Interim Results - Part 1

3rd Aug 2006 07:01

Barclays PLC03 August 2006 PART 1 OF 2 Interim Results Announcement 30th June 2006 BARCLAYS PLC INTERIM ANNOUNCEMENT OF RESULTS FOR 2006 TABLE OF CONTENTS PAGESummary of key information 1Performance summary 2Financial highlights 4Chief Executive's Half-year review 5Consolidated income statement 9Consolidated balance sheet 10Results by business 12Results by nature of income and expense 42Analysis of amounts included in the balance sheet 58Additional information 70Notes 74Consolidated statement of recognised income and expense 88Summary consolidated cashflow statement 89Other information 90Appendix 92Index 94 BARCLAYS PLC, 1 CHURCHILL PLACE, LONDON, E14 5HP, ENGLAND, UNITED KINGDOM. TELEPHONE: +44 (0) 20 7116 1000. COMPANY NO. 48839 The information in this announcement, which was approved by the Board ofDirectors on 2nd August 2006, does not comprise statutory accounts within themeaning of Section 240 of the Companies Act 1985 (the 'Act'). Statutory accountsfor the year ended 31st December 2005, which included certain informationrequired for the joint Annual Report on Form 20-F of Barclays PLC and BarclaysBank PLC to the US Securities and Exchange Commission (SEC) and which containedan unqualified audit report under Section 235 of the Act and which did not makeany statements under Section 237 of the Act, have been delivered to theRegistrar of Companies in accordance with Section 242 of the Act. Unless otherwise stated, the information in this announcement reflects thechanges in Barclays group structure and reporting, and the revisions to theGroup's policy for the internal cost of funding and the segmental disclosure ofrisk weighted assets, which were announced on 16th June 2006. For a fullerdiscussion of the changes, please refer to the 'Group reporting changes in 2006'announcement released on 16th June 2006. Details of these changes are also setout on page 70. Unless otherwise stated, the information set out in this announcement relates tothe six months to 30th June 2006 and is compared to the corresponding six monthsof 2005. 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 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, as well as UK domesticand global economic and business conditions, market related risks such aschanges in interest rates and exchange rates, the policies and actions ofgovernmental and regulatory authorities, changes in legislation, progress in theintegration of Absa into the Group's business and the achievement of synergytargets related to Absa, the outcome of pending and future litigation, and theimpact of competition - a number of which factors are beyond the Group'scontrol. As a result, the Group's actual future results may differ materiallyfrom the plans, goals, and expectations set forth in the Group's forward-lookingstatements. Any forward-looking statements made by or on behalf of Barclaysspeak only as of the date they are made. Barclays does not undertake to updateforward-looking statements to reflect any changes in Barclays expectations withregard thereto or any changes in events, conditions or circumstances on whichany such statement 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 South African company listed on theJohannesburg Stock Exchange in which Barclays owns a controlling stake. 'Absa' refers to the total results for Absa Group Limited 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 The Cost:income ratio is defined as operating expenses compared to total incomenet of insurance claims. The Cost:net income ratio is defined as operating expenses compared to totalincome net of insurance claims less impairment charges. The Return on average economic capital by business is defined as attributableprofit compared to average economic capital. 'Income' refers to total income net of insurance claims, unless otherwisespecified. 'Profit' refers to profit before tax unless otherwise specified. 3rd August 2006 BARCLAYS PLC "Barclays had an excellent first half, with earnings per share up 25%.Successful strategy execution delivered outstanding performance from our globalwholesale businesses, a substantial contribution from Absa and sustained incomegrowth in UK Banking. We are very well positioned across the Group for futuregrowth." John Varley, Group Chief Executive RESULTS FOR THE SIX MONTHS TO 30TH JUNE 2006 (UNAUDITED) Half-year ended 30.06.06 30.06.05 % ChangeGroup Results £m £m Total income net of insurance claims 10,969 7,922 38 Impairment charges (1,057) (706) 50 Operating expenses (6,269) (4,542) 38 Profit before tax 3,673 2,690 37 Profit attributable to minorityinterests (294) (134) 119 Profit attributable to equity holdersof the parent 2,307 1,841 25 Economic profit 1,385 1,004 38 Earnings per share 36.3p 29.1p 25 Dividend per share 10.5p 9.2p 14 Post-tax return on averageshareholders' equity 25.8% 23.4% Summary of divisional profit before tax(1) £m £m % Change UK Banking 1,265 1,138 11 UK Retail Banking 612 548 12 UK Business Banking 653 590 11 Barclaycard 297 346 (14) International Retail and CommercialBanking (IRCB) 539 174 210IRCB - ex Absa 222 174 28 IRCB - Absa 317 - - Barclays Capital 1,246 750 66 Barclays Global Investors 364 241 51 Wealth Management 110 84 31 (1) Summary excludes Wealth Management - closed life assurance activities and Head office functions and other operations. Full analysis of business profit before tax is on page 16. PERFORMANCE SUMMARY • The financial results reflect the successful execution of strategy: - Total income up 38% to £10,969m - Profit before tax up 37% to £3,673m - Earnings per share up 25% to 36.3p - Dividend per share up 14% to 10.5p - Economic profit up 38% to £1,385m - Return on average shareholders' equity of 26%. • UK Banking produced strong profit growth, up 11% to £1,265m, with the cost:income ratio improving a further three percentage points. UK Retail Banking delivered a 12% improvement in profit to £612m, driven by sustained income growth across the business and with additional investment spend mostly offsetting the benefit of gains on the sale and leaseback of property. UK Business Banking delivered strong, broadly based growth, with profit up 11% to £653m. • Barclaycard profit fell 14% to £297m. Strong income growth was offset by a continued rise in impairment charges, principally in the UK unsecured lending portfolios and by higher costs, mainly as a result of continued investment in Barclaycard US, which is performing in line with the acquisition business plan. • International Retail and Commercial Banking - excluding Absa achieved a profit of £222m, with strong underlying growth. There were good performances in all geographies, with continued progress from recent acquisitions in Spain and France and continued strong organic growth. • International Retail and Commercial Banking - Absa's contribution to profit was £317m in the first half of 2006. Absa Group Limited reported 16% growth in profit before tax to R4.9bn. Absa Group Limited's performance reflected a favourable economic environment, strong growth in demand for credit and in deposits, and good progress on the integration. • Barclays Capital produced an outstanding performance, with profit rising 66% to £1,246m, and compared well against its peer group. Income growth was broadly based across all asset classes and geographies, reflecting returns on past investment and the strength of the client franchise. Profit growth significantly exceeded the rate of growth of risk and capital consumption. • Barclays Global Investors maintained its track record of excellent growth, with profit up 51% to £364m. There was strong performance across products, distribution channels and geographies, whilst investing in key growth initiatives. Net new assets in the period were US$30bn and at 30th June 2006 assets under management totalled US$1.6 trillion. • Wealth Management profit rose 31% to £110m. This reflected balance sheet growth across the business, higher client funds under management and increased client activity, whilst investing for future growth. • Group income grew 38%, or 23% excluding the impact of Absa. Income growth was well diversified by income type and particularly strong in the wholesale and international businesses. Net interest income represented 40% of total income. • Impairment charges rose 50%. Impairment charges on loans and advances, excluding Absa, increased 30%. The increase was principally driven by a continued increase in arrears balances and lower rates of recovery in UK credit cards and unsecured loans. Small and medium business impairment charges increased towards Risk Tendency. Wholesale charges were lower and mortgage impairment was negligible. • Operating expenses grew 38%, in line with income growth. Excluding Absa, operating expenses growth was 21% and the cost:income ratios of all businesses improved. Growth in operating expenses was driven by higher performance related expenses, organic expansion of distribution channels in International Retail and Commercial Banking and continued investment for future growth. • The Group took advantage of historically low yields on property to realise gains of £238m from the sale and leaseback of some of its freehold portfolio. The majority of the gains were in UK Banking (£145m) where they were largely offset by an acceleration of investment expenditure. The remaining property gains were recorded in Barclaycard (£38m) and International Retail and Commercial Banking (£55m). • Approximately 50% of the Group's profits were generated from outside the