5th Aug 2005 07:01
Barclays PLC05 August 2005 Interim Results Announcement June 2005 BARCLAYS PLC INTERIM ANNOUNCEMENT OF RESULTS FOR 2005 TABLE OF CONTENTS PAGESummary 1Performance summary 2Financial highlights 3Half-year review 4Consolidated income statement 7Consolidated balance sheet 8Group performance ratios 10Results by business 11Results by nature of income and expense 36Additional information 59Notes 65Consolidated statement of recognised income and expense 80Summary consolidated cashflow statement 81Other information 82Index 83 BARCLAYS PLC The information in this announcement, which was approved by the Board ofDirectors on 4th August 2005, does not comprise statutory accounts within themeaning of Section 240 of the Companies Act 1985 (the 'Act'). Statutory accountsfor the year-ended 31st December 2004 were prepared under UK GAAP and includedcertain information required for the joint Annual Report on Form 20-F ofBarclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission(SEC) and which contained an unqualified audit report under Section 235 of theAct and which did not make any statements under Section 237 of the Act, havebeen delivered to the Registrar of Companies in accordance with Section 242 ofthe Act. 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 futureoperation. By their nature, forward-looking statements involve risk and uncertainty becausethey relate to future events and circumstances, including, but not limited to,the further development of standards and interpretations under IFRS applicableto past, current and future periods, evolving practices with regard to theinterpretation and application of standards under IFRS and pending tax electionswith regards to certain subsidiaries, as well as UK domestic and global economicand business conditions, market related risks such as changes in interest ratesand exchange rates, the policies and actions of governmental and regulatoryauthorities, changes in legislation, the outcome of pending and futurelitigation, the impact of competition, and the Group's ability to increaseearnings per share from acquisitions such as Absa (which may be affected by,among other things, the ability to realise expected synergies, integratebusinesses, and costs associated with the acquisition and integration) - anumber of which factors are beyond the Group's control. As a result, the Group'sactual future results may differ materially from the plans, goals, andexpectations set forth in the Group's forward-looking statements. Anyforward-looking statements made by or on behalf of Barclays speak only as of thedate 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 including its most recent Annual Report on Form 20-F. The Group has applied IFRS from 1st January 2004, with the exception of thestandards relating to financial instruments and insurance contracts which areapplied only with effect from 1st January 2005. Therefore the impacts ofadopting IAS 32, IAS 39 and IFRS 4 are not included in the 2004 comparatives inaccordance with IFRS 1 and financial instruments and insurance contracts areaccounted for under UK GAAP in 2004. The results for 2005 are therefore not entirely comparable to those for 2004 inaffected areas. For a fuller discussion of the transitional impacts of IFRS,please refer to the IFRS Transition Report 2004/2005, released 11th May 2005. 5th August 2005 BARCLAYS PLC "We made good progress in all the main elements of the Group's strategy,particularly our international growth plans. The profit growth in the first halfdemonstrates that our strategy is delivering strongly and that we are benefitingfrom a mix of business that is well diversified by sector, income type andgeography." John Varley, Group Chief Executive RESULTS FOR SIX MONTHS TO 30TH JUNE 2005 (UNAUDITED) Half-year ended 30.06.05 30.06.04 % Change £m £mTotal income, net of insurance claims 7,922 6,967 14 Impairment charges and other creditprovisions (706) (589) 20 Operating expenses (4,542) (3,974) 14 Profit before tax 2,690 2,463 9 Profit attributable to shareholders 1,841 1,798 2 Economic profit 1,004 964 4 Earnings per share 29.1p 28.0p 4 Proposed interim dividend per share 9.2p 8.25p 12 Post-tax return on averageshareholders' equity 23.4% 24.3% Highlights of business profit £m £m % Changebefore tax UK Banking 1,275 1,162 10 Barclays Capital 703 588 20 Barclays Global Investors 242 151 60 Wealth Management1 89 64 39 Barclaycard 379 459 (17) International Retail andCommercial Banking 188 145 30 In this document the income statement analysis compares, unless statedotherwise, the half-year ended 30th June 2005 to the corresponding period of2004. Balance sheet comparisons, unless stated otherwise, relate to thecorresponding position at 31st December 2004. 2004 comparatives do not includeadditional impacts arising from the first time application of IAS 32 (Financialinstruments: Disclosure and Presentation), IAS 39 (Financial instruments:Recognition and Measurement) and IFRS 4 (Insurance Contracts), which wereapplied from 1st January 2005. 