio improved two percentagepoints to 56%. Barclays Commercial Bank 2007 2006Income Statement Information £m £mNet interest income 1,738 1,702Net fee and commission income 749 642 --------- ---------Net trading income 9 2Net investment income 47 28 --------- ---------Principal transactions 56 30Other income 11 21 --------- ---------Total income 2,554 2,395Impairment charges (290) (252) --------- ---------Net income 2,264 2,143 --------- ---------Operating expenses excluding amortisation of intangible assets (903) (856)Amortisation of intangible assets (4) (1) --------- ---------Operating expenses (907) (857)Share of post-tax results of associates and joint ventures - 3Profit on disposal of subsidiaries, associates and joint ventures 14 76 --------- ---------Profit before tax 1,371 1,365 --------- ---------Balance Sheet InformationLoans and advances to customers £63.3bn £56.3bnCustomer accounts £60.8bn £57.4bnTotal assets £73.9bn £65.9bn Performance RatiosReturn on average economic capital(1) 30% 37%Cost:income ratio(1) 36% 36%Cost:net income ratio(1) 40% 40% Other Financial MeasuresRisk Tendency(1),(2) £305m £290mEconomic profit(1) £650m £738mRisk weighted assets £53.8bn £50.0bn Key FactNumber of Commercial Bank customers 81,000 77,000 (1) Defined on page iv.(2) Further information on risk tendency is included on page 90. Barclays Commercial Bank profit before tax increased £6m to £1,371m (2006:£1,365m) due to continued good income growth partially offset by lower gainsfrom business disposals. Profit before business disposals increased 5% to£1,357m (2006: £1,289m). Income increased 7% (£159m) to £2,554m (2006: £2,395m). Non-interest incomeincreased to 32% of total income (2006: 29%), reflecting continuing focus oncross sales and efficient balance sheet utilisation. There was very stronggrowth in net fee and commission income, which increased 17% (£107m) to £749m(2006: £642m) due to very strong performance in lending fees. There was alsogood growth in transaction related income, foreign exchange and derivativestransactions undertaken on behalf of clients. Net interest income improved 2% (£36m) to £1,738m (2006: £1,702m). Averagecustomer lendings increased 3% to £53.6bn (2006: £52.0bn) and 5%, excluding theimpact of the vehicle leasing and European vendor finance businesses sold in2006. Average customer accounts grew 4% to £46.4bn (2006: £44.8bn). The assetmargin decreased by twelve basis points to 1.80%, reflecting an increased focuson higher quality lending and competitive market conditions. The liabilitiesmargin remained broadly stable at 1.49%. Income from principal transactions, primarily reflecting venture capital andother equity realisations, increased 87% (£26m) to £56m (2006: £30m). Impairment charges increased 15% (£38m) to £290m (2006: £252m), mainly due to ahigher level of impairment losses in Larger Business as impairment trendedtowards risk tendency. There was a reduction in impairment levels in MediumBusiness due to a tightening of the lending criteria. Operating expenses increased 6% (£50m) to £907m (2006: £857m). Operatingexpenses are net of gains of £39m (2006: £60m) on the sale of property. Growthin operating expenses was focused on continuing investment in operations,infrastructure, and new initiatives in product development and sales capability. Barclaycard 2007 2006Income Statement Information £m £mNet interest income 1,394 1,383Net fee and commission income 1,080 1,106Net investment income 11 15Net premiums from insurance contracts 40 18Other income (26) - --------- ---------Total income 2,499 2,522Net claims and benefits incurred under insurance contracts (13) (8) --------- ---------Total income net of insurance claims 2,486 2,514Impairment charges (838) (1,067) --------- ---------Net income 1,648 1,447 --------- ---------Operating expenses excluding amortisation of intangible assets (1,073) (964)Amortisation of intangible assets (28) (17) --------- ---------Operating expenses (1,101) (981)Share of post-tax results of associates and joint ventures (7) (8) --------- ---------Profit before tax 540 458 --------- --------- Balance Sheet InformationLoans and advances to customers £20.1bn £18.2bnTotal assets £22.2bn £20.1bn Performance RatiosReturn on average economic capital(1) 19% 16%Cost:income ratio(1) 44% 39%Cost:net income ratio(1) 67% 68% Other Financial MeasuresRisk Tendency(1),(2) £945m £1,135mEconomic profit(1) £183m £137mRisk weighted assets £19.9bn £17.0bn Key FactsNumber of Barclaycard UK customers 10.1m 9.8mNumber of retailer relationships 93,000 93,000UK credit cards - average outstanding balances £8.4bn £9.4bnUK credit cards - average extended credit £6.9bn £8.0bnbalancesInternational - average outstanding balances £3.9bn £2.9bnInternational - average extended credit balances £3.3bn £2.5bnInternational cards in issue 8.8m 6.4mSecured lending - average outstanding loans £4.3bn £3.4bn (1) Defined on page iv.(2) Further information on risk tendency is included on page 90. Barclaycard profit before tax increased 18% (£82m) to £540m (2006: £458m),driven by strong international growth coupled with a significant improvement inUK impairment charges. Other income included a £27m loss on disposal of part ofthe Monument card portfolio. 2006 results reflected a property gain of £38m. Income decreased 1% (£28m) to £2,486m (2006: £2,514m) reflecting strong growthin Barclaycard International, offset by a decline in UK Cards revenue resultingfrom a more cautious approach to lending in the UK and a £27m loss on disposalof part of the Monument card portfolio. Net interest income increased 1% (£11m) to £1,394m (2006: £1,383m) due to strongorganic growth in international average extended credit card balances, up 32% to£3.3bn and average secured consumer lending balances up 26% to £4.3bn, partiallyoffset by lower UK average extended credit card balances which fell 14% to£6.9bn. Margins fell to 6.59% (2006: 7.13%) due to higher average base ratesacross core operating markets and a change in the product mix with an increasedweighting to secured lending. Net fee and commission income fell 2% (£26m) to £1,080m (2006: £1,106m) withgrowth in Barclaycard International offset by our actions in response to theOffice of Fair Trading's findings on late and overlimit fees in the UK whichwere implemented in August 2006. Impairment charges improved 21% (£229m) to £838m (2006: £1,067m) reflectingreduced flows into delinquency, lower levels of arrears and lower charge-offs inUK Cards. We made changes to our impairment methodologies to standardise ourapproach and in anticipation of Basel II. The net positive impact of thesechanges in methodology was offset by an increase in impairment charges inBarclaycard International and secured consumer lending. Operating expenses increased 12% (£120m) to £1,101m (2006: £981m). Excluding aproperty gain of £38m in 2006, operating expenses increased 8% (£82m) reflectingcontinued investment in expanding our businesses in Europe and the US. Costs inthe UK businesses were broadly flat, with