UK. • Barclays primary performance goal is to achieve top quartile Total Shareholder Return (TSR). As at 30th June 2006, in the 2004-2007 goal period, Barclays was positioned 7th within its peer group(1), which is third quartile. Compound annual growth in economic profit is well ahead of the growth target range (10%-13% pa). (1) Peer group for 2006 remained unchanged from 2005: ABN Amro, BBVA, BNP Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan, Lloyds TSB, Royal Bank of Scotland and UBS. FINANCIAL HIGHLIGHTS (UNAUDITED) Half-year ended 30.06.06 31.12.05 30.06.05RESULTS £m £m £m----------Net interest income 4,404 4,375 3,700Net fee and commission income 3,652 3,165 2,540Principal transactions(1) 2,575 1,630 1,549Net premiums from insurance 510 501 371contractsOther income 61 98 49 -------- -------- --------Total income 11,202 9,769 8,209Net claims and benefits paid oninsurance contracts (233) (358) (287) -------- -------- --------Total income net of insurance claims 10,969 9,411 7,922Impairment charges (1,057) (865) (706) -------- -------- --------Net income 9,912 8,546 7,216Operating expenses (6,269) (5,985) (4,542)Share of post-tax results ofassociates 30 29 16and joint ventures -------- -------- --------Profit before tax 3,673 2,590 2,690 -------- -------- --------Profit attributable to equityholders of the parent 2,307 1,606 1,841Economic profit 1,385 748 1,004 PER ORDINARY SHARE p p p--------------------Earnings 36.3 25.4 29.1Diluted earnings 35.1 24.3 28.4Dividend 10.5 17.4 9.2Net asset value 276 269 249 PERFORMANCE RATIOS % % %--------------------Post-tax return on averageshareholders' equity 25.8 26.4 23.4Cost:income ratio 57 64 57Cost:net income ratio 63 70 63 As at 30.06.06 31.12.05 30.06.05BALANCE SHEET £m £m £m---------------Shareholders' equity excludingminority 17,988 17,426 16,099interestsMinority interests 7,551 7,004 5,686 -------- -------- --------Total shareholders' equity 25,539 24,430 21,785Subordinated liabilities 13,629 12,463 11,309 -------- -------- --------Total capital resources 39,168 36,893 33,094 -------- -------- -------- Total assets 986,124 924,357 850,123Risk weighted assets 290,924 269,148 242,406 CAPITAL RATIOS % % %---------------- Tier 1 ratio 7.2 7.0 7.6Risk asset ratio 11.6 11.3 12.1 (1) Principal transactions comprise net trading income and net investment income. CHIEF EXECUTIVE'S HALF-YEAR REVIEW Barclays had an excellent first half, delivering a substantial increase inreturns to shareholders, whilst continuing to invest heavily for the future. Profit before tax increased 37% to £3,673m (2005: £2,690m). Earnings per sharerose 25% to 36.3p (2005: 29.1p). Economic profit increased 38%, and return onaverage shareholders' equity was 26%, (2005: 23%). We increased the interimdividend by 14% to 10.5p (2005: 9.2p). The strength of the Group's results demonstrates successful execution of ourfour strategic priorities: - Building the best bank in the UK- Accelerating growth of global businesses- Developing retail and commercial banking activities in selected countries outside the UK- Enhancing operational excellence. Group Performance Total income grew 38% to £10,969m (2005: £7,922m). Income growth was broadlybased by business and geography. The growth demonstrated the strength ofmomentum in each business, the contribution of Absa and especially strongperformances in the wholesale and institutional businesses. Excluding the effectof the first time consolidation of Absa, total income was up 23% compared withexpense growth of 21%. The mix of income continued to evolve reflecting thedevelopment of the business. Net interest income represented approximately 40%of total income. Approximately half of our profits were made from outside the UK. Total impairment charges rose 50% to £1,057m (2005: £706m). Impairment chargeson loans and advances, excluding Absa, increased 30%. This reflected the growthin the loan book, an increase in arrears balances and reduced recoveries in UKunsecured loans and credit cards and some growth in impairment charges for smalland medium businesses as they trended towards Risk Tendency. Credit relatedimpairment was stable in UK mortgages and was lower in wholesale and largercorporate business. Loans and advances to customers grew 19% since 30th June2005, or 8% excluding Absa. Operating expenses increased 38% to £6,269m (2005: £4,542m). Excluding theimpact of Absa, operating expenses grew 21% and the cost:income ratio improvedin all businesses. The principal driver of expense growth was variable costsdriven by the outstanding performances in Barclays Capital and Barclays GlobalInvestors. Reported operating expenses were reduced by £238m from gains on thesale and leaseback of freehold properties, as the Group took advantage ofhistorically low yields on property to realise gains on some of its freeholdportfolio. Gains of £145m in UK Banking were largely offset by an accelerationof investment expenditure. The remaining property gains were in Barclaycard(£38m) and International Retail and Commercial Banking (£55m). Business Performance UK Banking achieved strong growth in profit before tax, up 11% to £1,265m (2005:£1,138m). The cost:income ratio improved three percentage points relative to thefirst half of 2005. UK Retail Banking profit before tax grew 12% to £612m (2005: £548m). Incomegrowth of 7% extended the momentum established in 2005. Operating expenses grew3%, after property gains of £116m, which were largely reinvested through anacceleration of our plans to develop the business. UK Business Banking profit before tax increased 11% to £653m (2005: £590m).Income growth of 12% was driven by strong growth in average loans and deposits.Operating expenses increased 7% and benefited from property gains of £29m. Barclaycard profit before tax fell 14% to £297m (2005: £346m) as the impact ofhigher impairment charges and costs relating to international investmentexceeded income growth of 14%. Income growth reflected improved margins in theUK Cards portfolio, balance growth in UK unsecured loans, and strong momentum ininternational cards particularly Barclaycard US. Operating expenses grew 9%, or18% excluding property gains, reflecting continued investment in Barclaycard USand further development of the UK cards partnerships business. International Retail and Commercial Banking profit before tax of £539m (2005:£174m) reflected the first full period of our ownership of Absa. Absa GroupLimited reported 16% growth in profit before tax to R4,881m (2005: R4,193m),driven by very strong growth in demand for banking assets, especially inmortgages, vehicle and asset finance and credit cards. We are making goodprogress with integration and the realisation of synergy benefits. International Retail and Commercial Banking - excluding Absa increased profitbefore tax by 28% to £222m (2005: £174m). Strong income growth of 11% reflectedgood balance sheet growth in continental Europe, Africa and the Middle East,development of the corporate business in Spain and a strong performance from theSpanish funds business. Flat operating expenses reflected expansion of thedistribution network in Europe and India, offset by property gains of £55m. Wehave reached an agreement, subject to regulatory approval, to dispose of our43.7% stake in FirstCaribbean International Bank to Canadian Imperial Bank ofCommerce for US$1.08bn. Barclays Capital delivered outstanding results, increasing profit before tax 66%to £1,246m (2005: £750m). Performance was driven by income growth of 58%,arising from higher business volumes and client activity levels. Particularlystrong growth was delivered by interest rate products, equity products, currencyproducts, emerging markets, credit products and commodities. Growth in marketrisk and capital consumption was substantially lower than growth in income andprofit. Operating expenses growth of 54% reflected performance related costs andcontinued investment. The cost:net income ratio improved by two percentagepoints. Barclays Global Investors profit before tax increased 51% to £364m (2005:£241m). This excellent profit performance reflected income growth from flows ofnet new assets last year, strong investment performance in active products and atwo percentage point improvement in the cost: income ratio to 57%. Total assetsunder management increased to US$1.6 trillion, and net new asset flows continuedto be strong. Wealth Management delivered a 31% improvement in profit before tax to £110m(2005: £84m). Income growth of 15% was driven by growth in client transactions,deposit and loan balances and client funds under management. Operating expensesgrew 11% partly as a result of significant investment in client-facingprofessionals and infrastructure. Head office functions and other operations loss before tax increased to £157m(2005: £40m). This was driven by a reduction in net interest income retained inGroup Treasury, which was partially offset by a lower net impact ofconsolidation adjustments and lower operating expenses caused by the completionin 2005 of the Head Office relocation. The net gain from hedging activity wasalso lower than in 2005. Capital Management We continue to direct a lot of attention to capital management, maintaining astrong credit rating whilst optimising the returns to shareholders. At 30th June2006, our Tier 1 capital ratio was 7.2%. Our target Tier 1 capital ratio remains7.25%. As part of our active management of the balance sheet, we have taken advantageof historically low yields on property to dispose of a portion of our freeholdestate and crystallised