1 Formerly Private Clients BARCLAYS PLC PERFORMANCE SUMMARY • We made progress on each of our four strategic priorities: - Building the best bank in the UK - Accelerating growth of global product businesses - Developing retail and commercial banking activities in selected markets outside the UK - Enhancing operational excellence • The financial results reflect this progress: - Total income1 up 14% to £7,922m - Profit before tax up 9% to £2,690m - Earnings per share up 4% to 29.1p - Dividend per share up 12% to 9.2p - Return on average shareholders' equity of 23.4% • Income growth was well diversified by business, income type and geography. Non-interest income1 rose 16% and was over half of total income1. • In addition to strong organic growth, we continue to capture the benefits expected from recent acquisitions. • The increase in operating expenses1 was driven by significant investment directed at future growth in investment banking, asset management, international retail and commercial banking, international credit cards and by higher performance related costs. This was complemented by a strong focus on cost control in other areas. • Impairment charges and other credit provisions rose 20%, driven principally by an increase in delinquencies and a reduction in recoveries in UK credit cards. Impairment charges rose at a slower rate in unsecured loans, were steady in UK mortgages and decreased in the wholesale and corporate businesses. Asset quality remains strong. • UK Banking showed good growth with profit2 up 10% to £1,275m and made progress on its productivity commitment with the cost:income1 ratio improving by three percentage points. • Barclays Capital delivered another excellent performance with profit2 up 20% to £703m. Growth, both by product and geography, reflected the continued development through organic investment. • Barclays Global Investors outstanding results continued with profit2 up 60% to £242m, attracting US$61bn of net new assets under management and delivering strong investment performance. • Wealth Management profit2 grew significantly, up 39% to £89m, reflecting growth across the businesses, driven by good trends in transaction volumes and growth in the balance sheet. • Barclaycard profit2 fell 17% to £379m. Strong income growth was more than offset by a significant rise in impairment losses, principally in the UK card portfolio. Barclaycard profits were also adversely impacted by continued investment in international development. • International Retail and Commercial Banking achieved very strong growth with profit2 up 30% to £188m. There was progress in all geographies, and excellent performance in Spain. • The acquisition of a majority stake in Absa completed at the end of July. 1 Trends in income and expenses are expressed after the deduction of 'net insurance claims and benefits paid'.2 Profit before tax. BARCLAYS PLC FINANCIAL HIGHLIGHTS (UNAUDITED) Half-year ended 30.06.05 31.12.04 30.06.04RESULTS £m £m £m------- Net interest income 3,700 3,500 3,333Net fee and commissionincome 2,540 2,532 2,315Principal transactions 1,549 1,398 1,116Net premiums from insurancecontracts 371 506 536Other income 49 75 56Total income 8,209 8,011 7,356Net claims and benefits paidon insurance contracts (287) (870) (389)Total income, net ofinsurance claims 7,922 7,141 6,967Impairment charges and othercredit provisions (706) (504) (589)Net income 7,216 6,637 6,378Operating expenses (4,542) (4,562) (3,974)Share of results ofassociates and jointventures 16 42 14Profit on disposal ofassociates and jointventures - - 45 Profit before tax 2,690 2,117 2,463 Profit attributable toshareholders 1,841 1,456 1,798Economic profit 1,004 604 964 PER ORDINARY SHARE p p p------------------ Earnings 29.1 23.0 28.0Proposed dividend 9.2 15.75 8.25Net asset value 249 246 232 PERFORMANCE RATIOS % % %------------------Post-tax return on averageshareholders' equity 23.4 18.9 24.3Cost:income ratio1 57 64 57Cost:net income ratio 63 69 62 As at 30.06.05 01.01.05 31.12.04 30.06.04BALANCE SHEET £m £m £m £m-------------Shareholders' equityexcluding minority interests 16,099 15,287 15,870 14,978Minority interests 5,686 3,330 894 178Total shareholders' equity 21,785 18,617 16,764 15,156Loan capital 11,309 10,606 12,277 12,468Total capital resources 33,094 29,223 29,041 27,624Total assets 850,123 715,600 538,181 512,331Weighted risk assets 242,406 219,758 218,601 203,333 30.06.05 01.01.05 31.12.04 30.06.04 % % % %Tier 1 ratio 7.6 7.1 7.6 7.7Risk asset ratio 12.1 11.8 11.5 12.2 ECONOMIC DATA-------------Period end - US$/£ 1.79 1.92 1.81Average - US$/£ 1.88 1.83 1.82Period end - •/£ 1.48 1.41 1.49Average - •/£ 1.46 1.47 1.48 1 Total income, net of insurance claims BARCLAYS PLC HALF-YEAR REVIEW Barclays had a strong half-year, delivering good profit growth, investingheavily for the future and making progress in each of our four strategicpriorities: - Building the best bank in the UK- Accelerating growth of