investment in new UK productinnovations such as Barclaycard OnePulse being funded out of operatingefficiencies. Barclaycard International continued to gain momentum, delivering a profit beforetax of £77m against a loss before tax of £36m in 2006. We concluded seven newcredit card partnership deals across Western Europe. The Entercard joint venturecontinued to perform ahead of plan and entered the Danish market, extending itsreach across the Scandinavian region. Barclaycard US was profitable, with verystrong average balance growth and a number of new card partnerships includingLufthansa Airlines and Princess Cruise Lines. International Retail and Commercial Banking 2007 2006Income Statement Information £m £mNet interest income 1,890 1,653Net fee and commission income 1,210 1,221 --------- ---------Net trading income 69 6Net investment income 179 188 --------- ---------Principal transactions 248 194Net premiums from insurance contracts 372 351Other income 87 74 --------- ---------Total income 3,807 3,493Net claims and benefits incurred under insurance contracts (284) (244) --------- ---------Total income net of insurance claims 3,523 3,249Impairment charges (252) (167) --------- ---------Net income 3,271 3,082 --------- ---------Operating expenses excluding amortisation of intangible assets (2,279) (2,077)Amortisation of intangible assets (77) (85) --------- ---------Operating expenses (2,356) (2,162)Share of post-tax results of associates and joint ventures 7 49Profit on disposal of subsidiaries, associates and joint ventures 13 247 --------- ---------Profit before tax 935 1,216 --------- ---------Balance Sheet InformationLoans and advances to customers £70.1bn £53.2bnCustomer accounts £28.8bn £22.1bnTotal assets £89.5bn £68.6bn Performance RatiosReturn on average economic capital(1) 16% 36%Cost:income ratio(1) 67% 67%Cost:net income ratio(1) 72% 70% Other Financial MeasuresRisk Tendency(1),(2) £475m £220mEconomic profit(1) £150m £493mRisk weighted assets £53.3bn £40.8bn Key FactsNumber of branches 2,014 1,653Number of sales centres 335 52Number of distribution points 2,349 1,705 (1) Defined on page iv.(2) Further information on risk tendency is included on page 90. International Retail and Commercial Banking profit before tax decreased £281m to£935m (2006: £1,216m). International Retail and Commercial Banking - excludingAbsa profit before tax in 2006 included a £247m gain on the sale of associateFirstCaribbean International Bank and a £41m share of its post-tax results.Profit before tax in 2007 included gains from the sale and leaseback of propertyof £23m (2006: £55m). Very strong profit growth in Rand terms in InternationalRetail and Commercial Banking - Absa was offset by a 12% decline in the averagevalue of the Rand. A significant investment was made in infrastructure and distribution, includingthe opening of 644 new branches and sales centres across Western Europe,Emerging Markets and Absa. International Retail and Commercial Banking - excluding Absa 2007 2006Income Statement Information £m £mNet interest income 753 604Net fee and commission income 425 366 --------- ---------Net trading income 68 17Net investment income 109 66 --------- ---------Principal transactions 177 83Net premiums from insurance contracts 145 111Other income 9 20 --------- ---------Total income 1,509 1,184Net claims and benefits incurred under insurance contracts (170) (138) --------- ---------Total income net of insurance claims 1,339 1,046Impairment charges (79) (41) --------- ---------Net income 1,260 1,005 --------- ---------Operating expenses excluding amortisation of intangible assets (1,007) (765)Amortisation of intangible assets (16) (9) --------- ---------Operating expenses (1,023) (774)Share of post-tax results of associates and joint ventures 1 40Profit on disposal of subsidiaries, associates and joint ventures 8 247 --------- ---------Profit before tax 246 518 --------- --------- Balance Sheet InformationLoans and advances to customers £39.3bn £29.0bnCustomer accounts £15.7bn £11.0bnTotal assets £52.2bn £38.2bn Performance RatiosReturn on average economic capital(1) 11% 36%Cost:income ratio(1) 76% 74%Cost:net income ratio(1) 81% 77% Other Financial MeasuresRisk Tendency(1),(2) £220m £75mEconomic profit(1) £20m £309mRisk weighted assets £29.7bn £20.1bn Key FactsNumber of branches 1,177 853Number of sales centres 171 14Number of distribution points 1,348 867 (1) Defined on page iv.(2) Further information on risk tendency is included on page 90. International Retail and Commercial Banking - excluding Absa profit before taxdecreased 53% (£272m) to £246m (2006: £518m). Profit before tax in 2006 includeda £247m gain on the sale of associate FirstCaribbean International Bank and a£41m share of its post-tax results. Profit before tax in 2007 included gainsfrom the sale and leaseback of property in 2007 of £23m (2006: £55m). Theperformance reflected very strong income growth driven by a rapid growth indistribution points to 1,348 (2006: 867) as well as the launch of new businessesin India and UAE and a full retail and commercial banking offering in Italy. Income increased 28% (£293m) to £1,339m (2006: £1,046) driven by excellentperformances in Western Europe and Emerging Markets. Net interest income increased 25% (£149m) to £753m (2006: £604m). Total averagecustomer loans increased 22% (£6.1bn) to £33.3bn (2006: £27.2bn) with lendingmargins broadly stable. Mortgage balance growth in Western Europe was verystrong, with average Euro balances up 16% (EUR4.2bn) to EUR30.1bn (2006: EUR25.9bn). Average customer deposits increased 20% (£2.1bn) to £12.5bn (2006: £10.4bn) driven by growth in Western Europe and Emerging Markets. Net fee and commission income grew 16% (£59m) to £425m (2006: £366m), reflectingstrong performances in Western Europe driven by the expansion of the customerbase. Principal transactions increased £94m to £177m (2006: £83m) reflecting gains onequity investments, and higher foreign exchange income across Emerging Markets. Impairment charges rose 93% (£38m) to £79m (2006: £41m). The increase reflectedvery strong balance sheet growth in 2006 and 2007 and the impact of lowerreleases in 2007. Operating expenses grew 32% (£249m) to £1,023m (2006: £774m) driven by the rapidexpansion of the distribution network across all regions and investment inpeople and infrastructure to support future growth across the franchise.Operating expenses included property sales in Spain of £23m (2006: £55m). Western Europe continued to perform strongly. Profit before tax increased 30%(£56m) to £245m (2006: £189m). Barclays Spain profit before tax increased 53%(£72m) to £207m (2006: £135m) driven by increased customer lending, higherservice commissions and equity investment realisations. France also performedwell driven by good growth in the balance sheet, higher fees and commissions andgood cost control. Income grew very strongly in Italy as a result of the openingof new branches and the roll-out of a complete retail and commercial bankingoffering but this