Interim Results - Part 1

2nd Aug 2007 07:01

Barclays PLC02 August 2007 Interim Results Announcement 30th June 2007 2nd August 2007 BARCLAYS PLC INTERIM RESULTS ANNOUNCEMENT FOR 2007 TABLE OF CONTENTS PAGESummary of key information 2Performance summary 3Financial highlights 4Group Chief Executive's Review 5Group Finance Director's Review 7Consolidated income statement 11Consolidated balance sheet 12Results by business 14Results by nature of income and expense 42Analysis of amounts included in the balance sheet 57Performance management 61Additional information 69Notes 75Consolidated statement of recognised income and expense 90Summary consolidated cash flow statement 91Other information 92Appendix 1-Absa Group Limited results 94Index 96 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 1st August 2007, does not comprise statutory accounts within themeaning of Section 240 of the Companies Act 1985 (the 'Act'). Statutory accountsfor the year ended 31st December 2006, 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 income statement analyses compare the six months to30th June 2007 to the corresponding six months of 2006. Balance sheetcomparisons, unless otherwise stated, relate to the corresponding position at31st December 2006. Average balance sheet comparisons relate the six months to30th June 2007 to the corresponding six months of 2006. 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 ofBarclays plans and its current goals and expectations relating to its futurefinancial condition and performance and which involve a number of risks anduncertainties. Barclays cautions readers that no forward-looking statement is aguarantee of future performance and that actual results could differ materiallyfrom those contained in the forward-looking statements. Forward-lookingstatements sometimes use words such as 'aim', 'anticipate', 'target', 'expect','estimate', 'intend', 'plan', 'goal', 'believe', or other words of similarmeaning. Examples of forward-looking statements include, among others,statements regarding Barclays future financial position, income growth,impairment charges, business strategy, projected costs and estimates of capitalexpenditure and revenue benefits, projected levels of growth in the banking andfinancial markets, future financial and operating results, future financialposition, projected costs and estimates of capital expenditures, theconsummation of the business combination between ABN AMRO and Barclays withinthe expected timeframe and on the expected terms (if at all), the benefits ofthe business combination transaction involving ABN AMRO and Barclays, includingthe achievement of synergy targets, and plans and objectives for futureoperations of ABN AMRO, Barclays and the combined group and other statementsthat are not historical fact. By their nature, forward-looking statements involve risk and uncertainty becausethey relate to future events and circumstances which are subject to, among otherthings, domestic and global economic and business conditions, market relatedrisks such as changes in interest rates and exchange rates, the policies andactions of governmental and regulatory authorities, changes in legislation, thetiming and successful implementation of the proposed business combinationbetween ABN AMRO and Barclays, progress in the integration of Absa into theGroup's business and the achievement of synergy targets related to Absa, theoutcome of pending and future litigation, and the impact of competition-a numberof which factors are beyond the Group's control. As a result, the Group's actualfuture results may differ materially from the plans, goals, and expectations setforth in the Group's forward-looking statements. Additional risks and factorsare identified in Barclays filings with the U.S. Securities and ExchangeCommission (SEC) including Barclays Annual Report on Form 20-F for the fiscalyear ended December 31, 2006, which are available on Barclays website atwww.barclays.com and on the SEC's website at www.sec.gov. Any forward-lookingstatements made by or on behalf of Barclays speak only as of the date they aremade. Barclays does not undertake to update forward-looking statements toreflect any changes in expectations with regard thereto or any changes inevents, conditions or circumstances on which any such statement is based. Thereader should, however, consult any additional disclosures that Barclays hasmade or may make in documents they have filed or may file with the SEC. Future SEC Filings : Important Information In connection with the proposed business combination transaction between ABNAMRO and Barclays, Barclays has filed with the SEC a Registration Statement onForm F-4 ("Form F-4"), which includes a preliminary version of the Barclaysoffer document/prospectus. The Form F-4 has not yet become effective. Barclaysexpects that it will also file with the SEC a Statement on Schedule TO and otherrelevant materials. In addition, ABN AMRO expects that it will file with the SECa Recommendation Statement on Schedule 14D-9 and other relevant materials.Following the Form F-4 being declared effective by the SEC, Barclays intends tomail the final offer document/prospectus to holders of ABN AMRO ordinary shareslocated in the United States and Canada and to holders of ABN AMRO ADSs whereverlocated. Such final offer document/prospectus, however, is not currently available. Forinformation regarding the potential transaction, investors are urged to read thefinal offer document/prospectus and any documents regarding the potentialtransaction if and when they become available, because they will containimportant information. Investors will be able to obtain a free copy of the Form F-4, the final offerdocument/prospectus and other filings without charge, at the SEC's website(www.sec.gov) if and when such documents are filed with the SEC. Copies of suchdocuments may also be obtained from ABN AMRO and Barclays without charge, if andwhen they are filed with the SEC. This document shall not constitute an offer to buy sell or issue or thesolicitation of an offer to buy, sell or issue any securities, nor shall therebe any sale of securities in any jurisdiction in which such offer, solicitationor sale would be unlawful prior to registration or qualification under thesecurities laws of any such jurisdiction. Absa Definitions 'Absa Group Limited' refers to the consolidated results of the South Africangroup of which the parent company is listed on the Johannesburg Stock Exchange(JSE Limited) in which Barclays owns a controlling stake. 'Absa' refers to the results for Absa Group Limited as consolidated into theresults of Barclays PLC; translated into Sterling with adjustments foramortisation of intangible assets, certain head office adjustments, transferpricing and minority interests. 