global product businesses- Developing retail and commercial banking activities in selected markets outside the UK- Enhancing operational excellence Our overall profit performance demonstrated the benefits of our universal bankmodel and the diversification and growth characteristics of our mix ofbusinesses. Our investment in the first half was directed particularly at theglobal product businesses and International Retail and Commercial Banking. Profit before tax increased 9% to £2,690m (2004: £2,463m). Earnings per sharerose 4% to 29.1p (2004: 28.0p). We have increased the proposed interim dividendby 12% to 9.2p (2004: 8.25p). Total income1 grew 14% to £7,922m (2004: £6,967m). Income growth was broadlybased - by business and by income type - and reflected both underlying momentumand return on the investments made in prior years. Margins held up well acrossthe portfolio as a whole. Operating expenses1 in the first half rose 14% to £4,542m (2004: £3,974m) inline with growth in income. The substantial majority of the expense growth wasattributable to three factors: the very strong performance in the wholesale andinstitutional businesses driving higher variable costs; investment spend in theglobal product and international businesses; and the one-off expense of headoffice relocation. Costs in all other areas were tightly controlled, and werelower than the prior year in UK Banking. Impairment charges and other credit provisions increased 20% to £706m (2004:£589m). This growth was driven by an increase in the size of the book, higherdelinquency and lower recoveries in the Barclaycard UK card business. Impairmentwas stable in UK mortgages, and fell in corporate and wholesale reflecting thebenign credit environment. In UK Banking, we set a target in 2004 to deliver a 2 percentage pointimprovement per annum in the cost:income ratio in each of 2005, 2006 and 2007.The first half showed a 3 percentage point improvement relative to 2004 and thisresulted in an increase of 10% in profit before tax. UK Business Bankingcontinued to perform well with strong growth on both sides of the balance sheetresulting in strong income growth at stable margins. Tight cost discipline and agood risk performance also contributed to excellent profit growth of 20%. In UKRetail Banking, income was broadly flat, but we benefited from a strong focus oncosts, delivering a 4% reduction in operating expenses despite continuing heavyinvestment. We continued to build on the customer initiatives taken last year,delivering significant improvement in key customer service metrics. We have alsolaunched new products in general insurance, mortgages and current accounts. Goodgrowth in current accounts and overdrafts was largely offset by margin pressurein savings and a weak performance in mortgages. Excluding the effect of the saleof our interest in Edotech in 2004, underlying profit before tax was up 6%. 1 Trends in income and expenses are expressed after the deduction of 'netinsurance claims and benefits paid'. BARCLAYS PLC HALF-YEAR REVIEW Barclays Capital delivered record results in the first half, increasing profitbefore tax by 20% to £703m (2004: £588m). Performance was broadly based acrossproducts and geographies, reflecting delivery from past investments andcontinued strengthening of the client franchise. The risk management performancewas excellent in volatile and sometimes difficult market conditions. AverageDVaR, at £30.4m, was lower than the average for 2004. We continue to investheavily in Barclays Capital, building on the breadth and depth of itscapabilities. Barclays Global Investors (BGI) had another outstanding first half performance,increasing profit before tax by 60% to £242m (2004: £151m). BGI now has US$1.4trillion of assets under management, and continued to generate strong flows ofnet new assets and growth in higher margin products, reflecting ongoinginvestment in the business. BGI delivered strong investment performance inactive products, with most funds outperforming their benchmarks. BGI alsodelivered further significant improvement in operating margin and improved thecost:income1 ratio to 59% (2004: 64%). Wealth Management performed strongly. Profits2, which rose 39%, totalled £89m(2004: £64m). Growth in this business was underpinned by higher asset andliability volumes and higher levels of client activity across most of the wealthbusinesses. We continued to invest in new products, to improve customer serviceand to make progress with the integration of Gerrard. The cost:income1 ratioimproved by 4 percentage points. Barclaycard profits2 fell 17% to £379m (2004: £459m) as a result of higherimpairment charges and international investment. Income growth of 11% reflectedgood balance growth in the consumer loan businesses, stability in card margins,the momentum in international cards and a first-time contribution from Juniper.Operating expenses grew from the continued investment in the internationalbusinesses, principally the acquisition of