was more than offset by higher investment costs. Profit beforetax decreased in Portugal, with very strong income growth offset by increasedinvestment in the expansion of the business. Emerging Markets profit before tax increased 25% (£28m) to £142m (2006: £114m)reflecting a very strong rise in income across a broad range of markets, withparticularly strong growth in Egypt, UAE, Kenya, Ghana, Tanzania, Uganda andIndia. The income growth benefited from increased investment in the businessacross all geographies, including branch openings and the launch of retailbanking services in India and the UAE. International Retail and Commercial Banking - Absa 2007 2006Income Statement Information £m £mNet interest income 1,137 1,049Net fee and commission income 785 855 --------- ---------Net trading income/(loss) 1 (11)Net investment income 70 122 --------- ---------Principal transactions 71 111Net premiums from insurance contracts 227 240Other income 78 54 --------- ---------Total income 2,298 2,309Net claims and benefits incurred under insurance contracts (114) (106) --------- ---------Total income net of insurance claims 2,184 2,203Impairment charges (173) (126) --------- ---------Net income 2,011 2,077 --------- ---------Operating expenses excluding amortisation of intangible assets (1,272) (1,312)Amortisation of intangible assets (61) (76) --------- ---------Operating expenses (1,333) (1,388)Share of post-tax results of associates and joint ventures 6 9Profit on disposal of subsidiaries, associates and joint ventures 5 - --------- ---------Profit before tax 689 698 --------- --------- Balance Sheet InformationLoans and advances to customers £30.8bn £24.2bnCustomer accounts £13.1bn £11.1bnTotal assets £37.3bn £30.4bn Performance RatiosReturn on average economic capital(1) 23% 34%Cost:income ratio(1) 61% 63%Cost:net income ratio(1) 66% 67% Other Financial MeasuresRisk Tendency(1),(2) £255m £145mEconomic profit(1) £130m £184mRisk weighted assets £23.6bn £20.7bn Key FactsNumber of branches 837 800Number of sales centres 164 38Number of distribution points 1,001 838Number of ATMs 7,884 7,411Number of retail customers 9.7m 8.3mNumber of corporate customers 100,000 84,000 (1) Defined on page iv.(2) Further information on risk tendency is included on page 90. International Retail and Commercial Banking - Absa profit before tax decreasedto £689m (2006: £698m). Appendix 1 on page 98 summarises the Rand results of Absa Group Limited for theyear to 31st December 2007 as reported to the JSE Limited. Impact on Barclays results Absa Group Limited's profit before tax of R14,067m (2006: R11,417m) istranslated into Barclays results at an average exchange rate of R14.11/£ (2006:R12.47/£), a 12% depreciation in the average value of the Rand against Sterling.Consolidation adjustments reflected the amortisation of intangible assets of£55m (2006: £75m) and internal funding and other adjustments of £98m (2006:£72m). The resulting profit before tax of £844m (2006: £769m) is representedwithin International Retail and Commercial Banking - Absa £689m, (2006: £698m)and Barclays Capital, £155m (2006: £71m). Absa Group Limited's total assets were R640,909m (2006: R495,112m), growth of29%. This is translated into Barclays results at a period-end exchange rate ofR13.64/£ (2006: R13.71/£). The capital investment was hedged against currencymovements in 2007. Barclays Capital 2007 2006Income Statement Information £m £mNet interest income 1,179 1,158Net fee and commission income 1,235 952 --------- ---------Net trading income 3,739 3,562Net investment income 953 573 --------- ---------Principal transactions 4,692 4,135Other income 13 22 --------- ---------Total income 7,119 6,267Impairment charges and other credit provisions (846) (42) --------- ---------Net income 6,273 6,225 --------- ---------Operating expenses excluding amortisation of intangible assets (3,919) (3,996)Amortisation of intangible assets (54) (13) --------- ---------Operating expenses (3,973) (4,009)Share of post-tax results of associates and joint ventures 35 - --------- ---------Profit before tax 2,335 2,216 --------- --------- Balance Sheet InformationTotal assets £839.7bn £657.9bn Performance RatiosReturn on average economic capital(1) 33% 41%Cost:income ratio(1) 56% 64%Cost:net income ratio(1) 63% 64%Compensation:net income ratio 47% 49% Other Financial MeasuresRisk Tendency(1),(2) £140m £95mEconomic profit(1) £1,172m £1,181mRisk weighted assets £169.1bn £137.6bnAverage DVaR(1) £42.0m £37.1mAverage net income generated per member of staff ('000)(1),(3) £466 £575Corporate lending portfolio £52.3bn £40.6bn Key Facts 2007 2006 League League table Issuance table Issuance position value position valueAll international bonds (all currencies) 2nd US$273.2bn 1st US$271.9bnEurope overall debt 1st US$226.5bn 1st US$259.5bnSterling bonds 1st £15.5bn 1st £27.3bnUS investment grade corporate bonds 10th US$4.7bn 7th US$6.0bn (1) Defined on page iv.(2) Further information on risk tendency is included on page 90.(3) Adjusted to exclude contribution and headcount from HomEq and EquiFirst Barclays Capital delivered profits ahead of the record results achieved in 2006despite challenging trading conditions in the second half of the year. Profitbefore tax increased 5% (£119m) to £2,335m (2006: £2,216m). There was strongincome growth across the Rates businesses and excellent results in ContinentalEurope, Asia and Africa demonstrating the breadth of the client franchise. Netincome was slightly ahead at £6,273m (2006: £6,225m) and costs were tightlymanaged, declining slightly year on year. Absa Capital delivered very stronggrowth in profit before tax to £155m (2006: £71m). The US sub-prime driven market dislocation affected performance in the secondhalf of 2007. Exposures relating to US sub-prime were actively managed anddeclined over the period. Barclays Capital's 2007 results reflected net lossesrelated to the credit market turbulence of £1,635m, of which £795m was includedin income, net of £658m gains arising from the fair valuation of notes issued byBarclays Capital. Impairment charges included £840m against ABS CDO Super Seniorexposures, other credit market exposures and drawn leveraged financeunderwriting positions. Further detail is provided in the notes to thisannouncement. Income increased 14% (£852m) to £7,119m (2006: £6,267m) as a result of verystrong growth in interest rate, currency, equity, commodity and emerging marketasset classes. There was excellent income growth in Continental Europe, Asia,and Africa. Average DVaR increased 13% to £42.0m (2006: £37.1m) in line withincome. Secondary income, comprising principal transactions (net trading income and netinvestment income) and net interest income, is mainly generated from providingclient financing and risk management solutions. Secondary income increased 11%(£578m) to £5,871m (2006: £5,293m). Net trading income increased 5% (£177m) to £3,739m (2006: £3,562m) with strongcontributions from fixed income, commodities, equities, foreign exchange andprime