'International Retail and Commercial Banking-Absa' is the portion of Absa'sresults that is reported by Barclays within the International Retail andCommercial Banking business. 'Absa Capital' is the portion of Absa's results that is reported by Barclayswithin the Barclays Capital business. Glossary of terms 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 is defined as attributable profitcompared to average economic capital. 'Income' refers to total income net of insurance claims, unless otherwisespecified. SUMMARY OF KEY INFORMATION 'Barclays made good progress on all key strategic priorities and deliveredanother very strong set of results for shareholders. Double-digit growth inearnings and dividends reflects an outstanding performance from BarclaysCapital, good profit growth in UK Banking, an improvement in UK unsecuredimpairment and strong investment across the business'. John Varley, Group Chief Executive Half-year ended Group Results 30.06.07 30.06.06 % Change £m £m Total income net of insurance claims 11,902 10,969 9 Impairment charges (959) (1,057) (9) Operating expenses (6,847) (6,269) 9 Profit before tax 4,101 3,673 12 Profit attributable to minority interests (309) (294) 5 Profit attributable to equity holders of the parent 2,634 2,307 14 Economic profit 1,609 1,385 16 p p Earnings per share 41.4 36.3 14Diluted earnings per share 40.1 35.1 14Dividend per share 11.5 10.5 10 % % Tier 1 Capital ratio 7.7 7.2Return on average shareholders' equity 25.6 25.8 Profit before tax by business(1) £m £m % Change UK Banking 1,363 1,253 9 --------- --------- UK Retail Banking 651 600 9 UK Business Banking 712 653 9 --------- ---------Barclaycard 272 326 (17) International Retail and Commercial Banking 452 512 (12) Barclays Capital 1,660 1,246 33 Barclays Global Investors 388 364 7 Barclays Wealth 173 129 34 (1) Summary excludes Head Office functions and other operations. Full analysis of business profit before tax is on page 18. PERFORMANCE SUMMARY • Strong financial results reflect successful execution of strategy. • Income growth of 9% was broadly based by business and geography and reflected a particularly strong performance from Barclays Capital. • Operating expenses increased 9% as we continued to invest for future growth through increased headcount and distribution. • Profit before tax increased 12% despite adverse currency movements against Sterling. • Earnings per share increased 14%. • Approximately 50% of profits came from outside the UK. • In UK Retail Banking, good income growth (partially offset by settlements on overdraft fees), coupled with well controlled costs and improved impairment, drove profit growth of 9%. UK Business Banking profit rose 9%. This was mainly attributable to strong growth in fees and well controlled costs. • We are on track to deliver a further two percentage point improvement in the cost:income ratio of UK Banking during 2007, adding to the six percentage point improvement achieved during 2005 and 2006. • Headline profit of Barclaycard declined 17%. More than all of the headline profit decline was due to the impact of property gains in the first half of 2006 and a loss on the disposal of part of the Monument portfolio during the first half of 2007. Profit more than doubled relative to the second half of 2006 as a consequence of the reduction in impairment charges. • In International Retail and Commercial Banking - excluding Absa, the first half of 2006 included the gain on the sale of a property together with the contribution of our former associate FirstCaribbean International Bank. Adjusted for these, International Retail and Commercial Banking - excluding Absa generated strong profit growth in the first half of 2007, driven by significant increases in business volumes. Absa Group Limited announced very strong profit growth in Rand terms, but the 20% depreciation of the Rand versus Sterling caused period on period profit of International Retail and Commercial Banking - Absa to be broadly steady. • Barclays Capital delivered record results, with its two best quarters ever. Profit rose 33%. This was due to a very strong income performance driven by continued strong growth across asset classes and regions, in particular across the structured credit and credit derivatives, equities and commodities platforms, underpinned by the strength of the client franchise and its focus on delivering risk management and financing solutions. • In Barclays Global Investors profit rose 7% in Sterling, while both income and profit were up substantially more in US Dollars. This reflected the continued strength of the franchise and significant new flows and revenues into its suite of exchange traded funds, alternative asset classes and quantitative active strategies. • The profit of Barclays Wealth rose 34%. This reflected strong income growth from increased client funds and transaction volumes partially offset by continued investment in the business. • The Tier 1 capital ratio was stable at 7.7%. FINANCIAL HIGHLIGHTS Half-year ended 30.06.07 31.12.06 30.06.06RESULTS £m £m £m----------Net interest income 4,589 4,739 4,404Net fee and commission income 3,812 3,525 3,652Principal transactions 3,207 2,001 2,575Net premiums from insurance contracts 442 550 510Other income 100 153 61 -------- -------- --------Total income 12,150 10,968 11,202Net claims and benefits paid on insurance contracts (248) (342) (233) -------- -------- --------Total income net of insurance claims 11,902 10,626 10,969Impairment charges (959) (1,097) (1,057) -------- -------- --------Net income 10,943 9,529 9,912Operating expenses (6,847) (6,405) (6,269)Share of post-tax results of associates and joint ventures - 16 30Profit on disposal of subsidiaries, associates and JVs 5 323 - -------- -------- --------Profit before tax 4,101 3,463 3,673 -------- -------- -------- Profit attributable to equity holders of the parent 2,634 2,264 2,307Economic profit 1,609 1,319 1,385 PER ORDINARY SHARE p p p--------------------Earnings 41.4 35.6 36.3Diluted earnings 40.1 34.5 35.1Dividend 11.5 20.5 10.5Net asset value 320 303 276 PERFORMANCE RATIOS % % %--------------------Return on average shareholders' equity 25.6 24.7 25.8Cost:income ratio 58 60 57Cost:net income ratio 63 67 63 30.06.07 31.12.06 30.06.06BALANCE SHEET £m £m £m---------------Shareholders' equity excluding minority interests 20,973 19,799 17,988Minority interests 7,748 7,591 7,551 -------- -------- --------Total shareholders' equity 28,721 27,390 25,539Subordinated liabilities 15,067 13,786 13,629 -------- -------- --------Total capital resources 43,788 41,176 39,168 -------- -------- -------- Total assets 1,158,262 996,787 986,124Risk weighted assets 318,043 297,833 290,924 CAPITAL RATIOS % % %----------------Tier 1 ratio 7.7 7.7 7.2Risk asset ratio 11.8 11.7 11.6 GROUP CHIEF EXECUTIVE'S REVIEW I am pleased to report another strong half year for Barclays. We have deliveredexcellent results for shareholders - with double-digit growth in earnings anddividends - through the disciplined execution of our strategic priorities. When I became chief executive three years ago, I set out for shareholders thepriorities we had identified for executing our strategy. We said we would strivefor higher growth; that profit diversification outside the UK would help usachieve this growth; that an increasing ratio of non-net interest income to netinterest income would be a sign of increasing financial health and quality ofincome; that we would improve our standing in the eyes of our customers, ourcolleagues and our communities; that we would turn around the performance of ourUK Retail Bank; that we expected significant future growth in Barclays Capitaland Barclays Global Investors; and that our Wealth business would become anengine for growth. We have been delivering on each of these priorities since2004, applying in each of the businesses our common principle of 'earn, investand grow' - that is, investing strongly in the pursuit of growth while offeringour shareholders good short-term returns. Our strong first half performance in 2007 demonstrates continued progress onthese priorities, and continued success in execution. Profit increased by afurther 12% on top of the outstanding 37% profit growth achieved at the interimstage last year; earnings per share increased 14%, and we increased our dividendby 10%. Our return on equity was 26%. Our ambition is to be one of the handful of universal banks leading the globalfinancial services industry. We believe the universal banking model enables usbest to serve our customers and clients, and to capture superior returns onequity. Just a few years ago, Barclays was primarily a UK clearing bank. Our UK Bankingbusiness lies at the heart of the strength of the Barclays brand and we servemillions of customers in the United Kingdom. But we've been able to expandrapidly outside the United Kingdom, such that, even as our UK businesses havegrown strongly, half of our profit is made outside the UK and over two-thirds ofour profit is made outside of the two main UK Banking businesses. These half year results demonstrate that we are doing the things we said wewould. Our strategy of striving for higher growth via greater profitdiversification is generating increasing returns for our shareholders. Webelieve that the capabilities we have assembled within Barclays equip usstrongly to take advantage of the significant opportunities that lie ahead forthe financial services industry. We judge our performance by how we convert relevance to customers and clientsinto Total Shareholder Return (TSR) and economic profit, measuring ourselvesagainst multi-year performance goals. In 2003, we set a four-year goal ofdelivering top quartile TSR relative to a peer group of financial servicescompanies. We estimated that achieving that goal would require the generation ofannual growth in economic profit of 10%-13% per annum, which implied acumulative total of between £6.5bn and £7bn of economic profit from thebeginning of 2004 to the end of 2007. As we head into the last half year of ourcurrent four year goal period, we rank in the second quartile in TSR over theperiod. But we have already delivered a cumulative total of £7.6bn economicprofit, well ahead of the target, with a further six months to go. We will set new economic profit and TSR goals at the beginning of next year. As we report another set of strong interim results we are, of course, alsoheavily engaged in pursuit of a merger with ABN AMRO. Our goal in achieving thatmerger is the same as our standalone goal: higher growth and higher returns forshareholders as a result. We believe that in combination with ABN AMRO we wouldcreate a powerful new competitive force on behalf of customers and employees; auniversal bank with greater product and customer reach than Barclays standalone;and the opportunity to capture a significant and sustained increment over thealready high growth that we expect to achieve in the years ahead. Our pursuit ofthe merger does not change our strategy, but it would facilitate significantacceleration. We have recently announced that China Development Bank (CDB) and Temasek willbecome significant shareholders in Barclays. I am delighted to welcome them asmajor shareholders. I believe that their investment indicates that they shareour belief in the growth prospects of Barclays, as well as in the growthprospects of Barclays in a combination with ABN AMRO. We are particularly excited about the opportunities presented by the strategiccollaboration agreement with CDB. We believe that the further earnings growthunlocked by that agreement is material, that it creates further exposure to Asiawhich fits well with our strategy, and that it will create further benefits forall shareholders. We enter the second half of 2007 with good business momentum across Barclays,driven by a strong first half resulting from high levels of customer activity.Whilst we report at a time of turbulence in the capital markets, BarclaysCapital's net income for July was ahead of last year, and the UK and globaleconomic outlook continues to be broadly positive. We are well positioned togrow further in the years ahead. John VarleyGroup Chief Executive GROUP FINANCE DIRECTOR'S REVIEW Group performance In the first half of 2007, Barclays continued to make substantial progress onits strategic priorities, further diversifying the profit base and deliveringrecord financial results. Profits and earnings grew at a double digit raterelative to the very strong performance recorded in the first half of 2006. Profit before tax increased 12% to £4,101m (2006: £3,673m). This was achieveddespite significant adverse currency movements against Sterling. Earnings pershare rose 14% to 41.4p (2006: 36.3p). Profit grew at a rate higher than therate of growth of both daily value at risk and risk weighted assets. Group income rose 9% to £11,902m (2006: £10,969m). Income growth, which was ledby a particularly strong performance in Barclays Capital, was broadly based bybusiness and by geography. Group operating expenses increased 9% to £6,847m (2006: £6,269m). We continuedto invest in future business growth, with increased headcount in BarclaysCapital, Barclays Global Investors and Absa, and significant growth in thebranch network in International Retail