gains of £238m in the first half of 2006 and expect torealise further gains of about £150m in the second half of 2006. Dividends We expect to grow dividends per share approximately in line with earnings pershare over the longer term. We weight the annual dividend towards the finaldividend to maintain flexibility, consistent with our practice of prior years. Group Goals Barclays ranked 7th in its Total Shareholder Return (TSR) peer group(1) for thecurrent four year goal period which commenced on 1st January 2004. Outlook For the rest of 2006, the global economic outlook remains positive and we expectglobal growth to be at or ahead of the levels of 2005. We anticipate strongeconomic performances in the United Kingdom, the United States of America, theEurozone and Japan. In South Africa, actions by the monetary authorities inresponse to inflationary pressures are expected to moderate the pace of growthbut we remain confident as to the long-term growth prospects for the economy.The instability in the Middle East may affect volatility and the volume ofactivity in world financial markets. We expect retail credit conditions in the UK to remain challenging in the secondhalf of 2006 as impairment trends continue to be affected by the rise in averagebalances and the growth in personal bankruptcies. There are, however, signs ofstabilisation of the new flow into delinquency in our main credit card portfolioas the measures taken in the past 18 months have had a positive impact on thecredit quality of new business and the management of existing exposures. There is good earnings momentum across the Group and Barclays is well positionedto deliver strong earnings growth going forward. Senior Management I am delighted to welcome to the Executive Committee Frits Seegers, who joinedBarclays on 10th July 2006 as Chief Executive, Global Retail and CommercialBanking. John VarleyGroup Chief Executive (1) Peer group for 2006 remained unchanged from 2005: ABN Amro, BBVA, BNP Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan, Lloyds TSB, Royal Bank of Scotland and UBS. CONSOLIDATED INCOME STATEMENT (UNAUDITED) Half-year ended 30.06.06 31.12.05 30.06.05Continuing operations £m £m £mInterest income 10,544 9,584 7,648Interest expense (6,140) (5,209) (3,948) -------- -------- --------Net interest income 4,404 4,375 3,700 -------- -------- --------Fee and commission income 4,077 3,558 2,872Fee and commission expense (425) (393) (332) -------- -------- --------Net fee and commission income 3,652 3,165 2,540 -------- -------- --------Net trading income 2,201 1,145 1,176Net investment income 374 485 373 -------- -------- --------Principal transactions 2,575 1,630 1,549Net premiums from insurance contracts 510 501 371Other income 61 98 49 -------- -------- --------Total income 11,202 9,769 8,209Net claims and benefits paid oninsurance contracts (233) (358) (287) -------- -------- --------Total income net of insurance claims 10,969 9,411 7,922Impairment charges (1,057) (865) (706) -------- -------- --------Net income 9,912 8,546 7,216 -------- -------- --------Operating expenses excludingamortisation of intangible assets (6,206) (5,923) (4,525)Amortisation of intangible assets (63) (62) (17) -------- -------- --------Operating expenses (6,269) (5,985) (4,542)Share of post-tax results ofassociates and joint ventures 30 29 16 -------- -------- --------Profit before tax 3,673 2,590 2,690Tax (1,072) (724) (715) -------- -------- --------Profit for the period 2,601 1,866 1,975 -------- -------- -------- Profit attributable to minorityinterests 294 260 134Profit attributable to equity holdersof the parent 2,307 1,606 1,841 -------- -------- -------- 2,601 1,866 1,975 -------- -------- -------- p p pBasic earnings per ordinary share 36.3 25.4 29.1Diluted earnings per ordinary share 35.1 24.3 28.4 Dividends per ordinary share:Interim dividend 10.5 - 9.2Final dividend - 17.4 - Dividend £667m £1,105m £582m CONSOLIDATED BALANCE SHEET (UNAUDITED) As at 30.06.06 31.12.05 30.06.05Assets £m £m £mCash and balances at central banks 6,777 3,906 4,106Items in the course of collection from 2,600 1,901 2,208other banksTrading portfolio assets 181,857 155,723 134,235Financial assets designated at fairvalue:- held on own account 18,833 12,904 9,747- held in respect of linked liabilities to customers under investment contracts 79,334 83,193 69,792Derivative financial instruments 136,901 136,823 133,932Loans and advances to banks 35,330 31,105 35,225Loans and advances to customers 282,097 268,896 237,123Available for sale financial investments 53,716 53,497 61,143Reverse repurchase agreements and cash collateral on securities borrowed 171,869 160,398 149,400Other assets 5,866 4,734 3,598Investments in associates and joint ventures 560 546 438Goodwill 5,968 6,022 4,590Intangible assets 1,125 1,269 120Property plant and equipment 2,515 2,754 2,407Deferred tax assets 776 686 2,059 -------- -------- --------Total assets 986,124 924,357 850,123 -------- -------- -------- CONSOLIDATED BALANCE SHEET (UNAUDITED) As at 30.06.06 31.12.05 30.06.05Liabilities £m £m £mDeposits from banks 86,221 75,127 84,538Items in the course of collection due toother banks 2,700 2,341 2,809Customer accounts 253,200 238,684 217,715Trading portfolio liabilities 74,719 71,564 65,598Financial liabilities designated at fairvalue 43,594 33,385 8,231Liabilities to customers under investmentcontracts 81,380 85,201 71,608Derivative financial instruments 138,982 137,971 132,784Debt securities in issue 102,198 103,328 93,328Repurchase agreements and cash collateral onsecurities lent 146,165 121,178 122,076Other liabilities 10,767 11,131 9,649Current tax liabilities 592 747 786Insurance contract liabilities, includingunit-linked liabilities 3,558 3,767 3,589Subordinated liabilities 13,629 12,463 11,309Deferred tax liabilities 430 700 1,891Other provisions for liabilities 474 517 386Retirement benefit liabilities 1,976 1,823 2,041 -------- -------- --------Total liabilities 960,585 899,927 828,338 -------- -------- -------- Shareholders' equityCalled up share capital 1,628 1,623 1,616Share premium account 5,720 5,650 5,554Other reserves 587 1,377 1,593Retained earnings 10,279 8,957 7,575Less: treasury shares (226) (181) (239) -------- -------- --------Shareholders' equity excluding minorityinterests 17,988 17,426 16,099Minority interests 7,551 7,004 5,686 -------- -------- --------Total shareholders' equity 25,539 24,430 21,785 -------- -------- -------- -------- -------- --------Total liabilities and shareholders' equity 986,124 924,357 850,123 -------- -------- -------- FINANCIAL REVIEW Results by business The following section analyses the Group's performance by business. Formanagement and reporting purposes, Barclays is organised into the followingbusiness groupings: • UK Banking, comprising - UK Retail Banking - UK Business Banking • Barclaycard • International Retail and Commercial Banking, comprising - International Retail and Commercial Banking - excluding Absa - International Retail and Commercial Banking - Absa, included with effect from 27th July 2005 • Barclays Capital • Barclays Global Investors • Wealth Management • Wealth Management - closed life assurance activities • Head office functions and other operations. UK Banking UK Banking delivers banking solutions to Barclays UK retail and business 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 UK Business Banking. UK Retail Banking UK Retail Banking comprises Personal Customers, Local Business (formerly SmallBusiness), UK Premier and Home Finance (formerly Mortgages). This cluster ofbusinesses aims to build broader and deeper relationships with both existing andnew customers. Personal Customers and Home Finance provide a wide range ofproducts and services to retail customers, including current accounts, savingsand investment products, mortgages and general insurance. Local Businessprovides banking services to small businesses with an annual turnover up to £1m.UK Premier provides banking, investment products and advice to affluentcustomers. UK Business Banking UK Business Banking provides relationship banking to Barclays larger and mediumbusiness customers in the United Kingdom. Customers are served by a network ofrelationship and industry sector specialist managers who provide local access toan extensive range of products and services, as well as offering businessinformation and support. Customers are also offered access to the products andexpertise of other businesses in the Group, particularly Barclays Capital. UKBusiness Banking provides asset financing and leasing solutions through aspecialist business. Barclaycard Barclaycard is a multi-brand credit card and consumer lending business. It isone of Europe's leading credit card businesses and has an increasinginternational presence. In the UK, Barclaycard includes Barclaycard branded credit cards, Barclaysbranded loans, FirstPlus secured lending, Monument cards, SkyCard and the retailfinance business Clydesdale Financial Services. Barclaycard also manages cardoperations on behalf of Solution Personal Finance. Outside the UK, Barclaycard provides credit cards in the United States, Germany,Spain, Italy, Portugal and a number of other countries. In the Nordic region,Barclaycard operates through Entercard, a joint venture with ForeningsSparbanken(Swedbank). Barclaycard has successfully launched the Manchester United affinitycredit card in 11 countries across Asia Pacific, Africa, Europe and in theUnited States. Barclaycard Business processes card payments for retailers and merchants andissues