services businesses. These were largely offset by net losses in thebusiness affected by sub-prime mortgage related writedowns. The general wideningof credit spreads that occurred over the course of the second half of 2007 alsoreduced the carrying value of the £57bn of issued notes held at fair value onthe balance sheet, resulting in gains of £658m. Net investment income increased66% (£380m) to £953m (2006: £573m) as a result of a number of private equityrealisations, investment disposals in Asia and structured capital marketstransactions. Net interest income increased 2% (£21m) to £1,179m (2006:£1,158m), driven by higher contributions from money markets. The corporatelending portfolio increased 29% to £52.3bn (2006: £40.6bn), largely due to anincrease in drawn leveraged finance positions and a rise in drawn corporate loanbalances. Primary income, which comprises net fee and commission income from advisory andorigination activities, grew 30% (£283m) to £1,235m (2006: £952m), with goodcontributions from bonds and loans. Impairment charges and other credit provisions of £846m included £722m againstABS CDO Super Senior exposures, £60m from other credit market exposures and £58mrelating to drawn leveraged finance underwriting positions. Other impairmentcharges on loans and advances amounted to a release of £7m (2006: £44m release)before impairment charges on available for sale assets of £13m (2006: £86m). Operating expenses decreased 1% (£36m) to £3,973m (2006: £4,009m). The cost:netincome ratio improved to 63% (2006: 64%) and the compensation cost:net incomeratio improved by two percentage points to 47% (2006: 49%). Performance relatedpay, discretionary investment spend and short term contractor resourcesrepresented 42% (2006: 50%) of the cost base. Amortisation of intangible assetsof £54m (2006: £13m) principally related to mortgage service rights. Total headcount increased 3,000 during 2007 to 16,200 (2006: 13,200) including800 from the acquisition of EquiFirst. The majority of organic growth was inAsia Pacific. Barclays Global Investors 2007 2006Income Statement Information £m £mNet interest (expense)/income (8) 10Net fee and commission income 1,936 1,651 --------- ---------Net trading income 5 2Net investment (expense)/income (9) 2 --------- ---------Principal transactions (4) 4Other income 2 - --------- ---------Total income 1,926 1,665 --------- ---------Operating expenses excluding amortisation of intangible assets (1,184) (946)Amortisation of intangible assets (8) (5) --------- ---------Operating expenses (1,192) (951) --------- ---------Profit before tax 734 714 --------- --------- Balance Sheet InformationTotal assets £89.2bn £80.5bn Performance RatiosReturn on average economic capital(1) 241% 228%Cost:income ratio(1) 62% 57% Other Financial MeasuresEconomic profit(1) £430m £376mRisk weighted assets £2.0bn £1.4bnAverage net income generated per member of staff ('000)(1) £631 £666 Key FactsAssets under management (£): £1,044bn £927bn --------- ---------indexed £615bn £566bniShares £205bn £147bnactive £224bn £214bn --------- ---------Net new assets in period (£) £42bn £37bnAssets under management (US$): US$2,079bn US$1,814bn --------- ---------indexed US$1,225bn US$1,108bniShares US$408bn US$287bnactive US$446bn US$419bn --------- ---------Net new assets in period (US$) US$86bn US$68bnNumber of iShares products 324 191Number of institutional clients 3,000 2,900 (1) Defined on page iv.(2) Further information on risk tendency is included on page 90. Barclays Global Investors delivered solid growth in profit before tax, whichincreased 3% (£20m) to £734m (2006: £714m). Very strong US Dollar income andstrong profit growth was partially offset by the 8% depreciation in the averagevalue of the US Dollar against Sterling. Income grew 16% (£261m) to £1,926m (2006: £1,665m). Net fee and commission income grew 17% (£285m) to £1,936m (2006: £1,651m). Thiswas primarily attributable to increased management fees and securities lending.Incentive fees increased 6% (£12m) to £198m (2006: £186m). Higher asset values,driven by higher market levels and good net new inflows, contributed to thegrowth in income. Operating expenses increased 25% (£241m) to £1,192m (2006: £951m) as a result ofsignificant investment in key product and channel growth initiatives and ininfrastructure as well as growth in the underlying business. Operating expensesincluded charges of £80m (2006: £nil) related to selective support of liquidityproducts managed in the US. The cost:income ratio rose five percentage points to62% (2006: 57%). Headcount increased 700 to 3,400 (2006: 2,700). Headcount increased in allgeographical regions and across product groups and the support functions,reflecting continued investment to support further growth. Total assets under management increased 13% (£117bn) to £1,044bn (2006: £927bn)comprising £42bn of net new assets, £12bn attributable to the acquisition ofIndexchange Investment AG (Indexchange), £66bn of favourable market movementsand £3bn of adverse exchange movements. In US$ terms assets under managementincreased 15% (US$265bn) to US$2,079bn (2006: US$1,814bn), comprising US$86bn ofnet new assets, US$23bn attributable to acquisition of Indexchange, US$127bn offavourable market movements and US$29bn of positive exchange rate movements. Barclays Wealth 2007 2006Income Statement Information £m £mNet interest income 431 392Net fee and commission income 739 674 --------- ---------Net trading income 3 2Net investment income 52 154 --------- ---------Principal transactions 55 156Net premium from insurance contracts 195 210Other income 19 16 --------- ---------Total income 1,439 1,448Net claims and benefits incurred under insurance contracts (152) (288) --------- ---------Total Income net of insurance claims 1,287 1,160Impairment charges (7) (2) --------- ---------Net income 1,280 1,158 --------- ---------Operating expenses excluding amortisation of intangible assets (967) (909)Amortisation of intangible assets (6) (4) --------- ---------Operating expenses (973) (913) --------- ---------Profit before tax 307 245 --------- --------- Balance Sheet InformationLoans and advances to customers £9.0bn £6.2bnCustomer accounts £34.4bn £28.3bnTotal assets £18.0bn £15.0bn Performance RatiosReturn on average economic capital(1) 51% 40%Cost:income ratio(1) 76% 79% Other Financial MeasuresRisk Tendency(1),(2) £10m £10mEconomic profit(1) £233m £130mRisk weighted assets £7.7bn £6.1bnAverage net income generated per member of staff ('000) (1) £188 £181 Key FactTotal client assets £132.5bn £116.1bn (1) Defined on page iv.