and Commercial Banking. Operatingexpenses included gains on the sale of properties of £147m (2006: £238m) largelyin UK Retail Banking, which were substantially reinvested in the business. Group impairment charges improved 9% to £959m (2006: £1,057m). The 2006impairment charge included £83m relating to available for sale assets. Theimprovement also reflected reduced flows into delinquency and lower arrearsbalances in the UK cards and consumer loans business. The number of UK personalcustomers missing a payment continued to fall. UK Retail Banking mortgageimpairment charges remained negligible. Impairment levels in the wholesalesector continued to be stable, with low levels of defaults. Business performance - Global Retail and Commercial Banking UK Banking continued to pursue the strategic priority of building the best bankin the UK. Profit before tax increased 9% to £1,363m driven by solid growth inincome. The cost:income ratio improved one percentage point to 48%. Excludingthe impact of settlement on overdraft fees from prior years, the cost:incomeratio improved two percentage points. On this basis we continue to target a twopercentage point improvement in the cost:income ratio for the full year 2007. UK Retail Banking profit before tax grew 9% to £651m. Income of £2,121m includedthe impact of settlements on overdraft fees from prior years of £87m. Excludingthis item, income grew 5%. There was a strong performance in Personal CustomerRetail Savings and good performances in Local Business and Current Accounts. Weperformed strongly in mortgage origination, processing capacity and retentionsleading to a net market share of 6% of net lending in the first half of theyear. We invested substantially all of the £113m gains on property sales intothe business, upgrading distribution capabilities including completing themigration of Woolwich customers to Barclays products and infrastructure;transforming the performance of the mortgage business; improving the productrange; and improving core operations and processes. Overall costs were wellcontrolled and in line with the prior year. Impairment charges fell 9%benefiting from active management of consumer credit. UK Business Banking delivered good growth in profit before tax of 9% to £712m.Growth in loans and deposits with improved margins and strong growth in feesdrove income up 8%. Costs rose 3%, leading to a two percentage point improvementin the cost:income ratio to 33%. Barclaycard profit before tax of £272m was 17% lower than the first half of 2006but more than double the second half of 2006. Steady income reflected stronggrowth in Barclaycard International offset by a reduction in UK card extendedcredit balances. Impairment charges fell 9% to £443m. More selective customerrecruitment, limit management, and improved collections led to a reduction offlows into delinquency and lower levels of arrears balances. Costs rose 16%, ofwhich 9% is attributable to a property gain included in the 2006 figures. Wecontinued to invest in Barclaycard International and in UK partnerships.Barclaycard US continued to make progress and moved into profit. International Retail and Commercial Banking profit before tax declined 12% to£452m. Results in 2006 reflected a £55m gain on the sale and leaseback ofproperty, and a £21m post tax profit share from the associate FirstCaribbeanInternational Bank (FCIB). Results in 2007 reflected the impact of the 20%depreciation of the Rand against Sterling. International Retail and Commercial Banking - excluding Absa achieved profitbefore tax of £142m (2006: £195m). Excluding the prior year £55m gain on thesale and leaseback of property and a £21m post tax profit share from theassociate FCIB, profit before tax grew 19%. Income growth of 16% was driven bystrong balance sheet growth and increased net fees and commissions income.Excluding the prior year property gain, costs grew 15% as we continued to investin distribution capacity and technology. We opened 173 new branches in the firsthalf of 2007. International Retail and Commercial Banking - Absa Sterling profit fell £7m to£310m, after absorbing a 20% decline in the value of the Rand. Absa GroupLimited profit before tax grew 32% in Rand terms, reflecting very strong growthin Retail Banking, Absa Corporate and Business Bank and Absa Capital. Loans andadvances increased 20% from 30th June 2006 and deposits grew 13%. We havedelivered synergies of R650m for the half year to 30th June 2007. On anannualised basis we are therefore close to delivering the R1.4bn targeted byDecember 2009. Business Performance - Investment Banking and Investment Management Barclays Capital delivered record profit before tax with a 33% increase to£1,660m. Income growth of 21% was broadly based across asset classes andgeographies. Growth was particularly strong in areas where we have invested inrecent years, including commodity, credit and equity products. Profit growth wasaccompanied by improvements in productivity: income and profit grewsignificantly faster than Daily Value at Risk, risk weighted assets, economiccapital and costs. The cost:net income ratio improved three percentage points to60%. We continued to invest for future growth, increasing headcount by 2,500,including 1,400 from the acquisition of EquiFirst, a US mortgage originationbusiness. Barclays Global Investors (BGI) profit before tax increased 7% to £388m. Incomegrowth of 12% was primarily attributable to increased management fees,particularly in the iShares and active businesses, and securities lending.Profit and income growth were both affected by the 9% depreciation of the USDollar against Sterling. BGI costs increased 15% as we continued the strategicinvestment programme with a build-out across multiple products and platforms andongoing investment to support the growth of the business. The cost:income ratiorose to 59% (2006: 57%). Assets under management grew US$199bn to US$2 trillion,including net new assets of $50bn (2006: $30bn). Barclays Wealth profit before tax rose 34% to £173m. This reflected incomegrowth of 10% driven by increased client funds, greater transaction volumes,favourable market conditions and increased income from life assurance. Costswere well controlled as business volumes rose and the cost:income ratio improvedsix percentage points to 72% (2006: 78%). Redress costs declined. The businesscontinued to invest in client-facing staff and infrastructure and to upgradetechnology to build a platform for future growth. Total client assets increased20% to £126.8bn. Head office functions and other operations In Head office functions and other operations the loss before tax increased £50mto £207m. 2006 results included a £59m gain