credit and charge cards to corporate customers and the UK government. Barclaycard works closely with other parts of the Group, including UK RetailBanking, UK Business Banking and International Retail and Commercial Banking, toleverage their distribution capabilities. International Retail and Commercial Banking International Retail and Commercial Banking provides Barclays internationalpersonal and corporate customers with banking services. The products andservices offered to customers are tailored to meet the regulatory and commercialenvironments within each country. For reporting purposes from 2005, theoperations have been grouped into two components: International Retail andCommercial Banking - excluding Absa and International Retail and CommercialBanking - Absa. As announced on 29th June 2006, Barclays has now entered into a definitiveagreement with Canadian Imperial Bank of Commerce for the sale of its 43.7%shareholding in FirstCaribbean International Bank Limited, which is expected tocomplete by the end of 2006. International Retail and Commercial Banking works closely with all other partsof the Group to leverage synergies from product and service propositions. International Retail and Commercial Banking - excluding Absa International Retail and Commercial Banking - excluding Absa provides a range ofbanking services, including current accounts, savings, investments, mortgagesand loans to personal and corporate customers across Spain, Portugal, France,Italy, the Caribbean, Africa and the Middle East. International Retail and Commercial Banking - Absa International Retail and Commercial Banking - Absa represents 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 basic bank 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, sales, trading andresearch, prime services and equity products; Credit, which includes primary andsecondary activities for loans and bonds for investment grade, high yield andemerging market credit, as well as hybrid capital products, asset based finance,commercial mortgage backed securities, credit derivatives, structured capitalmarkets and large asset leasing; and Private Equity. Barclays Capital includesAbsa Capital, the investment banking business of Absa. 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. BGI alsoprovides 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 150 fundsfor institutions and individuals trading in thirteen markets globally. BGI'sinvestment philosophy focuses on the three dimensions of performance; return,risk and cost, offering clients total performance management. Wealth Management Wealth Management serves affluent, high net worth and intermediary clientsworldwide, providing private banking, asset management, stockbroking, offshorebanking, wealth structuring and financial planning services. Wealth Management works closely with all other parts of the Group to leveragesynergies from client relationships and product capabilities. Wealth Management - closed life assurance activities Wealth Management - closed life assurance activities comprise the closed lifeassurance businesses of Barclays and Woolwich in the UK. Head office functions and other operations Head office functions and other operations comprise: • Head office and central support functions• Businesses in transition• Consolidation adjustments. Head office and central support functions comprise the following areas:Executive Management, Finance, Treasury, Corporate Affairs, Human Resources,Strategy and Planning, Internal Audit, Legal, Corporate Secretariat, Property,Tax, Compliance and Risk. Costs incurred wholly on behalf of the businesses 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. Group reporting changes in 2006 (see page 70) Barclays announced on 16th June 2006 the impact of certain changes in Groupstructure and reporting on the 2005 and 2004 results. Barclays has realigned a number of reportable business segments based on thereorganisation of certain portfolios to better reflect the type of clientserved, the nature of the products offered and the associated risks and rewards.The Group's policy for the internal cost of funding and the segmental disclosureof risk weighted assets were also revised with effect from 1st January 2006. Theresulting restatements had no impact on the Group Income Statement or BalanceSheet. The figures in this document for the six months ended 30th June 2006 and thecomparatives for the prior periods reflect the new structure. SUMMARY OF RESULTS (UNAUDITED) Analysis of profit attributable to equity holders of the parent Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mUK Banking 1,265 1,062 1,138 -------- -------- --------UK Retail Banking 612 492 548UK Business Banking 653 570 590 -------- -------- --------Barclaycard 297 294 346International Retail and CommercialBanking 539 459 174 -------- -------- --------International Retail and CommercialBanking - ex Absa 222 161 174International Retail and CommercialBanking - Absa 317 298 - -------- -------- --------Barclays Capital 1,246 681 750Barclays Global Investors 364 299 241Wealth Management 110 82 84Wealth Management - closed lifeassurance activities 9 (4) (3)Head office functions and otheroperations (157) (283) (40) -------- -------- --------Profit before tax 3,673 2,590 2,690Tax (1,072) (724) (715) -------- -------- --------Profit for the period 2,601 1,866 1,975Profit attributable to minorityinterests (294) (260) (134) -------- -------- --------Profit attributable to equity holdersof the parent 2,307 1,606 1,841 -------- -------- -------- TOTAL ASSETS AND RISK WEIGHTED ASSETS Total assets As at 30.06.06 31.12.05 30.06.05 £m £m £mUK Banking 134,391 130,304 129,093 -------- -------- --------UK Retail Banking 70,906 70,389 71,476UK Business Banking 63,485 59,915 57,617 -------- -------- --------Barclaycard 26,604 25,771 24,166International Retail and Commercial Banking 65,132 63,556 29,985 -------- -------- --------International Retail and Commercial Banking- ex Absa 35,832 34,195 29,985International Retail and Commercial Banking- Absa 29,300 29,361 - -------- -------- --------Barclays Capital 659,328 601,193 573,131Barclays Global Investors 77,298 80,900 68,877Wealth Management 6,841 6,094 5,843Wealth Management - closed life assuranceactivities 7,243 7,276 6,653Head office functions and other operations 9,287 9,263 12,375 -------- -------- -------- 986,124 924,357 850,123 -------- -------- --------Risk weighted assets As at 30.06.06 31.12.05 30.06.05 £m £m £mUK Banking 84,625 79,929 83,554 -------- -------- --------UK Retail Banking 33,841 32,803 37,129UK Business Banking 50,784 47,126 46,425 -------- -------- --------Barclaycard 23,968 21,752 21,335International Retail and Commercial Banking 42,081 41,228 18,900 -------- -------- --------International Retail and Commercial Banking- ex Absa 21,408 20,394 18,900International Retail and Commercial Banking- Absa 20,673 20,834 - -------- -------- --------Barclays Capital 130,533 116,677 107,201Barclays Global Investors 1,378 1,456 1,408Wealth Management 4,915 4,061 4,457Wealth Management - closed life assurance activities - - -Head office functions and other operations 3,424 4,045 5,551 -------- -------- -------- 290,924 269,148 242,406 -------- -------- -------- Further analysis of total assets and risk weighted assets, can be found on page61. UK Banking Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet interest income 1,959 1,960 1,784Net fee and commission income 919 879 841 -------- -------- --------Net trading income 2 2 (2)Net investment income 17 9 17 -------- -------- --------Principal transactions 19 11 15Net premiums from insurance contracts 135 139 141Other income 2 13 20 -------- -------- --------Total income 3,034 3,002 2,801Net claims and benefits on insurancecontracts (26) (25) (33) -------- -------- --------Total income net of insurance claims 3,008 2,977 2,768Impairment charges (198) (188) (139) -------- -------- --------Net income 2,810 2,789 2,629 -------- -------- --------Operating expenses excludingamortisation of intangible assets (1,546) (1,728) (1,484)Amortisation of intangible assets (1) (2) (1) -------- -------- --------Operating expenses (1,547) (1,730) (1,485)Share of post-tax results ofassociates 2 3 (6)and joint ventures -------- -------- --------Profit before tax 1,265 1,062 1,138 -------- -------- -------- Cost:income ratio 51% 58% 54%Cost:net income ratio 55% 62% 57% Risk Tendency £470m £430m £400mReturn on average economic capital 36% 33% 33% Economic profit £641m £577m £553m As at 30.06.06 31.12.05 30.06.05 Loans and advances to customers £120.6bn £118.2bn £117.1bnCustomer accounts £136.0bn £129.7bn £126.8bnTotal assets £134.4bn £130.3bn £129.1bnRisk weighted assets £84.6bn £79.9bn £83.6bn Key Facts Number of UK branches 2,014 2,029 2,053 UK Banking profit before tax increased 11% (£127m) to £1,265m (2005: £1,138m)driven by good income growth, partly offset by higher impairment charges andcosts. Gains from the sale and leaseback of properties of £145m included inoperating expenses were largely offset by £114m of incremental investmentexpenditure undertaken to accelerate the development of UK Retail Banking. UK Banking has targeted a cost:income ratio reduction of two percentage pointsper annum in each of 2005, 2006 and 2007. This was exceeded in 2005 as the cost:income ratio improved by three percentage points to 56% for the year. Goodprogress has been made in delivering the 2006 cost:income ratio reduction and inthe first half of 2006 a year-on-year improvement of three percentage points wasachieved. UK Retail