Juniper. The integration anddevelopment of Juniper is in line with plan, with good growth in newpartnerships signed. Barclaycard International continued to make good progressin Spain and Germany. Barclaycard announced new business extensions, including ajoint venture with ForeningsSparbanken in Scandinavia, and a partnership withSky TV in the UK. International Retail and Commercial Banking, where profit2 rose 30% to £188m(2004: £145m), performed strongly, driven by expansion in continental Europe,particularly in mortgages. There was continued good progress with theintegration of Banco Zaragozano, where synergies are running ahead of plan. Thegrowth of International Retail and Commercial Banking will be accelerated in thesecond half by the completion of the acquisition of a majority stake in Absa inSouth Africa and by the acquisition of the ING Ferri business in France. Good capital management enhances shareholder returns and continues to be a corefocus. In the first half of 2005, we raised £2.3bn of preference share capitalto fund organic growth and the acquisition of a majority stake in Absa. The Tier1 capital ratio reported at 30th June 2005 has reduced by 90 basis pointsfollowing completion of the Absa transaction. We intend to run a tighter capitalstructure and we have optimised the use of preference share capital in ourfunding mix over the past 18 months. This has enabled us to buy back £700m ofshares in 2004 and fund £3.1 billion of acquisitions and joint ventures withoutissuing ordinary shares. We continue to target the maintenance of our Aa1/AA/AA+credit ratings and have factored this into our capital management plans. Whilstwe would continue to adjust our capital levels to reflect the environment andour business mix, our current focus is to rebuild capital ratios toapproximately 7.25% for the Tier 1 ratio. This is expected to be achieved in2006 through the natural evolution of retained earnings. 1 Trends in income and expenses are expressed after the deduction of 'net insurance claims and benefits paid'.2 Profit before tax. BARCLAYS PLC HALF-YEAR REVIEW We continue our progressive approach to dividends. With our annual dividendapproximately twice covered by earnings, the balance between income distributionto shareholders and earnings retention to fund growth is appropriate. We expectto grow dividends per share approximately in line with earnings per share overthe longer term. We would look to smooth this, with dividend growth lower thanearnings growth in years where earnings growth is exceptionally high, and theconverse when earnings growth in a particular year is below trend. We expect tocontinue the practice of weighting the annual dividend towards the finaldividend to maintain flexibility, consistent with the practice and balance ofprior years. In terms of progress towards Group goals, Barclays ranked in the second quartileof its Total Shareholder Return (TSR) peer group2 for the goal period starting1st January 2004. Cumulative economic profit growth for this period has exceededour stated compound annual target range of 10-13%. We have completed the transition to International Financial Reporting Standards(IFRS). Our first half results included the implementation of IAS 32, IAS 39 andIFRS 4. This will introduce more volatility to reported earnings. In the firsthalf of 2005, this volatility had a positive effect on earnings in some areas,particularly in the Group Treasury. The other key impacts on the incomestatement in 2005 have been a change in the reporting of insurance income and areclassification between interest income and fee and commission income. The neteffect of the incremental IFRS changes in 2005 has been a modest reduction inreported earnings per share. The economic outlook for the remainder of the year continues to be fairlypositive. We expect the strong economic performances in the US and China tocontinue to benefit the global economy. Although the rate of growth in the UK isexpected to be below the level of the past few years, it is still expected to bein line with the longer term trend. We continue to see some softness in the UKconsumer sector, but the wholesale and corporate sector is in very good health.The outlook for interest rates and unemployment is reassuring from a credit riskperspective. For the full year, excluding significant acquisitions and disposals, we continueto target double digit income1 growth, with expense1 growth broadly in line withthis. Impairment charges are expected to be approximately in line with RiskTendency. In the second half of this year, we will also account for five monthsof earnings from Absa (net of the associated funding and hedging costs), whichwe expect to be modestly accretive to earnings per share. We can now welcome to the Group our new colleagues from Absa. Absa's Chairman,Dr Danie Cronje, joins the Barclays Board as a non-executive Director on 1stSeptember 2005. We are excited about the prospects for the enlarged businessboth in South Africa and across