(2) Further information on risk tendency is included on page 90. Barclays Wealth profit before tax showed very strong growth of 25% (£62m) to£307m (2006: £245m). Performance was driven by broadly based income growth,reduced redress costs and tight cost control, partially offset by additionalvolume related costs and increased investment in people and infrastructure tosupport future growth. Income increased 11% (£127m) to £1,287m (2006: £1,160m). Net interest income increased 10% (£39m) to £431m (2006: £392m) reflectingstrong growth in both customer deposits and lending. Average deposits grew 13%to £31.2bn (2006: £27.7bn). Average lending grew 35% to £7.4bn (2006: £5.5bn)driven by increased lending to high net worth, affluent and intermediaryclients. Assets margin increased 3 basis points to 1.11% (2006: 1.08%)reflecting changes in the product mix. The liabilities margin reduced by 7 basispoints to 1.03% (2006: 1.10%) driven by competitive pricing of products. Net fee and commission income grew 10% (£65m) to £739m (2006: £674m). Thisreflected growth in client assets and higher transactional income from increasedsales of investment products and solutions. Principal transactions decreased £101m to £55m (2006: £156m) as a result oflower growth in the value of unit linked insurance contracts. Net premiums frominsurance contracts reduced £15m to £195m (2006: £210m). These reductions wereoffset by a lower charge for net claims and benefits incurred under insurancecontracts of £152m (2006: £288m). Operating expenses increased 7% to £973m (2006: £913m) with greater volumerelated costs and a significant increase in investment partially offset byefficiency gains and lower customer redress costs of £19m (2006: £67m). Ongoinginvestment programmes included increased hiring of client facing staff andimprovements to infrastructure with the upgrade of technology and operationsplatforms. The cost:income ratio improved three percentage points to 76% (2006:79%). Total client assets, comprising customer deposits and client investments,increased 14% (£16.4bn) to £132.5bn (2006: £116.1bn) reflecting strong net newasset inflows and the acquisition of Walbrook, an independent fiduciary servicescompany, which completed on 18th May 2007. Head office functions and other operations 2007 2006Income Statement Information £m £mNet interest income 128 80Net fee and commission expense (424) (301) --------- ---------Net trading (loss)/income (66) 40Net investment (expense)/income (17) 2 --------- ---------Principal transactions (83) 42Net premiums from insurance contracts 152 139Other income 35 39 --------- ---------Total income (192) (1)Impairment (charges)/releases (3) 11 --------- ---------Net income (195) 10 --------- ---------Operating expenses excluding amortisation of intangible assets (233) (259)Amortisation of intangible assets (1) (10) --------- ---------Operating expenses (234) (269)Profit on disposal of associates and joint ventures 1 - --------- ---------Loss before tax (428) (259) --------- ---------Balance Sheet InformationTotal assets £7.1bn £7.1bn Other Financial MeasuresRisk Tendency(1),(2) £10m £10mRisk weighted assets £1.6bn £1.9bn (1) Defined on page iv.(2) Further information on risk tendency is included on page 90. Head office functions and other operations loss before tax increased £169m to£428m (2006: £259m). Group segmental reporting is performed in accordance with Group accountingpolicies. This means that inter-segment transactions are recorded in eachsegment as if undertaken on an arm's length basis. Adjustments necessary toeliminate inter-segment transactions are included in Head office functions andother operations. The impact of such inter-segment adjustments increased £86m to £233m (2006:£147m). These adjustments included internal fees for structured capital marketactivities of £169m (2006: £87m) and fees paid to Barclays Capital for debt andequity raising and risk management advice of £65m (2006: £23m), both of whichincreased net fee and commission expense in head office. The impact on theinter-segment adjustments of the timing of the recognition of insurancecommissions included in Barclaycard was a reduction in head office income of £9m(2006: £44m). This net reduction was reflected in a decrease in net fee andcommission income of £162m (2006: £184m) and an increase in net premium incomeof £153m (2006: £140m). Principal transactions decreased to a loss of £83m (2006: £42m profit). 2006included a £55m profit from a hedge of the expected Absa foreign currencyearnings. 2007 included a loss of £33m relating to fair valuation of calloptions embedded within retail US$ preference shares arising from widening ofown credit spreads. Operating expenses decreased £35m to £234m (2006: £269m). The primary driver ofthis decrease was the receipt of a break fee relating to the ABN Amrotransaction which, net of transaction costs, reduced expenses by £58m. This waspartially offset by lower rental income and lower proceeds on property sales. NOTES 1. Net interest income 2007 2006 £m £mCash and balances with central banks 145 91Available for sale investments 2,580 2,811Loans and advances to banks 1,416 903Loans and advances to customers 19,559 16,290Other 1,608 1,710 --------- ---------Interest income 25,308 21,805 --------- --------- Deposits from banks (2,720) (2,819)Customer accounts (4,110) (3,076)Debt securities in issue (6,651) (5,282)Subordinated liabilities (878) (777)Other (1,339) (708) --------- ---------Interest expense (15,698) (12,662) --------- ---------Net interest income 9,610 9,143 --------- --------- Group net interest income increased 5% (£467m) to £9,610m (2006: £9,143m)reflecting balance sheet growth across a number of businesses. Group net interest income reflects structural hedges which function to reducethe impact of the volatility of short-term interest rate movements on equity andcustomer balances that do not re-price with market rates. The contribution ofstructural hedges relative to average base rates decreased to £351m expense(2006: £26m income), largely due to the smoothing effect of the structural hedgeon changes in interest rates. Other interest expense principally includes interest on repurchase agreementsand hedging activity. Business Margins 2007 2006 % %UK Retail Banking assets 1.20 1.32UK Retail Banking liabilities 2.15 2.05Barclays Commercial Bank assets 1.80 1.92Barclays Commercial Bank liabilities 1.49 1.46Barclaycard assets 6.59 7.13International Retail and Commercial Banking - ex Absa assets 1.32 1.29International Retail and Commercial Banking - ex Absa liabilities 1.91 2.06International Retail and Commercial Banking - Absa assets 2.86 2.95International Retail and Commercial Banking - Absa liabilities(1) 3.25 2.90Barclays Wealth assets 1.11 1.08Barclays Wealth liabilities 1.03 1.10 Average Balances 2007 2006 £m £mUK Retail Banking assets 78,502 73,593UK Retail Banking liabilities 81,848 76,498Barclays Commercial Bank assets 53,600 52,018Barclays Commercial Bank liabilities 46,367 44,839Barclaycard assets 19,191 17,918International Retail and Commercial Banking - ex Absa assets 33,321 27,210International Retail and Commercial Banking - ex Absa liabilities 12,484 10,423International Retail and Commercial Banking - Absa assets 26,132 24,388International Retail and Commercial Banking - Absa liabilities(1) 11,659 11,071Barclays Wealth assets 7,403 5,543Barclays Wealth liabilities 31,151 27,744 (1) International Retail and Commercial