Banking Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet interest income 1,137 1,158 1,050Net fee and commission income 608 572 559 -------- -------- --------Net trading income - - -Net investment income - - 9 -------- -------- --------Principal transactions - - 9Net premiums from insurance contracts 135 139 141Other income - 4 12 -------- -------- --------Total income 1,880 1,873 1,771Net claims and benefits on insurancecontracts (26) (25) (33) -------- -------- --------Total income net of insurance claims 1,854 1,848 1,738Impairment charges (98) (75) (75) -------- -------- --------Net income 1,756 1,773 1,663Operating expenses (1,144) (1,282) (1,108)Share of post-tax results of associatesand joint ventures - 1 (7) -------- -------- --------Profit before tax 612 492 548 -------- -------- -------- Cost:income ratio 62% 69% 64%Cost:net income ratio 65% 72% 67% Risk Tendency £195m £180m £170mReturn on average economic capital 36% 37% 33% Economic profit £314m £316m £270m As at 30.06.06 31.12.05 30.06.05 Loans and advances to customers £65.0bn £64.8bn £66.0bnCustomer accounts £81.7bn £78.8bn £75.4bnTotal assets £70.9bn £70.4bn £71.5bnRisk weighted assets £33.8bn £32.8bn £37.1bn Key Facts Personal Customers-------------------- Number of UK current accounts 11.3m 11.1m 10.9mNumber of UK savings accounts 10.9m 10.8m 10.7mTotal UK mortgage balances (residential) £59.3bn £59.6bn £61.0bnNumber of household insurance policies 727,000 616,000 590,000 Local Business and UK Premier------------------------------- Number of Local Business customers 641,000 630,000 617,000Number of UK Premier customers 293,000 286,000 280,000 UK Retail Banking profit before tax increased 12% (£64m) to £612m (2005: £548m). Total income net of insurance claims increased 7% (£116m) to £1,854m (2005:£1,738m), demonstrating continued momentum. The improvement was broadly basedacross business segments and income categories. There was strong growth in LocalBusiness, UK Premier and Personal Customers retail savings. Net interest income increased 8% (£87m) to £1,137m (2005: £1,050m). Growth wasdriven by higher contributions from Local Business, UK Premier and PersonalCustomers retail savings. UK residential mortgage balances ended the period at £59.3bn (31st December2005: £59.6bn). Gross advances were 43% higher at £7.3bn (31st December 2005:£5.1bn), which represented a market share of 5% (2005: 4%) but this was offsetby redemptions. Mortgage applications, by value, were 67% higher than last yearand reflected the launch of new competitive products in a stronger market,supported by greater promotion, as well as improved capacity and servicing.Mortgage servicing was brought back in-house with the termination of anoutsourcing arrangement taking effect in February 2006. Significant progress hasbeen made since then in improving processing efficiency. The average loan tovalue ratio within the mortgage book on a current valuation basis was 34% (2005:34%). In non-mortgage loans, Local Business average loans and advances balancesincreased 15%, and UK Premier average loans and advances balances increased 34%.The assets margin improved slightly to 0.86% (2005: 0.83%) reflecting a broadlystable mortgage margin, despite the impact of new product launches and a highercontribution from non-mortgage assets. Total average customer deposit balances increased 8% to £77.6bn (2005: £72.1bn).Good growth was achieved in Local Business and in UK Premier where averagebalances increased 8% and 9% respectively. Within Personal Customers, retailsavings average balance growth was 8% and current account average balancesincreased 5%. The liabilities margin was broadly stable at 1.98% (2005: 2.01%). Net fee and commission income increased 9% (£49m) to £608m (2005: £559m). Therewas strong growth in current account and debit card fees. Local Businessdelivered strong growth, driven by increased income from current accounts. Therewas also strong growth from UK Premier, reflecting higher income from investmentadvice and banking services. Net premiums from insurance underwriting activities decreased to £135m (2005:£141m), reflecting lower consumer loan volumes and reduced take-up of insuranceon these loans. Impairment charges increased 31% (£23m) to £98m (2005: £75m). The increase wasdriven by strong volume growth and some deterioration in delinquency rates inthe Local Business loan portfolio. Losses from the mortgage portfolio remainednegligible, with arrears at low levels and broadly stable compared with theyear-end 2005 position. Operating expenses increased 3% (£36m) to £1,144m (2005: £1,108m). Gains fromthe sale and leaseback of property of £116m were largely offset by incrementalinvestment expenditure to bring forward planned improvements in operatingefficiency and customer service. This included the costs associated withenhancing the Woolwich brand, improving the branch network and streamlining andre-engineering back office processes, as recently announced, as well asadditional investment in technology deployed in branches and restructuringcosts. The cost:income ratio improved two percentage points to 62% (2005: 64%). UK Business Banking Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet interest income 822 802 734Net fee and commission income 311 307 282 --------- --------- ---------Net trading income 2 2 (2)Net investment income 17 9 8 --------- --------- ---------Principal transactions 19 11 6Other income 2 9 8 --------- --------- ---------Total income 1,154 1,129 1,030Impairment charges (100) (113) (64) --------- --------- ---------Net income 1,054 1,016 966 --------- --------- ---------Operating expenses excludingamortisation of intangible assets (402) (446) (376)Amortisation of intangible assets (1) (2) (1) --------- --------- ---------Operating expenses (403) (448) (377)Share of post-tax results ofassociates 2 2 1and joint ventures --------- --------- ---------Profit before tax 653 570 590 --------- --------- --------- Cost:income ratio 35% 40% 37%Cost:net income ratio 38% 44% 39% Risk Tendency £275m £250m £230mReturn on average economic capital 35% 30% 33% Economic profit £327m £261m £283m As at 30.06.06 31.12.05 30.06.05 Loans and advances to customers £55.6bn £53.4bn £51.1bnCustomer accounts £54.3bn £50.9bn £51.4bnTotal assets £63.5bn £59.9bn £57.6bnRisk weighted assets £50.8bn £47.1bn £46.5bn Key Facts Total number of Business Bankingcustomers 147,000 144,000 144,000 UK Business Banking profit before tax increased 11% (£63m) to £653m (2005:£590m), driven by strong income growth. Performance was particularly strong inLarger Business. The first half of 2006 included an £11m contribution for a fullsix months from Iveco Finance, in which a 51% stake was acquired on 1st June2005. Iveco Finance is performing in line with the acquisition business plan. Total income increased 12% (£124m) to £1,154m (2005: £1,030m), with the increasebeing broadly based and driven by strong balance sheet growth. Net interest income increased 12% (£88m) to £822m (2005: £734m) largely drivenby growth in the loan portfolio. Average lending balances increased 21% to £51.1bn (2005: £42.1bn), with goodcontributions from all business areas and a stable lending margin. Iveco Financecontributed £1.6bn of the growth in average lending balances. Average depositbalances increased 11% to £43.7bn (2005: £39.2bn) with good growth from bothLarger Business and Medium Business. The deposit margin experienced somecompression, although it improved relative to the second half of 2005. Net fee and commission income increased 10% (£29m) to £311m (2005: £282m),principally from foreign exchange and derivative business transacted throughBarclays Capital on behalf of a number of business customers. Income from principal transactions was £19m (2005: £6m), relating principally toprofit realised on the sale of three equity investments. Impairment charges increased 56% (£36m) to £100m (2005: £64m). The increase inimpairment reflected the growth in lending balances and the inclusion of IvecoFinance. Operating expenses increased 7% (£26m) to £403m (2005: £377m) reflecting volumegrowth, increased expenditure on front line staff, higher revenue related costsand the inclusion of Iveco Finance. Operating expenses include a credit of £29mon the sale and leaseback of property. The cost:income ratio improved twopercentage points to 35% (2005: 37%). Barclaycard Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet interest income 914 896 830Net fee and commission income 533 518 454Net investment income 15 - -Net premiums from insurance contracts 15 14 10 -------- -------- --------Total income 1,477 1,428 1,294Net claims and benefits on insurancecontracts (6) (5) (2) -------- -------- --------Total income net of insurance claims 1,471 1,423 1,292Impairment charges (696) (590) (508) -------- -------- --------Net income 775 833 784 -------- -------- --------Operating expenses excludingamortisation of intangible assets (471) (531) (430)Amortisation of intangible assets (8) (8) (9) -------- -------- --------Operating expenses (479) (539) (439)Share of post-tax results of associatesand joint ventures 1 - 1 -------- -------- --------Profit before tax 297 294 346 -------- -------- -------- Cost:income ratio 33% 38% 34%Cost:net income ratio 62% 65% 56% Risk Tendency £1,340m £1,100m £980mReturn on average economic capital 13% 14% 18% Economic profit £55m £68m £115m As at 30.06.06 31.12.05 30.06.05 Loans and advances to customers £24.8bn £24.0bn £23.1bnTotal assets £26.6bn £25.8bn £24.2bnRisk weighted assets £24.0bn £21.8bn £21.3bn Key