the continent of Africa. We are also delightedto have strengthened the Barclays Board during the first half through theappointment of Robert E. Diamond Jnr. as an executive Director and President ofthe Group, and through the appointment of Robert Steel and John Sunderland asnon-executive Directors. John VarleyGroup Chief Executive 1 Trends in income and expenses are expressed after the deduction of 'net insurance claims and benefits paid'.2 Peer group for 2005 unchanged from 2004: ABN Amro, BBVA, BNP Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan Chase, Lloyds TSB, Royal Bank of Scotland and UBS. BARCLAYS PLC CONSOLIDATED INCOME STATEMENT (UNAUDITED) Half-year ended 30.06.05 31.12.04 30.06.04Continuing operations £m £m £mInterest income 7,648 7,315 6,565Interest expense (3,948) (3,815) (3,232) --------- --------- ---------Net interest income 3,700 3,500 3,333 --------- --------- ---------Fee and commission income 2,872 2,861 2,648Fee and commission expense (332) (329) (333) --------- --------- ---------Net fee and commission income 2,540 2,532 2,315 --------- --------- ---------Net trading income 1,176 684 803Net investment income 373 714 313 --------- --------- ---------Principal transactions 1,549 1,398 1,116Net premiums from insurance contracts 371 506 536Other income 49 75 56 --------- --------- ---------Total income 8,209 8,011 7,356Net claims and benefits paid oninsurance contracts (287) (870) (389) --------- --------- ---------Total income, net of insurance claims 7,922 7,141 6,967Impairment charge and other creditprovisions (706) (504) (589) --------- --------- ---------Net income 7,216 6,637 6,378Operating expenses (4,542) (4,562) (3,974)Share of results of associates andjoint ventures 16 42 14Profit on disposal of associates andjoint ventures - - 45 --------- --------- ---------Profit before tax 2,690 2,117 2,463Tax (715) (634) (645) --------- --------- ---------Profit for the period 1,975 1,483 1,818 --------- --------- --------- Profit attributable to minorityinterests 134 27 20Profit attributable to shareholders 1,841 1,456 1,798 --------- --------- --------- 1,975 1,483 1,818 --------- --------- --------- p p pBasic earnings per ordinary share 29.1 23.0 28.0Diluted earnings per share 28.9 22.8 27.9 Proposed dividends per ordinary share:Interim 9.2 - 8.25Final - 15.75 - Proposed dividend £582m £1,010m £528m BARCLAYS PLC CONSOLIDATED BALANCE SHEET (UNAUDITED) As at 30.06.05 01.01.05 31.12.04 30.06.04Assets £m £m £m £mCash and balances atcentral banks 4,106 3,238 1,753 1,829Items in the course ofcollection from otherbanks 2,208 1,772 1,772 2,527Treasury bills and othereligible bills 6,658 6,547Trading portfolio assets 134,235 110,033Financial assets designated atfair value:- held on own account 9,747 9,799- held in respect of linked liabilities to customers under investment contracts 69,792 63,124Derivative financialinstruments 133,932 94,211Loans and advances tobanks 35,225 25,728 80,632 83,034Loans and advances tocustomers 237,123 207,259 262,409 252,053Debt securities 130,311 119,840Equity shares 11,399 8,599Available for salefinancial investments 61,143 48,097Reverse repurchaseagreements and cashcollateral on securitiesborrowed 149,400 139,574Other assets 3,491 3,647 25,915 21,344Insurance assets,including unit-linkedassets 107 109 8,576 8,165Investments in associatesand joint ventures 438 429 429 442Goodwill 4,590 4,518 4,518 4,398Intangible assets 120 139 139 62Property, plant andequipment 2,407 2,282 2,282 2,108Deferred tax assets 2,059 1,641 1,388 1,383 ------- ------- ------- -------Total assets 850,123 715,600 538,181 512,331 ------- ------- ------- ------- BARCLAYS PLC CONSOLIDATED BALANCE SHEET (UNAUDITED) As at 30.06.05 01.01.05 31.12.04 30.06.04Liabilities £m £m £m £mDeposits from banks 84,538 74,735 111,024 115,836Items in the course ofcollection due to otherbanks 2,809 1,205 1,205 1,442Customer accounts 217,715 194,478 217,492 206,170Trading portfolioliabilities 65,598 59,114Financial liabilitiesdesignated at fair value:held on own account 8,231 5,320Liabilities to customersunder investmentcontracts 71,608 64,609Derivative financialinstruments 132,784 94,429Debt securities in issue 93,328 76,154 83,842 69,431Repurchase agreements andcash collateral onsecurities lent 122,076 98,582Other liabilities 9,649 9,869 82,936 79,546Current tax liabilities 786 621 621 697Insurance contractliabilities, includingunit-linked liabilities 3,589 3,596 8,377 7,944Subordinated liabilities:- Undated loan capital-non convertible 4,366 4,208 6,149 6,233- Dated loan capital-convertible to preference shares 13 15 15 15- Dated loan capital-non convertible 6,930 6,383 6,113 6,220Deferred tax liabilities 1,891 1,397 1,362 1,284Other provisions forliabilities 386 403 416 329Retirement benefitliabilities 2,041 1,865 1,865 2,028 ------- ------- ------- -------Total liabilities 828,338 696,983 521,417 497,175 ------- ------- ------- ------- Shareholders' equityCalled up share capital 1,616 1,614 1,614 1,613Share