Banking - Absa liabilities businessmargins, average balances and business net interest income for 2006 have beenrestated. Business net interest income 2007 2006 £m £mUK Retail Banking assets 939 970UK Retail Banking liabilities 1,763 1,566Barclays Commercial Bank assets 963 999Barclays Commercial Bank liabilities 693 655Barclaycard assets 1,266 1,278International Retail and Commercial Banking - ex Absa assets 439 349International Retail and Commercial Banking - ex Absa liabilities 238 216International Retail and Commercial Banking - Absa assets 746 719International Retail and Commercial Banking - Absa liabilities(1) 379 321Barclays Wealth assets 82 60Barclays Wealth liabilities 320 306 --------- ---------Business net interest income 7,828 7,439 --------- --------- Reconciliation of business interest income to Group net interest income 2007 2006 £m £mBusiness net interest income 7,828 7,439Other:Barclays Capital 1,179 1,158Barclays Global Investors (8) 10Other 611 536 --------- ---------Group net interest income 9,610 9,143 --------- --------- Business net interest income is derived from the interest rate earned on averageassets or paid on average liabilities relative to the average Bank of Englandbase rate, local equivalents for international businesses or the rate managed bythe bank using derivatives. The margin is expressed as annualised businessinterest income over the relevant average balance. Asset and liability marginscannot be added together as they are relative to the average Bank of Englandbase rate, local equivalent for international businesses or the rate managed bythe bank using derivatives. The benefit of capital attributed to thesebusinesses is excluded from the calculation of business margins and business netinterest income. Average balances are calculated on daily averages for most UK banking operationsand monthly averages elsewhere. Within the reconciliation of Group net interest income, there is an amountcaptured as Other. This relates to the benefit of capital excluded from thebusiness margin calculation, Head office functions and other operations and netfunding on non-customer assets and liabilities. (1) International Retail and Commercial Banking - Absa liabilities businessmargins, average balances and business net interest income for 2006 have beenrestated. UK Retail Banking assets margin decreased 12 basis points to 1.20% (2006: 1.32%)principally due to the increased proportion of mortgages and the contraction inunsecured loans. UK Retail Banking liabilities margin increased 10 basis pointsto 2.15% (2006: 2.05%) due to pricing initiatives and changes in the productmix. Barclays Commercial Bank assets margin decreased by 12 basis points to 1.80%(2006: 1.92%) due to changes in the product mix. Barclays Commercial Bankliabilities margin remained broadly stable at 1.49% (2006: 1.46%). Barclaycard assets margin decreased 54 basis points to 6.59% (2006: 7.13%) dueto higher average base rates across core markets and an increased weighting tosecured lending. International Retail and Commercial Banking - excluding Absa assets margin of1.32% (2006: 1.29%) was broadly stable. International Retail and CommercialBanking - excluding Absa liabilities margin decreased 15 basis points to 1.91%(2006: 2.06%) primarily driven by changes in the product and country mix. International Retail and Commercial Banking - Absa assets margin decreased 9basis points to 2.86% (2006: 2.95%) due to increased competition, increases ininterest rates and changes in the product mix. The liabilities margin increased35 basis points to 3.25% (2006: 2.90%) driven by a re-pricing of customerdeposits and higher interest rates. Barclays Wealth assets margin increased 3 basis points to 1.11% (2006: 1.08%)due to changes in the product mix. The liabilities margin decreased 7 basispoints to 1.03% (2006: 1.10%) due to competitive pricing. The impact of the structural hedge on customer balances has been included withinbusiness margins and has smoothed the impact of changing interest rates beforethe impact of changes in product mix or product pricing. 2. Net fee and commission income 2007 2006 £m £mBrokerage fees 109 70Investment management fees 1,787 1,535Securities lending 241 185Banking and credit related fees and commissions 6,363 6,031Foreign exchange commission 178 184 --------- ---------Fee and commission income 8,678 8,005 --------- ---------Fee and commission expense (970) (828) --------- ---------Net fee and commission income 7,708 7,177 --------- --------- Net fee and commission income increased 7% (£531m) to £7,708m (2006: £7,177m). Fee and commission income rose 8% (£673m) to £8,678m (2006: £8,005m) reflectingincreased management and securities lending fees in Barclays Global Investors,increased client assets and higher transactional income in Barclays Wealth andhigher income generated from lending fees in Barclays Commercial Bank. Feeincome in Barclays Capital increased primarily due to the acquisition of HomEq. 3. Principal transactions 2007 2006 £m £mRates related business 4,162 2,848Credit related business (403) 766 --------- ---------Net trading income 3,759 3,614 --------- ---------Cumulative gain from disposal of available for sale assets 560 307Dividend income 26 15Net income from financial instruments designated at fair value 293 447Other investment income 337 193 --------- ---------Net investment income 1,216 962 --------- ---------Principal transactions 4,975 4,576 --------- --------- Principal transactions increased 9% (£399m) to £4,975m (2006: £4,576m). Net trading income increased 4% (£145m) to £3,759m (2006: £3,614m). The majorityof the Group's net trading income arises in Barclays Capital. Growth in theRates related business reflects very strong performances in fixed income,commodities, foreign exchange, equity and prime services. The Credit relatedbusiness includes net losses from credit market turbulence and the benefits ofwidening credit spreads on the fair value of issued notes. Further detail on theimpact on net trading income of the changes in fair value of financialinstruments is provided in note 17. Net investment income increased 26% (£254m) to £1,216m (2006: £962m). Thecumulative gain from disposal of available for sale assets increased 82% (£253m)to £560m (2006: £307m) largely as a result of a number of private equityrealisations and divestments. Net income from financial instruments designatedat fair value decreased by 34% (£154m) largely due to lower growth in the valueof linked insurance assets within Barclays Wealth. Fair value movements on insurance assets included within net investment incomecontributed £113m (2006: £205m). 4. Net premiums from insurance contracts 2007 2006 £m £mGross premiums from insurance contracts 1,062 1,108Premiums ceded to reinsurers (51) (48) --------- ---------Net premiums from insurance contracts 1,011 1,060 --------- --------- Net premiums from insurance contracts decreased 5% (£49m) to £1,011m (2006:£1,060m), primarily due to lower customer take up of loan protection insurance. 