in respect of the hedging of thetranslation of the Absa foreign currency earnings. Capital management At 30 June 2007, our Tier 1 Capital ratio was stable at 7.7%. We maintained our progressive approach to dividends and increased the dividendto shareholders by 10%. We commenced parallel running for Basel II at the end of 2006 and have sincecompleted our second parallel run. We continue to expect a modest reduction inour capital demand under Basel II, with slightly lower risk weighted assets. Ouroverall expectation is for our regulatory capital position to be broadlyunchanged. For 2007 we continue to report our capital ratios under Basel I. Chris LucasGroup Finance Director CONSOLIDATED INCOME STATEMENT (UNAUDITED) Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £m -------- -------- --------Interest income 12,037 11,261 10,544Interest expense (7,448) (6,522) (6,140) -------- -------- --------Net interest income 4,589 4,739 4,404 -------- -------- --------Fee and commission income 4,292 3,928 4,077Fee and commission expense (480) (403) (425) -------- -------- --------Net fee and commission income 3,812 3,525 3,652 -------- -------- --------Net trading income 2,811 1,413 2,201Net investment income 396 588 374 -------- -------- --------Principal transactions 3,207 2,001 2,575Net premiums from insurance contracts 442 550 510Other income 100 153 61 -------- -------- --------Total income 12,150 10,968 11,202Net claims and benefits incurred on insurance contracts (248) (342) (233) -------- -------- --------Total income net of insurance claims 11,902 10,626 10,969Impairment charges (959) (1,097) (1,057) -------- -------- --------Net income 10,943 9,529 9,912 -------- -------- -------- Operating expenses excluding amortisation of intangible assets (6,760) (6,332) (6,206)Amortisation of intangible assets (87) (73) (63) -------- -------- --------Operating expenses (6,847) (6,405) (6,269)Share of post-tax results of associates and joint ventures - 16 30Profit on disposal of subsidiaries, associates and joint ventures 5 323 - -------- -------- --------Profit before tax 4,101 3,463 3,673Tax (1,158) (869) (1,072) -------- -------- --------Profit after tax 2,943 2,594 2,601 -------- -------- -------- Profit attributable to minority interests 309 330 294Profit attributable to equity holders of the parent 2,634 2,264 2,307 -------- -------- -------- 2,943 2,594 2,601 -------- -------- -------- p p pBasic earnings per ordinary share 41.4 35.6 36.3Diluted earnings per ordinary share 40.1 34.5 35.1 Dividends per ordinary share:Interim dividend 11.5 - 10.5Final dividend - 20.5 - Dividend £731m £1,311m £666m CONSOLIDATED BALANCE SHEET (UNAUDITED) As at 30.06.07 31.12.06 30.06.06Assets £m £m £mCash and balances at central banks 4,785 7,345 6,777Items in the course of collection from other banks 2,533 2,408 2,600Trading portfolio assets 217,573 177,867 181,857Financial assets designated at fair value:- held on own account 46,171 31,799 18,833- held in respect of linked liabilities to customers under investment contracts 92,194 82,798 79,334Derivative financial instruments 174,225 138,353 136,901Loans and advances to banks 43,191 30,926 35,330Loans and advances to customers 321,243 282,300 282,097Available for sale financial investments 47,764 51,703 53,716Reverse repurchase agreements and cash collateral on securities borrowed 190,546 174,090 171,869Other assets 6,289 5,850 5,866Current tax assets 345 557 -Investments in associates and joint ventures 228 228 560Goodwill 6,635 6,092 5,968Intangible assets 1,228 1,215 1,125Property, plant and equipment 2,538 2,492 2,515Deferred tax assets 774 764 776 --------- -------- --------Total assets 1,158,262 996,787 986,124 --------- -------- -------- CONSOLIDATED BALANCE SHEET (UNAUDITED) As at 30.06.07 31.12.06 30.06.06Liabilities £m £m £mDeposits from banks 87,429 79,562 86,221Items in the course of collection due to other banks 2,206 2,221 2,700Customer accounts 292,444 256,754 253,200Trading portfolio liabilities Financial liabilities designated at fair 79,252 71,874 74,719value 63,490 53,987 43,594Liabilities to customers under investment contracts 93,735 84,637 81,380Derivative financial instruments 177,774 140,697 138,982Debt securities in issue 118,745 111,137 102,198Repurchase agreements and cash collateral on securities lent 181,093 136,956 146,165Other liabilities 10,908 10,337 10,767Current tax liabilities 1,003 1,020 592Insurance contract liabilities, including unit-linked liabilities 3,770 3,878 3,558Subordinated liabilities 15,067 13,786 13,629Deferred tax liabilities 258 282 430Provisions 527 462 474Retirement benefit liabilities 1,840 1,807 1,976 --------- -------- --------Total liabilities 1,129,541 969,397 960,585 --------- -------- -------- Shareholders' equityCalled up share capital 1,637 1,634 1,628Share premium account 5,859 5,818 5,720Other reserves 271 390 587Retained earnings 13,461 12,169 10,279Less: treasury shares (255) (212) (226) --------- -------- --------Shareholders' equity excluding minority interests 20,973 19,799 17,988Minority interests 7,748 7,591 7,551 --------- -------- --------Total shareholders' equity 28,721 27,390 25,539 --------- -------- -------- --------- -------- --------Total liabilities and shareholders' equity 1,158,262 996,787 986,124 --------- -------- -------- RESULTS BY BUSINESS The following section analyses the Group's performance by business. Thisreflects the business segment restatements as disclosed on 19th June 2007 (seepage 69). For management and reporting purposes, Barclays is organised into thefollowing business groupings: Global Retail and Commercial Banking • 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. Investment Banking and Investment Management • Barclays Capital • Barclays Global Investors • Barclays Wealth Head office functions and other operations UK Banking UK Banking delivers banking solutions to Barclays UK retail and business bankingcustomers. It offers a range of integrated products and services and access tothe expertise of other Group businesses. Customers are served through a varietyof channels comprising the branch network, automated teller machines, telephonebanking, online banking and relationship managers. UK Banking is managed throughtwo business areas, UK Retail Banking and UK Business Banking. UK Retail Banking UK Retail Banking comprises Personal Customers, Home Finance, Local Business,Consumer Loans and Barclays Financial Planning. This cluster of businesses aimsto build broader and deeper relationships with its Personal and Local Businesscustomers through providing a wide range of products and financial services.Personal Customers and Home Finance provide access to current