Facts Number of Barclaycard UK customers 11.2m 11.2m 11.2mNumber of retailer relationships 95,000 93,000 92,000UK credit cards - average outstanding balances £9.6bn £10.1bn £10.2bnUK credit cards - average extended credit balances £8.2bn £8.6bn £8.8bnUK loans - average consumer lending balances £11.6bn £10.3bn £9.9bnInternational - average extended credit balances £2.3bn £1.8bn £1.7bnInternational - cards in issue 5.3m 4.3m 3.7m Barclaycard profit before tax decreased 14% (£49m) to £297m (2005: £346m) asstrong income growth was more than offset by higher impairment charges andincreased costs from the continued development of the International businesses. Total income net of insurance claims increased 14% (£179m) to £1,471m (2005:£1,292m) driven by good performances across the diversified UK cards andconsumer loans businesses and Barclaycard Business, and by very strong momentumin international cards. Net interest income increased 10% (£84m) to £914m (2005: £830m). UK averageextended credit card balances fell 7% to £8.2bn (2005: £8.8bn), reflecting lowerpromotional rate balances and tighter lending criteria. UK average consumerlending balances increased 17% to £11.6bn (2005: £9.9bn). International averageextended credit card balances rose 35% to £2.3bn (2005: £1.7bn). Margins incredit cards improved in the first half of 2006 to 8.78% (2005: 7.56%), due tothe impact of increased card rates and a reduced proportion of promotional ratebalances in the UK. Margins in consumer lending fell to 4.34% (2005: 5.15%), dueto continued competitive pressures and a change in the product mix, with ahigher weighting to secured lending in FirstPlus. Net fee and commission income increased 17% (£79m) to £533m (2005: £454m) as aresult of increased contributions from SkyCard, FirstPlus, Barclaycard Businessand Barclaycard International. Investment income of £15m represents the proceeds arising from the sale of partof the stake in MasterCard Inc, as part of its flotation. Impairment charges increased 37% (£188m) to £696m (2005: £508m). Relative to thesecond half of 2005, impairment charges increased 18%. The increase was drivenby a rise in delinquent balances, increased numbers of bankruptcies and lowerrates of recovery from customers in the UK cards and loans businesses. The risein delinquent balances is reflected in a significant increase in non-performingloans. Operating expenses increased 9% (£40m) to £479m (2005: £439m), which included again from the sale and leaseback property of £38m. Excluding this gain,underlying operating expenses increased 18% (£78m) to £517m largely as a resultof the continued investment in Barclaycard US and the development of the UKPartnerships business. Barclaycard International continued its growth strategy, with the continentalEuropean businesses delivering excellent results and the Swedbank joint ventureperforming in line with its business plan. Barclaycard International loss beforetax increased to £4m (2005: loss £3m). The loss before tax for Barclaycard USwas £21m (2005: loss £13m). The performance and integration of Barclaycard USproceeded in line with expectations, with continued strong growth in balancesand customer numbers and the creation of a number of new partnerships. International Retail and Commercial Banking Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet interest income 847 776 274Net fee and commission income 669 534 171 -------- -------- --------Net trading income 3 (3) 6Net investment income 47 76 67 -------- -------- --------Principal transactions 50 73 73Net premiums from insurance contracts 174 167 60Other income 34 46 14 -------- -------- --------Total income 1,774 1,596 592Net claims and benefits on insurancecontracts (119) (120) (85) -------- -------- --------Total income net of insurance claims 1,655 1,476 507Impairment charges (68) (24) (8) -------- -------- --------Net income 1,587 1,452 499 -------- -------- --------Operating expenses excludingamortisation of intangible assets (1,030) (974) (343)Amortisation of intangible assets (45) (45) (2) -------- -------- --------Operating expenses (1,075) (1,019) (345)Share of post-tax results ofassociates and joint ventures 27 26 20 -------- -------- --------Profit before tax 539 459 174 -------- -------- -------- Cost:income ratio 65% 69% 68%Cost:net income ratio 68% 70% 69% Risk Tendency £195m £175m £75mReturn on average economic capital 30% 24% 22% Economic profit £187m £135m £70m As at 30.06.06 31.12.05 30.06.05 Loans and advances to customers £50.4bn £49.3bn £21.7bnCustomer accounts £23.0bn £22.6bn £9.6bnTotal assets £65.1bn £63.6bn £30.0bnRisk weighted assets £42.1bn £41.2bn £18.9bn Key Facts Number of international branches 1,542 1,516 799 International Retail and Commercial Banking profit before tax increased £365m to£539m (2005: £174m). The increase reflected the inclusion of InternationalRetail and Commercial Banking - Absa profit before tax of £317m for 2006 andstrong underlying organic growth in Europe. International Retail and Commercial Banking - excluding Absa Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet interest income 296 288 274Net fee and commission income 226 206 171 -------- -------- --------Net trading income 12 25 6Net investment income 29 21 67 -------- -------- --------Principal transactions 41 46 73Net premiums from insurance contracts 50 69 60Other income 14 9 14 -------- -------- --------Total income 627 618 592Net claims and benefits on insurancecontracts (65) (76) (85) -------- -------- --------Total income net of insurance claims 562 542 507Impairment charges (16) (5) (8) -------- -------- --------Net income 546 537 499 -------- -------- --------Operating expenses excludingamortisation of intangible assets (341) (391) (343)Amortisation of intangible assets (4) (4) (2) -------- -------- --------Operating expenses (345) (395) (345)Share of post-tax results of associatesand joint ventures 21 19 20 -------- -------- --------Profit before tax 222 161 174 -------- -------- -------- Cost:income ratio 61% 73% 68%Cost:net income ratio 63% 74% 69% Risk Tendency £70m £75m £75mReturn on average economic capital 26% 17% 22% Economic profit £94m £45m £70m As at 30.06.06 31.12.05 30.06.05 Loans and advances to customers £27.0bn £25.4bn £21.7bnCustomer accounts £10.9bn £10.4bn £9.6bnTotal assets £35.8bn £34.2bn £30.0bnRisk weighted assets £21.4bn £20.4bn £18.9bn Key Facts Number of international branches 815 798 799Number of Barclays Africa and Middle 1.3m 1.3m 1.3mEast customer accountsNumber of Barclays Europe customers 801,000 800,000 760,000Number of European mortgage customers 232,000 221,000 206,000European mortgages - average balances (Euros) €24.9bn €21.2bn €19.9bnEuropean assets under management (Euros) €23.8bn €22.6bn €19.5bn International Retail and Commercial Banking - excluding Absa performed well,with profit before tax increasing 28% (£48m) to £222m (2005: £174m). Theperformance was broad based, with stronger underlying profits in allgeographies. Underlying profit before tax, excluding gains from asset sales in2006 and 2005 increased 17% (£24m) to £167m (2005: £143m). Total income net of insurance claims increased 11% (£55m) to £562m (2005:£507m). Underlying income increased 18% (£86m) to £562m (2005: £476m). Net interest income increased 8% (£22m) to £296m (2005: £274m), reflectingstrong balance sheet growth in continental Europe, Africa and the Middle East,and the development of the corporate business in Spain. Total average customer loans increased 25% to £26.2bn (2005: £20.9bn). Mortgagebalance growth in continental Europe was particularly strong, with average Eurobalances up 25%. Growth in European mortgages as a proportion of total balancesand competitive pressures in key European markets contributed to lower lendingmargins. Average customer deposits increased 12% to £10.2bn (2005: £9.1bn), withdeposit margins rising modestly. Net fee and commission income increased 32% (£55m) to £226m (2005: £171m). Thisreflected a strong performance from the Spanish funds business, where averageassets under management increased 14%, together with good growth in France,including the contribution of the ING Ferri business which was acquired on 1stJuly 2005. Net fee and commission income showed solid growth in Africa and theMiddle East. Principal transactions reduced to £41m (2005: £73m), which in 2005 included £23mfrom the redemption of preference shares in FirstCaribbean International Bank. Impairment charges increased to £16m (2005: £8m), principally as a result of theabsence in 2006 of one-off recoveries which arose in 2005 in Africa and theMiddle East. Operating expenses were flat at £345m, including gains from the sale andleaseback of property in Spain of £55m. Excluding these gains, underlyingoperating expenses increased 16% to £400m (2005: £345m). The increase was belowthe growth in underlying income, and reflected the continued expansion of thebusiness in Africa and the Middle East, investments in the European distributionnetwork, particularly in Portugal and Italy, and the acquisition of the INGFerri business in France. Barclays Spain continued to perform strongly. Profit before tax increased 25%(£17m) to £86m (2005: £69m), excluding one off gains on asset sales of £55m(2005: £8m) and integration costs of £16m (2005: £28m). This was driven by thecontinued realisation of benefits from the integration of Banco Zaragozano,together with good growth in mortgages and assets under management. Profitbefore tax also increased strongly in Portugal reflecting good flows of newcustomers and increased