5. Other income 2007 2006 £m £mIncrease in fair value of assets held in respect of linked liabilities to customers underinvestment contracts 5,592 7,417Increase in liabilities to customers under investment contracts (5,592) (7,417)Property rentals 53 55Loss on part disposal of Monument credit card portfolio (27) -Other 162 159 --------- ---------Other income 188 214 --------- --------- Certain asset management products offered to institutional clients by BarclaysGlobal Investors are recognised as investment contracts. Accordingly theinvested assets and the related liabilities to investors are held at fair valueand changes in those fair values are reported within Other income. 6. Net claims and benefits incurred under insurance contracts 2007 2006 £m £mGross claims and benefits incurred under insurance contracts 520 588Reinsurers' share of claims incurred (28) (13) --------- ---------Net claims and benefits incurred under insurance contracts 492 575 --------- --------- Net claims and benefits incurred under insurance contracts decreased 14% (£83m)to £492m (2006: £575m). Net claims and benefits incurred under insurance contracts excluding Absadecreased by 19%, principally reflecting lower investment gains attributable tocustomers in Barclays Wealth. 7. Impairment charges and other credit provisions 2007 2006Impairment charges on loans and advances £m £mNew and increased impairment allowances 2,871 2,722Releases (338) (389)Recoveries (227) (259) -------- ---------Impairment charges on loans and advances (see note 21) 2,306 2,074 Other credit provisionsCharges/(credits) in respect of undrawncontractually committed facilities and guarantees 476 (6) -------- ---------Impairment charges on loans and advances and other credit provisions 2,782 2,068 Impairment charges on available for sale assets 13 86 -------- ---------Impairment charges and other credit provisions 2,795 2,154 -------- --------- Impairment charges and other credit provisions on ABS CDO Super Senior and othercredit market exposures included above: Impairment charges on loans and advances 313 -Charges in respect of undrawn facilities 469 - --------Impairment charges and other credit provisions on ABS CDO Super Senior and other credit marketpositions 782 - -------- --------- Total impairment charges and other credit provisions increased 30% (£641m) to£2,795m (2006: £2,154m). Impairment charges on loans and advances and other credit provisions increased35% (£714m) to £2,782m (2006: £2,068m) reflecting charges of £782m against ABSCDO Super Senior and other credit market positions. Impairment charges on loans and advances and other credit provisions as apercentage of Group total loans and advances increased to 0.71% (2006: 0.65%);total loans and advances grew 23% to £389,290m (2006: £316,561m). Retail Retail impairment charges on loans and advances fell 11% (£204m) to £1,605m(2006: £1,809m). Retail impairment charges as a percentage of period end totalloans and advances reduced to 0.98% (2006: 1.30%); total retail loans andadvances increased 18% to £164,062m (2006: £139,350m). Barclaycard impairment charges improved 21% (£229m) to £838m (2006: £1,067m)reflecting reduced flows into delinquency, lower levels of arrears and lowercharge-offs in UK Cards. We made changes to our impairment methodologies tostandardise our approach and in anticipation of Basel II. The net positiveimpact of these changes in methodology was offset by the increase in impairmentcharges in Barclaycard International and secured consumer lending. Impairment charges in UK Retail Banking decreased by £76m (12%) to £559m (2006:£635m), reflecting lower charges in unsecured Consumer Lending and LocalBusiness driven by improved collection processes, reduced flows intodelinquency, lower arrears trends and stable charge-offs. In UK Home Finance,asset quality remained strong and mortgage charges remained negligible. Mortgagedelinquencies as a percentage of outstandings remained stable and amountscharged off were low. Impairment charges in International Retail and Commercial Banking - excludingAbsa rose by £38m (93%) to £79m (2006: £41m) reflecting very strong balancesheet growth in 2006 and 2007 and the impact of lower releases in 2007. Arrears in some of International Retail and Commercial Banking - Absa's retailportfolios deteriorated in 2007, driven by interest rate increases in 2006 and2007 resulting in pressure on collections. Wholesale and corporate Wholesale and corporate impairment charges on loans and advances increased £436mto £701m (2006: £265m). Wholesale and corporate impairment charges as apercentage of period end total loans and advances increased to 0.31% (2006:0.15%); total loans and advances grew 27% to £225,228m (2006: £177,211m). Barclays Capital impairment charges and other credit provisions of £846mincluded a charge of £782m against ABS CDO Super Senior and other credit marketexposures and £58m net of fees relating to drawn leveraged finance positions. The impairment charge in Barclays Commercial Bank increased £38m (15%) to £290m(2006: £252m), primarily due to higher impairment charges in Larger Business,partially offset by a lower charge in Medium Business due to a tightening of thelending criteria. 8. Operating expenses 2007 2006 £m £mStaff costs (refer to page 51) 8,405 8,169Administrative expenses 3,978 3,980Depreciation 467 455Impairment loss - property and equipment and intangible assets 16 21Operating lease rentals 414 345Gain on property disposals (267) (432)Amortisation of intangible assets 186 136 -------- --------Operating expenses 13,199 12,674 -------- -------- Operating expenses grew 4% (£525m) to £13,199m (2006: £12,674m). The increasewas driven by growth of 3% (£236m) in staff costs to £8,405m (2006: £8,169m) andlower gains on property disposals. Administrative expenses remained flat at £3,978m (2006: £3,980m) reflecting goodcost control across all businesses. Operating lease rentals increased 20% (£69m) to £414m (2006: £345m), primarilydue to increased property held under operating leases. Operating expenses were reduced by gains from the sale of property of £267m(2006: £432m) as the Group continued the sale and leaseback of some of itsfreehold portfolio, principally in UK Banking. Amortisation of intangible assets increased 37% (£50m) to £186m (2006: £136m)primarily reflecting the amortisation of mortgage servicing rights relating tothe acquisition of HomEq in November 2006. The Group cost:income ratio improved two percentage points to 57% (2006: 59%). Staff costs 2007 2006 £m £mSalaries and accrued incentive payments 6,993 6,635Social security costs 508 502Pension costsdefined contribution plans 141 128defined benefit plans 150 282Other post retirement benefits 10 30Other 603 592 -------- --------Staff costs 8,405 8,169 -------- -------- Staff costs increased 3% (£236m) to £8,405m (2006: £8,169m). Salaries and accrued incentive payments rose 5% (£358m) to £6,993m (2006:£6,635m), reflecting increased permanent and fixed term staff worldwide. Defined benefit plans