account andsavings products, Woolwich branded mortgages and general insurance. ConsumerLoans provides unsecured loan and protection products and Barclays FinancialPlanning provides investment advice and products. Local Business providesbanking services, including money transmission, to small businesses. UK Business Banking UK Business Banking provides relationship banking to Barclays larger and mediumbusiness customers in the UK. Customers are served by a network of relationshipand industry sector specialist managers who provide local access to an extensiverange of products and services, as well as offering business information andsupport. Customers are also offered access to the products and expertise ofother businesses in the Group, particularly Barclays Capital and Barclaycard. UKBusiness Banking provides asset financing and leasing solutions through aspecialist business. Barclaycard Barclaycard is a multi-brand credit card business which also processes cardpayments for retailers and merchants and issues credit and charge cards tocorporate customers and the UK Government. It is one of Europe's leading creditcard businesses and has an increasing presence in the United States. In the UK, Barclaycard comprises Barclaycard, SkyCard and FirstPlus securedlending. Outside the UK, Barclaycard provides credit cards in the United States, Germany,Spain, Italy, Portugal, Africa, India and the United Arab Emirates. In theNordic region, Barclaycard operates through Entercard, a joint venture withForeningsSparbanken (Swedbank). 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 banking services toBarclays personal and corporate customers outside the UK The products andservices offered to customers are tailored to meet the regulatory and commercialenvironments within each country. For reporting purposes the operations aregrouped into two components: International Retail and Commercial Banking -excluding Absa and International Retail and Commercial Banking - Absa. 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 to retail and corporate customers in Western Europe andEmerging Markets, including current accounts, savings, investments, mortgagesand loans. Western Europe includes Spain, Italy, France and Portugal. EmergingMarkets includes Africa, India 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 current and deposit accounts,mortgages, instalment finance, credit cards, bancassurance products and wealthmanagement services; it also offers customised business solutions for commercialand large corporate customers. Barclays Capital Barclays Capital is a leading global investment bank which provides largecorporate, institutional and government clients with solutions to theirfinancing and risk management needs. Barclays Capital services a wide variety of client needs, from capital raisingand managing foreign exchange, interest rate, equity and commodity risks,through to providing technical advice and expertise. Activities are organisedinto three principal areas: Rates, which includes fixed income, foreignexchange, commodities, emerging markets, money markets, prime services andequity products; Credit, which includes primary and secondary activities forloans and bonds for investment grade, high yield and emerging market credit, aswell as hybrid capital products, asset based finance, mortgage backedsecurities, credit derivatives, structured capital markets and large assetleasing; and Private Equity. Barclays Capital includes Absa Capital, theinvestment banking business of Absa. Barclays Capital works closely with allother parts of the Group to leverage synergies from client relationships andproduct capabilities. Barclays Global Investors Barclays Global Investors (BGI) is one of the world's largest asset managers anda leading global provider of investment management products and services. BGI offers structured investment strategies such as indexing, global assetallocation and risk controlled active products including hedge funds andprovides related investment services such as securities lending, cash managementand portfolio transition services. In addition, BGI is the global leader inassets and products in the exchange traded funds business, with over 290 fundsfor institutions and individuals trading in nineteen markets globally. BGI'sinvestment philosophy is founded on managing all dimensions of performance: aconsistent focus on controlling risk, return and cost. BGI collaborates with theother Barclays businesses, particularly Barclays Capital and Barclays Wealth, todevelop and market products and leverage capabilities to better serve the clientbase. Barclays Wealth Barclays Wealth serves affluent, high net worth and intermediary clientsworldwide, providing private banking, asset management, stockbroking, offshorebanking, wealth structuring, financial planning services and manages the closedlife assurance activities of Barclays and Woolwich in the UK. Barclays Wealth works closely with all other parts of the Group to leveragesynergies from client relationships and product capabilities. Head office functions and other operations Head office functions and other operations comprises: • Head office and central support functions • Businesses in transition • Consolidation adjustments. Head office and central support functions comprises the following areas:Executive Management, Finance, Treasury, Corporate Affairs, Human Resources,Strategy and Planning, Internal Audit, Legal, Corporate Secretariat, Property,Tax, Compliance and Risk. Costs incurred wholly on behalf of the businesses arerecharged to them. Businesses in transition principally relate to certain lending portfolios thatare centrally managed with the objective of maximising recovery from the assets. Consolidation adjustments largely reflect the elimination of intra-segmenttransactions. Analysis of profit attributable to equity holders of the parent Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £mUK Banking 1,363 1,293 1,253 -------- -------- --------UK Retail Banking 651 581 600UK Business Banking 712 712 653 -------- -------- --------Barclaycard 272 132 326International Retail and Commercial Banking 452 704 512 -------- -------- --------International Retail and Commercial Banking-ex Absa 142 323 195International Retail and Commercial Banking-Absa 310 381 317 -------- -------- --------Barclays Capital 1,660 970 1,246Barclays Global Investors 388 350 364Barclays Wealth 173 116 129Head office functions and other operations (207) (102) (157) -------- -------- --------Profit before tax 4,101 3,463 3,673Tax (1,158) (869) (1,072) -------- -------- --------Profit after tax 2,943 2,594 2,601Profit attributable to minority (309) (330) (294)interests -------- -------- --------Profit attributable to equity holders of the parent 2,634 2,264 2,307 -------- -------- -------- Total assets As at 30.06.07 31.12.06 30.06.06 £m £m £mUK Banking 153,772 147,576 141,970 -------- -------- --------UK Retail Banking 84,266 81,692 78,485UK Business Banking 69,506 65,884 63,485 -------- -------- --------Barclaycard 20,406 20,082 19,155International Retail and Commercial Banking 75,236 68,588 64,916 -------- -------- --------International Retail and Commercial Banking-ex Absa 42,434 38,191 35,616International Retail and Commercial Banking-Absa 32,802 30,397 29,300 -------- -------- --------Barclays Capital 796,389 657,922 659,328Barclays Global Investors 90,440 80,515 77,298Barclays Wealth 16,663 15,022 14,170Head office functions and other 5,356 7,082 9,287operations --------- -------- -------- 1,158,262 996,787 986,124 --------- -------- -------- Risk weighted assets As at 30.06.07 31.12.06 30.06.06 £m £m £mUK Banking 93,261 92,981 92,805 -------- -------- --------UK Retail Banking 42,498 43,020 42,021UK Business Banking 50,763 49,961 50,784 -------- -------- --------Barclaycard 17,053 17,035 15,698International Retail and Commercial Banking 45,299 40,810 41,884 -------- -------- --------International Retail and Commercial Banking-ex Absa 23,520 20,082 21,211International Retail and Commercial Banking-Absa 21,779 20,728 20,673 -------- -------- --------Barclays Capital 152,467 137,635 130,533Barclays Global Investors 1,616 1,375 1,378Barclays Wealth 6,871 6,077 5,202Head office functions and other operations 1,476 1,920 3,424 -------- -------- -------- 318,043 297,833 290,924 -------- -------- -------- Further analysis of total assets and risk weighted assets, can be found on page60. UK Banking Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet interest income 2,270 2,287 2,180Net fee and commission income 951 985 947 -------- -------- --------Net trading income 2 - 2Net investment income 30 11 17 -------- -------- --------Principal transactions 32 11 19Net premiums from insurance contracts 87 141 143Other income 54 61 2 -------- -------- --------Total income 3,394 3,485 3,291Net claims and benefits on insurance contracts (22) (7) (28) -------- -------- --------Total income net of insurance claims 3,372 3,478 3,263Impairment charges (400) (481) (406) -------- -------- --------Net income 2,972 2,997 2,857 -------- -------- --------Operating expenses excluding amortisation of intangible assets (1,606) (1,782) (1,605)Amortisation of intangible assets (4) (1) (1) -------- -------- --------Operating expenses (1,610) (1,783) (1,606)Share of post-tax results of associates and joint ventures 1 3 2Profit on disposal of subsidiaries, associates and joint ventures - 76 - -------- -------- --------Profit before tax 1,363 1,293 1,253 -------- -------- -------- Cost:income ratio 48% 51% 49%Cost:net income ratio 54% 59% 56% Risk Tendency £870m £790m £705mReturn on average economic capital 30% 27% 24% Economic profit £654m £734m £593m As at 30.06.07 31.12.06 30.06.06Loans and advances to customers £137.6bn £131.0bn £127.8bnCustomer accounts £144.3bn £139.7bn £133.4bnTotal assets £153.8bn £147.6bn £142.0bnRisk weighted assets £93.3bn £93.0bn £92.8bn Key Facts Number of UK branches 1,810 2,014 2,014 UK Banking profit before tax increased 9% (£110m) to £1,363m (2006: £1,253m)driven principally by solid income growth. Gains from the sale and leaseback ofproperties of £138m (2006: £145m) included in operating expenses weresubstantially offset by investment expenditure primarily to accelerate thedevelopment of UK Retail Banking. The cost:income ratio improved one percentage point to 48%. Excludingsettlements on overdraft fees from prior years, the cost:income ratio improvedtwo percentage points. On this basis, UK Banking continues to target a twopercentage point improvement in 2007, a further extension of the six percentagepoint aggregate improvement in 2005 and 2006. As part of the Woolwich transition and overall investment programme in our UKdistribution network, we have co-located branches within 300 metres of eachother, either to the preferred site or to a new location that best enables us toserve customer needs. UK Retail Banking Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet interest income 1,407 1,407 1,358Net fee and commission income 600 654 636Net premiums from insurance contracts 87 141 143Other income 49 42 - -------- -------- --------Total income 2,143 2,244 2,137Net claims and benefits on insurance contracts (22) (7) (28) -------- -------- --------Total income net of insurance claims 2,121 2,237 2,109Impairment charges (277) (329) (306) -------- -------- --------Net income 1,844 1,908 1,803 -------- -------- --------Operating expenses excluding amortisation of intangible assets (1,191) (1,328) (1,203)Amortisation of intangible assets (3) (1) - -------- -------- --------Operating expenses (1,194) (1,329) (1,203)Share of post-tax results of associates and joint ventures 1 2 - -------- -------- --------Profit before tax 651 581 600 -------- -------- -------- Cost:income ratio 56% 59% 57%Cost:net income ratio 65% 70% 67% Risk Tendency £580m £500m £430mReturn on average economic capital 28% 30% 26% Economic profit £315m £323m £266m As at 30.06.07 31.12.06 30.06.06Loans and advances to customers £77.5bn £74.7bn £72.2bnCustomer accounts £84.5bn £82.3bn £79.1bnTotal assets £84.3bn £81.7bn £78.5bnRisk weighted assets £42.5bn £43.0bn £42.0bn Key Facts Number of UK current accounts 11.4m 11.5m 11.3mNumber of UK savings accounts 11.1m 11.0m 10.9mTotal UK mortgage balances (residential) £65.0bn £61.7bn £59.1bnNumber of household insurance policies 839,000 825,000 727,000Number of Local Business customers 637,000 630,000 641,000 UK Retail Banking profit before tax increased 9% (£51m) to £651m (2006: £600m),driven by good income growth which was offset by settlements on overdraft fees,well controlled costs and improved impairment. Income increased £12m to £2,121m (2006: £2,109m). There was strong growth inPersonal Customer Retail Savings and good growth in Personal Customers CurrentAccounts and Local Business. This was offset by £87m settlements on overdraftfees from prior years. Excluding this item, income grew £99m or 5%. Net interest income increased 4% (£49m) to £1,407m (2006: £1,358m). Growth wasdriven by a higher contribution from deposits, through a combination of goodbalance sheet growth and an increased liability margin. Total average customerdeposit balances increased 7% to £80.2bn (2006: £74.9bn), supported by thelaunch of new products. Mortgage volumes improved significantly, driven by a focus on improvingcapacity, customer service, value and promotion. UK residential