premium account 5,554 5,524 5,524 5,437Less: treasury shares (239) (119) (119) (115)Available for salereserve 374 314Cash flow hedging reserve 328 302Capital redemptionreserve 309 309 309 305Other capital reserve 617 617 617 617Translation reserve (35) (58) (58) (43)Retained earnings 7,575 6,784 7,983 7,164 ------- ------- ------- -------Shareholders' equityexcluding minorityinterest 16,099 15,287 15,870 14,978Minority interests 5,686 3,330 894 178 ------- ------- ------- -------Total shareholders'equity 21,785 18,617 16,764 15,156 ------- ------- ------- ------- ------- ------- ------- -------Total liabilities andshareholders' equity 850,123 715,600 538,181 512,331 ------- ------- ------- ------- BARCLAYS PLC Group performance ratios As at 30.06.05 01.01.05 31.12.04 30.06.04Net asset value per ordinaryshare (excluding minority interests) 249p 236p 246p 232p Half-year ended 30.06.05 31.12.04 30.06.04 % % %Post-tax return on average shareholders'equity (excluding minority interests) 23.4 18.9 24.3 Cost:income ratios The cost:income ratios are defined as follows: • The cost:income ratio is defined as operating expenses compared to total income, net of insurance claims; and • The cost:net income ratio is defined as operating expenses compared to total income, net of insurance claims, less impairment charges. Half-year ended 30.06.05 31.12.04 30.06.04 % % % Cost:income ratio 57 64 57 Cost:net income ratio 63 69 62 BARCLAYS PLC FINANCIAL REVIEW Results by business The following section analyses the Group's performance by business. For management and reporting purposes, Barclays is organised into the following business groupings: • UK Banking, comprising - UK Retail Banking - UK Business Banking • Barclays Capital • Barclays Global Investors • Wealth Management • Wealth Management - closed life assurance activities • Barclaycard • International Retail and Commercial Banking • Head office functions and other operations UK Banking UK Banking delivers banking solutions to Barclays UK retail and business banking customers. It offers a range of integrated products and services and access to the expertise of other Group businesses. Customers are served through a variety of channels comprising the branch network, automated teller machines, telephone banking, online banking and relationship managers. UK Banking is managed through two business areas, UK Retail Banking and UK Business Banking. UK Retail Banking UK Retail Banking comprises Personal Customers, Mortgages, Small Business and UK Premier. This cluster of businesses enables the building of broader and deeper relationships with both existing and new customers. Personal Customers and Mortgages provide a wide range of products and services to 14 million retail customers, including current accounts, savings, mortgages, and general insurance. Small Business provides banking services to 580,000 small businesses. UK Premier provides banking, investment products and advice to some 280,000 affluent customers. UK Business Banking UK Business Banking provides relationship banking to the Group's larger and medium business customers in the United Kingdom. Customers are served by a network of relationship and industry sector specialist managers who provide local access to an extensive range of products and services, as well as offering business information and support. Customers are also offered access to the products and expertise of other businesses in the Group, particularly Barclays Capital. UK Business Banking provides asset financing and leasing solutions through a specialist business to customers in the United Kingdom and continental Europe. BARCLAYS PLC Barclays Capital Barclays Capital is a leading global investment bank which provides large corporate, institutional and government clients with solutions to their financing and risk management needs. Barclays Capital services a wide variety of client needs, from capital raising and managing foreign exchange, interest rate and commodity risks, through to providing technical advice and expertise. Activities are organised into three principal areas: Rates, which includes fixed income, foreign exchange, commodities, emerging markets, money markets sales, trading and research, prime brokerage and equity related activities; Credit, which includes primary and secondary activities for loans and bonds for investment grade, high yield and emerging market credits, as well as hybrid capital products, asset based finance, commercial mortgage backed securities, credit derivatives, structured capital markets and large asset leasing; and Private Equity. Barclays Global Investors Barclays Global Investors (BGI) is one of the world's largest asset managers and a leading global provider of investment management products and services. BGI offers structured investment strategies such as indexing, tactical asset allocation and risk-controlled active products. BGI also provides related investment services such as securities lending, cash management and