pension costs decreased 47% (£132m) to £150m (2006:£282m). This was mainly due to lower service costs. Staff numbers 2007 2006UK Banking 41,200 42,600 -------- --------UK Retail Banking 32,800 34,500Barclays Commercial Bank 8,400 8,100 -------- --------Barclaycard 7,800 8,500International Retail and Commercial Banking 58,300 47,800 -------- --------International Retail and Commercial Banking-ex Absa 22,100 13,900International Retail and Commercial Banking-Absa 36,200 33,900 -------- --------Barclays Capital 16,200 13,200Barclays Global Investors 3,400 2,700Barclays Wealth 6,900 6,600Head office functions and other operations 1,100 1,200 -------- --------Total Group permanent staff worldwide 134,900 122,600 -------- -------- Staff numbers are shown on a full-time equivalent basis. Total Group permanentand fixed term contract staff comprised 61,900 (31st December 2006: 62,400) inthe UK and 73,000 (31st December 2006: 60,200) internationally. UK Retail Banking headcount decreased 1,700 to 32,800 (31st December 2006:34,500), due to efficiency initiatives in back office operations and thetransfer of operations personnel to Barclays Commercial Bank. BarclaysCommercial Bank headcount increased 300 to 8,400 (31st December 2006: 8,100) dueto the transfer of operations personnel from UK Retail Banking and additionalinvestment in front line staff to drive improved geographical coverage. Barclaycard staff numbers decreased 700 to 7,800 (31st December 2006: 8,500),due to efficiency initiatives implemented across the UK operation and the saleof part of the Monument card portfolio, partially offset by an increase in theInternational cards businesses. International Retail and Commercial Banking staff numbers increased 10,500 to58,300 (31st December 2006: 47,800). International Retail and Commercial Banking- excluding Absa staff numbers increased 8,200 to 22,100 (31st December 2006:13,900) due to growth in the distribution network. International Retail andCommercial Banking - Absa staff numbers increased 2,300 to 36,200 (31st December2006: 33,900), reflecting growth in the business and distribution network. Barclays Capital staff numbers increased 3,000 to 16,200 (31st December 2006:13,200) including 800 from the acquisition of EquiFirst. This reflected furtherinvestment in the front office, systems development and control functions tosupport continued business expansion. The majority of organic growth was in AsiaPacific. Barclays Global Investors staff numbers increased 700 to 3,400 (31st December2006: 2,700). Headcount increased in all geographical regions and across productgroups and the support functions, reflecting continued investment to supportfurther growth. Barclays Wealth staff numbers increased 300 to 6,900 (31st December 2006: 6,600)principally due to the acquisition of Walbrook and increased client facingprofessionals. 9. Share of post-tax results of associates and joint ventures 2007 2006 £m £mProfit from associates 33 53Profit/(loss) from joint ventures 9 (7) -------- --------Share of post-tax results of associates and joint ventures 42 46 -------- -------- The overall share of post-tax results of associates and joint ventures decreased£4m to £42m (2006: £46m). The share of results from associates decreased £20mmainly due to the sale of FirstCaribbean International Bank (2006: £41m) at theend of 2006, partially offset by an increased contribution from private equityassociates. The share of results from joint ventures increased by £16m mainlydue to the contribution from private equity entities. 10. Profit on disposal of subsidiaries, associates and joint ventures 2007 2006 £m £mProfit on disposal of subsidiaries, associates and joint ventures 28 323 -------- -------- The profit on disposal in 2007 relates mainly to the disposal of the Group'sshareholdings in Gabetti Property Solutions (£8m) and Intelenet Global Services(£13m). 11. Tax The tax charge for the period was based on a UK corporation tax rate of 30%(2006: 30%). The effective rate of tax for 2007, based on profit before tax, was28.0% (2006: 27.2%). The effective tax rate differed from 30% as it took accountof the different tax rates applied to profits earned outside the UK, non-taxablegains and income and adjustments to prior year tax provisions. The forthcomingchange in the UK rate of corporation tax from 30% to 28% on 1st April 2008 ledto an additional tax charge in 2007 as a result of its effect on the Group's netdeferred tax asset. The tax charge for the year included £946m (2006: £1,234m)arising in the UK and £1,035m (2006: £707m) arising overseas. The effective taxrate for 2007 was higher than the 2006 rate, principally because there was ahigher level of profit on disposals of subsidiaries, associates and jointventures offset by losses or exemptions in 2006. 12. Profit attributable to minority interests 2007 2006 £m £mAbsa Group Limited 299 262Preference shares 198 175Reserve capital instruments 87 92Upper tier 2 instruments 16 15Barclays Global Investors minority interests 40 47Other minority interests 38 33 -------- --------Profit attributable to minority interests 678 624 -------- -------- 13. Earnings per share 2007 2006 Profit attributable to equity holders of the parent £4,417m £4,571mDilutive impact of convertible options (£25m) (£30m) -------- --------Profit attributable to equity holders of theparent including dilutive impact of convertible options £4,392m £4,541m Basic weighted average number of shares in issue 6,410m 6,357mNumber of potential ordinary shares(1) 177m 150m -------- --------Diluted weighted average number of shares 6,587m 6,507m -------- -------- p pBasic earnings per ordinary share 68.9 71.9 Diluted earnings per ordinary share 66.7 69.8 The calculation of basic earnings per share is based on the profit attributableto equity holders of the parent and the weighted average number of sharesexcluding own shares held in employee benefit trusts and shares held fortrading. The basic and diluted weighted average number of shares in issue in 2007reflected 336.8 million shares issued on 14th August 2007, 299.5 million ofwhich were repurchased by 31st December 2007. The buyback programme wassubsequently completed on 31st January 2008. The weighted average number ofshares in issue in 2007 was increased by 54 million shares as a result of thistemporary increase. When calculating the diluted earnings per share, the profit attributable toequity holders of the parent is adjusted for the conversion of outstandingoptions into shares within Absa Group Limited and Barclays Global Investors UKHoldings Limited. The weighted average number of ordinary shares excluding ownshares held in employee benefit trusts and shares held for trading, is adjustedfor the effects of all dilutive potential ordinary shares, totalling 177 million(2006: 150 million). (1) Potential ordinary shares reflect the dilutive impact of share optionsoutstanding. This information is provided by RNS The company news service from the London Stock Exchange

---

Related Shares:

Barclays