business volumes. France performed well as a result ofgood organic growth and the acquisition of ING Ferri. Africa and the Middle East profit before tax was in line with prior year at £62m(2005: £62m). This reflected balance sheet growth across the businesses offsetby continued investment and higher impairment charges as a result of the absenceof one off recoveries that arose in 2005. The share of post tax profits from associates increased £1m to £21m (2005: £20m)reflecting an increased contribution from FirstCaribbean. International Retail and Commercial Banking - Absa Half-year Period from ended 27.07.05 until 30.06.06 31.12.05(1) £m £mNet interest income 551 488Net fee and commission income 443 328 --------- ---------Net trading income (9) (28)Net investment income 18 55 --------- ---------Principal transactions 9 27Net premiums from insurance contracts 124 98Other income 20 37 --------- ---------Total income 1,147 978Net claims and benefits on insurance contracts (54) (44) --------- ---------Total income net of insurance claims 1,093 934Impairment charges (52) (19) --------- ---------Net income 1,041 915 --------- ---------Operating expenses excluding amortisation ofintangible assets (689) (583)Amortisation of intangible assets (41) (41) --------- ---------Operating expenses (730) (624)Share of post-tax results of associates and jointventures 6 7 --------- ---------Profit before tax 317 298 --------- --------- Cost:income ratio 67% 67%Cost:net income ratio 70% 68% Risk Tendency £125m £100mReturn on average economic capital 37% 36% Economic profit £93m £90m As at 30.06.06 31.12.05Loans and advances to customers £23.4bn £23.9bnCustomer accounts £12.1bn £12.2bnTotal assets £29.3bn £29.4bnRisk weighted assets £20.7bn £20.8bn Key Facts Number of branches 727 718Number of ATMs 6,256 5,835Number of retail customers 8.0m 7.6mNumber of corporate customers 80,000 79,000 (1) Barclays acquired a controlling stake in Absa Group Limited on 27th July 2005. The comparable period referred to below, for illustrative purposes only, is thesix months to 30th June 2005. Barclays acquired a controlling stake in AbsaGroup Limited on 27th July 2005. A summary of Absa Group Limited's results forthe six months to 30th June 2006 is included in the Appendix on page 92(1). Absa Group Limited's profit before tax increased 16% reflecting very goodperformances from banking operations which were well spread across all businesssegments. Absa's bancassurance offering was negatively affected by increasedequity market volatility. Net interest income grew strongly as credit demand remained strong. Growth inloans and advances to customers was driven by mortgages and credit cards.Margins contracted modestly reflecting an increased reliance on wholesalefunding as well as increased competition. Growth in non-interest income reflected increased retail transaction volumes,partially offset by the closure of the Absa Group's international operationsoutside Africa and lower fair value gains in respect of the listed equityportfolio. Impairment charges grew, largely within Absa Home Loans and Retail BankingServices. The ratio of non-performing loans to total advances continued toimprove. Operating expenses increased, principally due to the further expansion of theAbsa branch and ATM network and regulatory and compliance expenditure. We are making good progress with integration and the realisation of synergybenefits. (1) Absa Group's interim reporting period has changed from the six months ended30th September to the six months ended 30th June. This change was necessitatedby the need to align Absa's financial reporting with that of Barclays. Tofacilitate evaluation and interpretation, these results are compared withunaudited proforma results for the six months ended 30th June 2005. Barclays Capital Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet interest income 495 540 525Net fee and commission income 516 403 373 -------- -------- --------Net trading income 2,139 1,116 1,115Net investment income 277 253 160 -------- -------- --------Principal transactions 2,416 1,369 1,275Other income 10 12 8 -------- -------- --------Total income 3,437 2,324 2,181Impairment charges (70) (59) (52) -------- -------- --------Net income 3,367 2,265 2,129 -------- -------- --------Operating expenses excludingamortisation of intangible assets (2,120) (1,583) (1,378)Amortisation of intangible assets (1) (1) (1) -------- -------- --------Operating expenses (2,121) (1,584) (1,379) -------- -------- --------Profit before tax 1,246 681 750 -------- -------- -------- Cost:income ratio 62% 68% 63%Cost:net income ratio 63% 70% 65% Risk Tendency £125m £110m £80mReturn on average economic capital 47% 30% 38% Average net income generated permember £330 £242 £259of staff ('000) Economic profit £671m £323m £383m As at 30.06.06 31.12.05 30.06.05 Total assets £659.3bn £601.2bn £573.1bnRisk weighted assets £130.5bn £116.7bn £107.2bn Key Facts(1) 30.06.06 30.06.05 League League table Issuance table Issuance position value position valueAll international bonds (all 2nd $111.0bn 4th $96.0bncurrencies)Sterling bonds 2nd £10.9bn 2nd £8.3bnInternational securitisations 4th $16.5bn 9th $10.7bnUS investment grade bonds 7th $3.2bn 4th $5.1bn (1) League tables compiled by Barclays Capital from external sources includingDealogic and Thomson Financial. Barclays Capital delivered record profit before tax and net income. Profitbefore tax increased 66% (£496m) to £1,246m (2005: £750m). This was the resultof the very strong income performance which was driven by higher businessvolumes and client activity levels. Net income increased 58% (£1,238m) to£3,367m (2005: £2,129m). Profit before tax for Absa Capital was £45m. ExcludingAbsa Capital, profit before tax increased by 60%. Total income increased 58% (£1,256m) to £3,437m (2005: £2,181m) as a result ofvery strong growth across the Rates and Credit businesses. Income grew acrossall asset classes, in particular interest rate products, equity products,currency products, emerging markets, credit products and commodities. Income bygeography was well spread with significant contributions from the US, Europe andAsia. The top line performance reflects returns from past investments and thestrength of the client franchise. Average DVaR grew to £36m (2005: £30m) wellbelow the rate of income growth. 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 62%(£1,111m) to £2,911m (2005: £1,800m). Net trading income increased 92% (£1,024m) to £2,139m (2005: £1,115m) with verystrong contributions across the Rates and Credit businesses, in particularequities, commodities, fixed income and credit derivatives. These results weredriven by higher volumes of client led activity and favourable marketconditions. Net investment income increased 73% (£117m) to £277m (2005: £160m)driven by investment realisations, primarily in Private Equity and structuredcapital markets. Net interest income decreased 6% (£30m) to £495m (2005: £525m)driven by lower contributions from money markets. Primary income, which comprises net fee and commission income from advisory andorigination activities, grew 38% (£143m) to £516m (2005: £373m). This reflectedhigher volumes and continued market share gains in a number of key markets, withstrong contributions from bonds, European leveraged loans and convertiblesissuances. Impairment charges of £70m relate primarily to impairment charges on availablefor sale assets of £83m, partially offset by recoveries in the loan portfolio.The impairment charge on available for sale assets arose where an intention tosell caused losses in the available for sale portfolio to be treated as otherthan temporary in nature. The impairment charge arose from interest ratemovements rather than credit deterioration. There is a corresponding gainrecognised in net trading income. Operating expenses increased 54% (£742m) to £2,121m (2005: £1,379m), reflectinghigher performance related costs due to strong results. The cost:net incomeratio improved to 63% (2005: 65%). Staff costs to net income ratio improved to51% (2005: 52%). Compared with the first half of 2005, performance related pay,discretionary investment spend and short-term contractor resource represented ahigher proportion of operating expenses of 54% (2005: 46%). Total headcount increased by 600 during the first half of 2006 to 10,500 (31stDecember 2005: 9,900). Growth was broadly based across all regions and reflectedfurther investments in the front office, systems development and controlfunctions to support greater business volumes. Barclays Global Investors Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet interest income 7 9 6Net fee and commission income 837 727 570 -------- -------- --------Net trading income 1 - 2Net investment income - - 4 -------- -------- --------Principal transactions 1 - 6 -------- -------- --------Total income 845 736 582 -------- -------- --------Operating expenses excludingamortisation of intangible assets (479) (435) (340)Amortisation of intangible assets (2) (2) (2) -------- -------- --------Operating expenses (481) (437) (342)Share of post-tax results of associatesand joint ventures - - 1 -------- -------- --------Profit before tax 364 299 241 -------- -------- -------- Cost:income ratio 57% 59% 59%Average net income generated per memberof staff ('000) £360 £330 £298 Return on average economic capital 260% 282% 214% Economic profit £195m £170m £129m As at 30.06.06 31.12.05 30.06.05 Total assets £77.3bn £80.9bn £68.9bnRisk weighted assets £1.4bn £1.5bn £1.4bn Key Facts Number of institutional