portfolio transition services. In addition, BGI is the global leader in Exchange Traded Funds, with over 130 funds for institutions and individuals trading in eleven global markets. BGI's investment philosophy is founded on managing all dimensions of performance: a consistent focus on controlling risk, return and cost. Wealth Management Wealth Management (formerly Private Clients) serves affluent, high net worth and corporate clients, primarily in the UK and continental Europe, providing private banking, offshore banking, stockbroking, asset management and financial planning services. Wealth Management - closed life assurance activities Wealth Management - closed life assurance activities comprise the closed life assurance businesses of Barclays and Woolwich in the UK. BARCLAYS PLC Barclaycard Barclaycard is a multi-brand credit card and consumer lending business with an increasing international presence and is one of the leading credit card businesses in Europe. In the UK, Barclaycard manages the Barclaycard branded credit cards and other non-Barclaycard branded card portfolios including Monument, SkyCard and Solution Personal Finance. In consumer lending, Barclaycard manages both secured and unsecured loan portfolios, through Barclays branded loans, being mostly Barclayloan, and also through the FirstPlus and Clydesdale Financial Services businesses. Outside the UK, Barclaycard operates in the United States, through Juniper Financial Corporation, in Germany, Spain, Greece, Italy, Portugal, Republic of Ireland and across Africa. In the Nordic region, Barclaycard operates through Entercard, the joint venture with ForeningsSparbanken (Swedbank). Barclaycard Business processes card payments for retailers and issues purchasing and credit cards to business customers and to the UK Government. Barclaycard works closely with other parts of the Group, including UK Retail Banking, UK Business Banking and International Retail and Commercial Banking, to leverage their distribution capability. International Retail and Commercial Banking International Retail and Commercial Banking provides a range of banking services, including current accounts, savings, investments, mortgages and loans to personal and corporate customers across Spain, Portugal, France, Italy, the Caribbean, Africa and the Middle East. International Retail and Commercial Banking works closely with other parts of the Group, including Barclaycard, UK Banking, Barclays Capital and Barclays Global Investors, to leverage synergies from product and service propositions. Head office functions and other operations Head office functions and other operations comprise: • head office and central support functions • discontinued businesses in transition • consolidation adjustments Head office and central support functions comprise the following areas: Executive Management, Finance, Treasury, Communications, Human Resources, Strategy and Planning, Internal Audit, Legal, Corporate Secretariat, Property, Tax, Compliance and Risk. Costs incurred wholly on behalf of the businesses are recharged to them. Discontinued businesses in transition principally relate to South American and Middle Eastern corporate banking businesses. These businesses are centrally managed with the objective of maximising recovery from the assets. Consolidation adjustments largely reflect the elimination of inter segment transactions. BARCLAYS PLC SUMMARY OF RESULTS (UNAUDITED) Analysis of profit attributable to shareholders Half-year ended 30.06.05 31.12.04 30.06.04 £m £m £m UK Banking 1,275 1,103 1,162 -------- -------- -------- UK Retail Banking 549 405 558 UK Business Banking 726 698 604 -------- -------- -------- Barclays Capital 703 432 588 Barclays Global Investors 242 185 151 Wealth Management 89 46 64 Wealth Management - closed life assurance activities (2) (51) (1) Barclaycard 379 384 459 International Retail and Commercial Banking 188 148 145 Head office functions and other operations (184) (130) (105) -------- -------- -------- Profit before tax 2,690 2,117 2,463 Tax (715) (634) (645) -------- -------- -------- Profit for the period 1,975 1,483 1,818 Profit attributable to minority interests (134) (27) (20) -------- -------- -------- Profit attributable to shareholders 1,841 1,456 1,798 -------- -------- -------- BARCLAYS PLC TOTAL ASSETS AND WEIGHTED RISK ASSETS Total assets As at 30.06.05 01.01.05 31.12.04 30.06.04 £m £m £m £m UK Banking 134,322 128,573 119,561 114,404 -------- -------- -------- -------- UK Retail Banking 67,518 69,064 68,861 67,255 UK Business Banking 66,804 59,509 50,700 47,149 -------- -------- -------- -------- Barclays Capital 566,675 454,437 346,901 330,235 Barclays Global Investors 68,630 61,201 798 711 Wealth Management 5,215 5,050 5,007 4,409 Wealth Management - closed life assurance activities 6,653 6,551 6,425 6,092 Barclaycard 23,777 22,878 23,059 20,693 International Retail and Commercial Banking 29,505 28,723 28,448 25,114 Head office functions and other operations 