clients 2,800 2,800 2,700Assets under management:-indexed £571bn £586bn £517bn-active £199bn £198bn £169bn-managed cash and other £107bn £97bn £95bnTotal assets under management £877bn £881bn £781bnTotal assets under management (US$) $1,623bn $1,513bn $1,401bnNet new assets in period £17bn £19bn £29bnNet new assets in period (US$) $30bn $27bn $61bnNumber of iShares products 164 149 135Total iShares assets under management(1) £124bn £113bn £84bn (1) Included in indexed assets. Barclays Global Investors (BGI) delivered excellent growth in profit before tax,increasing 51% (£123m) to £364m (2005: £241m), reflecting exceptionally strongincome growth. The performance was broad-based by products, distributionchannels and geographies. Net fee and commission income increased 47% (£267m) to £837m (2005: £570m). Thevery strong income performance was attributable to increased management andincentive fees, particularly in the iShares and active businesses. Incentivefees increased 41% (£31m) to £107m (2005: £76m). Higher asset values, driven bygood net new inflows and higher market levels, and a strong investmentperformance, contributed to the growth in income. Operating expenses increased 41% (£139m) to £481m (2005: £342m) as a result ofhigher performance based expenses, significant investment in key growthinitiatives and ongoing investment in product development and infrastructure.The cost:income ratio improved to 57% (2005: 59%). Total headcount rose by 100 to 2,400 (31st December 2005: 2,300). Headcountincreased in all regions, across product groups and the support functions,reflecting continued investment to support strategic initiatives. Total assets under management of £877bn remained in line with 2005 year-endlevels (31st December 2005: £881bn). Net new inflows of £17bn and positivemarket move impact of £27bn were more than offset by the adverse impact ofexchange rate movements of £48bn. In US$ terms assets under management increasedby US$110bn to US$1,623bn (31st December 2005: US$1,513bn), comprising US$30bnof net new assets, US$43bn of favourable market movements and US$37bn ofexchange rate movements. Wealth Management Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet interest income 178 169 160Net fee and commission income 336 306 283 -------- -------- --------Net trading income - - -Net investment income - - 5 -------- -------- --------Principal transactions - - 5Other income (1) - (1) -------- -------- --------Total income 513 475 447Impairment charges (1) (1) (1) -------- -------- --------Net income 512 474 446 -------- -------- --------Operating expenses excludingamortisation of intangible assets (400) (391) (361)Amortisation of intangible assets (2) (1) (1) -------- -------- --------Operating expenses (402) (392) (362) -------- -------- --------Profit before tax 110 82 84 -------- -------- -------- Cost:income ratio 78% 83% 81%Cost:net income ratio 79% 83% 81% Risk Tendency £10m £5m £5mReturn on average economic capital 52% 42% 35% Average net income generated permember £70 £66 £62of staff ('000) Economic profit £77m £60m £49m As at 30.06.06 31.12.05 30.06.05Loans and advances to customers £5.1bn £4.7bn £4.4bnCustomer accounts £25.0bn £23.1bn £22.5bnTotal assets £6.8bn £6.1bn £5.8bnRisk weighted assets £4.9bn £4.1bn £4.5bn Key FactsTotal client assets £84.7bn £78.3bn £74.2bn Wealth Management profit before tax rose 31% (£26m) to £110m (2005: £84m),driven by broad based income growth and favourable market conditions, partiallyoffset by increased volume related costs and increased investment in people andinfrastructure to support future growth. Total income increased 15% (£66m) to £513m (2005: £447m). Net interest income increased 11% (£18m) to £178m (2005: £160m) reflectinggrowth in both customer deposits and customer lending. Average loans tocustomers grew 16% to £4.9bn, driven mainly by increased lending to offshore andprivate banking clients. Average customer deposits grew 10% (£2.3bn) to £24.5bn(2005: £22.2bn). Asset margins increased to 1.11% (2005: 0.98%) and the depositmargin was stable at 1.08% (2005: 1.06%). Net fee and commission income increased 19% (£53m) to £336m (2005: £283m). Theincrease reflected growth in client assets and higher transactional income,including increased sales of investment products to private banking andfinancial planning clients, and higher stockbroking volumes. Operating expenses increased 11% (£40m) to £402m (2005: £362m) with greatervolume related and investment costs. Investment costs include increased hiringand improvements to infrastructure with the upgrade of technology and operationsplatforms. The cost:net income ratio improved two percentage points to 79%(2005: 81%). Total client assets, comprising customer deposits and client investments,increased to £84.7bn (31st December 2005: £78.3bn) reflecting good net new assetinflows and favourable market conditions. Wealth Management - closed life assurance activities Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet interest income (4) 2 (16)Net fee and commission income 25 26 18 -------- -------- --------Net trading income 1 - -Net investment income 24 144 115 -------- -------- --------Principal transactions 25 144 115Net premiums from insurance contracts 93 95 100Other income 6 10 1 -------- -------- --------Total income 145 277 218Net claims and benefits on insurancecontracts (82) (208) (167) -------- -------- --------Total income net of insurance claims 63 69 51Operating expenses (54) (73) (54) -------- -------- --------Profit/(loss) before tax 9 (4) (3) -------- -------- -------- Cost:income ratio 86% 106% 106% Return on average economic capital 22% 11% (18)% Economic profit/(loss) £4m £1m £(8m) As at 30.06.06 31.12.05 30.06.05Total assets £7.2bn £7.3bn £6.7bn Wealth Management - closed life assurance activities profit before tax was £9m(2005: loss £3m) predominantly due to lower funding costs and reduced customerredress costs in 2006. Profit before tax excluding customer redress costs was £43m (2005: £37m). Total income increased to £63m (2005: £51m) due to reduced funding costs. Operating expenses remained steady at £54m. Costs relating to redress forcustomers decreased to £34m (2005: £40m) whilst other operating expensesincreased to £20m (2005: £14m). Head office functions and other operations Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet interest income 8 23 137Net fee and commission income (183) (228) (170) -------- -------- --------Net trading income 55 30 55Net investment income (6) 3 5 -------- -------- --------Principal transactions 49 33 60Net premiums from insurance contracts 93 86 60Other income 10 17 7 -------- -------- --------Total income (23) (69) 94Impairment (charges)/releases (24) (3) 2 -------- -------- --------Net (loss)/income (47) (72) 96 -------- -------- --------Operating expenses excludingamortisation of intangible assets (106) (208) (135)Amortisation of intangible assets (4) (3) (1) -------- -------- --------Operating expenses (110) (211) (136) -------- -------- --------Loss before tax (157) (283) (40) -------- -------- -------- Risk Tendency £25m £25m £35m As at 30.06.06 31.12.05 30.06.05Total assets £9.3bn £9.3bn £12.4bnRisk weighted assets £3.4bn £4.0bn £5.6bn Head office functions and other operations loss before tax increased £117m to£157m (2005: loss £40m). This reflects the reduced interest income on capitalretained within Treasury, following the acquisition of Absa Group Limited,partially offset by lower net impact of asymmetric consolidation adjustments,and lower operating expenses following the head office relocation to CanaryWharf in 2005. 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. Consolidation adjustmentsnecessary to eliminate the inter-segment transactions, including adjustments toeliminate the timing differences on the recognition of inter-segment income andexpenses, are included in Head Office functions and other operations. The impact of such asymmetric consolidation adjustments reduced by £51m to £81m(2005: £132m). These adjustments related to the timing of the recognition ofinsurance commissions included in Barclaycard and UK Banking amounting to £35m(2005: £49m); internal fees for structured capital markets activities of £41m(2005: £63m); and fees paid to Barclays Capital for capital raising and riskmanagement advice of £5m (2005: £32m). Net interest income reduced £129m to £8m (2005: £137m) mainly due to a reductionin net interest income retained in Treasury as 2005 included interest earned onexcess capital held in anticipation of the acquisition of Absa Group Limited.Treasury's net interest income also included the hedge ineffectiveness for theperiod, which together with other related Treasury adjustments, amounted to aloss of £3m (2005: £35m gain) and the cost of hedging the foreign exchange riskon the Group's investment in Absa, which amounted to £39m (2005: £nil). Net trading income of £55m (2005: £55m) includes £59m (2005: £nil) in respect ofa hedge of the translation exposure arising from Absa's Rand earnings, of which£10m was realised at 30th June 2006. Impairment charges increased £26m to £24m (2005: recovery £2m). The increase wasdriven by impairment in the transition businesses. Operating expenses decreased £26m to £110m (2005: £136m), primarily due to theelimination in 2006 of expenses incurred in 2005 relating to the head officerelocation to Canary Wharf (2005: £52m). MORE TO FOLLOW This information is provided by RNS The company news service from the London Stock Exchange

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