10,756 3,669 3,464 6,275 Goodwill 4,590 4,518 4,518 4,398 -------- -------- -------- -------- 850,123 715,600 538,181 512,331 -------- -------- -------- -------- Weighted risk assets As at 30.06.05 01.01.05 31.12.04 30.06.04 £m £m £m £m UK Banking 100,355 92,590 91,913 87,506 -------- -------- -------- -------- UK Retail Banking 37,010 37,835 37,111 36,458 UK Business Banking 63,345 54,755 54,802 51,048 -------- -------- -------- -------- Barclays Capital 90,828 79,511 79,949 72,715 Barclays Global Investors 1,474 1,233 1,230 1,004 Wealth Management 4,589 4,187 4,018 3,632 Barclaycard 21,666 21,595 20,188 18,404 International Retail and Commercial Banking 19,430 18,701 19,319 17,292 Head office functions and other operations 4,064 1,941 1,984 2,780 -------- -------- -------- -------- 242,406 219,758 218,601 203,333 -------- -------- -------- -------- Weighted risk assets at 1st January 2005 have been restated from those reported in the IFRS Transition Report, reflecting a review of the treatment of certain assets and offsets. BARCLAYS PLC UK Banking Half-year ended 30.06.05 31.12.04 30.06.04 £m £m £m Net interest income 1,919 1,780 1,697 Net fee and commission income 868 974 962 -------- -------- -------- Net trading income (2) - - Net investment income 19 4 1 -------- -------- -------- Principal transactions 17 4 1 Net premiums from insurance contracts 141 100 149 Other income 15 31 6 -------- -------- -------- Total income 2,960 2,889 2,815 Net claims and benefits on insurance contracts (33) (20) (26) -------- -------- -------- Total income, net of insurance claims 2,927 2,869 2,789 Impairment charges and other credit provisions (148) (46) (153) -------- -------- -------- Net income 2,779 2,823 2,636 Operating expenses (1,498) (1,722) (1,519) Share of results of associates and joint ventures (6) 2 3 Profit on disposal of associates and joint ventures - - 42 -------- -------- -------- Profit before tax 1,275 1,103 1,162 -------- -------- -------- Cost:income ratio 51% 60% 54% Cost:net income ratio 54% 61% 58% Risk Tendency £420m £375m £360m Return on average economic capital 34% 32% 35% Economic profit £592m £565m £593m As at 30.06.05 01.01.05 31.12.04 30.06.04 Loans and advances to £125.4bn £119.6bn £114.1bn £109.0bn customers Customer accounts £131.0bn £124.6bn £114.8bn £113.1bn Total assets £134.3bn £128.6bn £119.6bn £114.4bn Weighted risk assets £100.4bn £92.6bn £91.9bn £87.5bn Key Facts 30.06.05 31.12.04 30.06.04 Number of UK branches 2,053 2,061 2,064 UK Banking profit before tax increased 10% (£113m) to £1,275m (2004: £1,162m), driven by good income growth, well controlled risk and strong cost management as operating expenses were held below 2004 levels. UK Banking has continued to make good progress towards achieving its strategic aims of delivering integrated banking solutions to customers, enhancing the customer service experience, capturing revenue growth opportunities and improving productivity. UK Banking is targeting cost: income ratio improvements of 2 percentage points per annum in 2005, 2006 and 2007. During the first half of 2005 UK Banking made good progress towards achieving this target with the cost:income ratio improving by 3 percentage points to 51% (2004: 54%). BARCLAYS PLC UK Retail Banking Half-year ended 30.06.05 31.12.04 30.06.04 £m £m £m Net interest income 1,041 1,046 1,013 Net fee and commission income 550 554 569 -------- -------- -------- Net trading income - - - Net investment income 9 1 - -------- -------- -------- Principal transactions 9 1 - Net premiums from insurance contracts 141 100 149 Other income 12 22 4 -------- -------- -------- Total income 1,753 1,723 1,735 Net claims and benefits on insurance contracts (33) (20) (26) -------- -------- -------- Total income, net of insurance claims 1,720 1,703 1,709 Impairment charges and other credit provisions (72) 2 (62) -------- -------- -------- Net income 1,648 1,705 1,647 Operating expenses (1,092) (1,300) (1,133) Share of results of associates and joint ventures (7) - 2 Profit on disposal of associates and joint ventures - - 42 -------- -------- -------- Profit before tax 549 405 558 -------- -------- -------- Cost:income ratio 63% 76% 66% Cost:net income ratio 66% 76% 69% Risk Tendency £160m £150m £150m Return on average economic capital 34% 25% 36% Economic profit £256m £183m £290m As at 30.06.05 01.01.05 31.12.04 30.06.04 Loans and advances to £64.9bn £66.0bn £65.6bn £64.4bn customers Customer accounts £74.6bn £73.1bn £72.4bn £70.7bn Total assets £67.5bn £69.1bn £68.9bn £67.3bn Weighted risk assets £37.0bn £37.8bn £37.1bn £36.5bn Key Facts 30.06.05 31.12.04 30.06.04 Personal Customers ------------------ Number of UK current accounts 10.9m 10.7m 10.6m Number of UK savings accounts 10.7m 10.6m 10.5m Total UK mortgage balances (residential) £61.0bn £61.7bn £60.8bn Small Business and UK Premier ----------------------------- Number of Small Business customers 580,000 566,000 567,000 Number of UK PremierRelated Shares:
Barclays