mortgagebalances were £65.0bn at the end of the period (31st December 2006: £61.7bn), anapproximate market share of 6% (31st December 2006: 6%). Gross advances were 45%higher at £10.5bn (2006: £7.3bn). Net lending was £3.2bn (2006: net outflow£0.3bn), a market share of net lending of 6% (2006: net outflow 1%). The assetmargin was reduced by the flow of new mortgages and base rate changes. The loanto value ratio within the residential mortgage book on a current valuation basiswas 32% (2006: 34%). Consumer lending balances showed a moderate fall, reflecting the impact oftighter lending criteria. Net fee and commission income decreased 6% (£36m) to £600m (2006: £636m). Therewas good current account income growth in Personal Customers and Local Business.Barclays Financial Planning achieved good income growth through higher value andstructured product sales. This was more than offset by settlements on overdraftfees. Net premiums from insurance underwriting activities reduced 39% (£56m) to £87m(2006: £143m). There continued to be lower customer take-up of loan protectioninsurance. Net claims and benefits on insurance contracts fell to £22m (2006:£28m). Other income increased to £49m (2006: nil), representing the benefit fromreinsurance. Impairment charges decreased 9% (£29m) to £277m (2006: £306m) reflecting lowercharges in unsecured consumer loans. This was driven by reduced flows intodelinquency, lower levels of arrears and stable charge-offs. Operating expenses fell £9m to £1,194m (2006: £1,203m). Gains from the sale andleaseback of property of £113m (2006: £116m) were substantially reinvested inthe business to upgrade distribution capabilities, with particular focus onconverting the branch network, improving the product range to meet customerneeds and improving operations and processes. The cost:income ratio improved one percentage point to 56%. UK Business Banking Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet interest income 863 880 822Net fee and commission income 351 331 311 -------- -------- --------Net trading income 2 - 2Net investment income 30 11 17 -------- -------- --------Principal transactions 32 11 19Other income 5 19 2 -------- -------- --------Total income 1,251 1,241 1,154Impairment charges (123) (152) (100) -------- -------- --------Net income 1,128 1,089 1,054 -------- -------- --------Operating expenses excluding amortisation of intangible assets (415) (454) (402)Amortisation of intangible assets (1) - (1) -------- -------- --------Operating expenses (416) (454) (403)Share of post-tax results of associates and joint ventures - 1 2Profit on disposal of subsidiaries, associates and joint ventures - 76 - -------- -------- --------Profit before tax 712 712 653 -------- -------- -------- Cost:income ratio 33% 37% 35%Cost:net income ratio 37% 42% 38% Risk Tendency £290m £290m £275mReturn on average economic capital 31% 39% 35% Economic profit £339m £411m £327m As at 30.06.07 31.12.06 30.06.06Loans and advances to customers £60.1bn £56.3bn £55.6bnCustomer accounts £59.8bn £57.4bn £54.3bnTotal assets £69.5bn £65.9bn £63.5bnRisk weighted assets £50.8bn £50.0bn £50.8bn Key Facts Total number of Business Banking customers 151,000 150,000 147,000 UK Business Banking profit before tax increased 9% (£59m) to £712m (2006:£653m), driven by continued good income growth. UK Business Banking maintainedits market share of primary customer relationships. Income increased 8% (£97m) to £1,251m (2006: £1,154m) The uplift in income wasbroadly based across income categories. Net interest income improved 5% (£41m) to £863m (2006: £822m) driven by solidbalance sheet growth. There was continued growth in all business areas, inparticular Larger Business. Average deposit balances increased 6% to £46.5bn(2006: £43.7bn) with good growth across product categories. Average lendingbalances grew 2% to £52.3bn (2006: £51.1bn) reflecting the disposal of £1.1bnassets in the vehicle leasing and European vendor finance businesses sold in thesecond half of 2006. The liabilities margin improved and the assets margin wasbroadly stable. Net fee and commission income increased 13% (£40m) to £351m (2006: £311m) due tostrong growth in lending fees, syndication fees and transaction related income. Income from principal transactions was £32m (2006: £19m), primarily reflectingstrong gains from venture capital and private equity realisations. Impairment increased 23% (£23m) to £123m (2006: £100m), mainly as a consequenceof Larger Business credit charges trending towards risk tendency. Impairmentcharges in Medium Business and Asset & Sales Financing reduced. Operating expenses increased 3% (£13m) to £416m (2006: £403m) reflecting tightcost control. Operating expenses included gains of £25m (2006: £29m) on the saleand leaseback of property which were reinvested in the business, including costsrelating to the acceleration of the rationalisation of operating sites andtechnology infrastructure. The cost:income ratio improved two percentage points to 33% (2006: 35%). Barclaycard Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet interest income 700 705 678Net fee and commission income 544 544 562Net trading income 2 - -Net investment income - - 15Net premiums from insurance contracts 21 11 7Other income (27) - - -------- -------- --------Total income 1,240 1,260 1,262Net claims and benefits on insurance contracts (7) (4) (4) -------- -------- --------Total income net of insurance claims 1,233 1,256 1,258Impairment charges (443) (579) (488) -------- -------- --------Net income 790 677 770 -------- -------- --------Operating expenses excluding amortisation of intangible assets (505) (527) (437)Amortisation of intangible assets (11) (9) (8) -------- -------- --------Operating expenses (516) (536) (445)Share of post-tax results of associates and joint ventures (2) (9) 1 -------- -------- --------Profit before tax 272 132 326 -------- -------- -------- Cost:income ratio 42% 43% 35%Cost:net income ratio 65% 79% 58% Risk Tendency £1,000m £1,135m £1,105mReturn on average economic capital 19% 12% 20% Economic profit £101m £22m £115m As at 30.06.07 31.12.06 30.06.06Loans and advances to customers £18.3bn £18.2bn £17.4bnTotal assets £20.4bn £20.1bn £19.2bnRisk weighted assets £17.1bn £17.0bn £15.7bn Key Facts Number of Barclaycard UK customers 9.6m 9.8m 11.2mNumber of retailer relationships 95,000 93,000 95,000UK credit cards - average outstanding balances £8.5bn £9.2bn £9.6bnUK credit cards - average extended credit balances £7.0bn £7.8bn £8.2bnInternational - average extended credit balances £3.1bn £2.6bn £2.3bnInternational - cards in issue 7.6m 6.4m 5.3m Barclaycard profit before tax decreased 17% (£54m) to £272m (2006: £326m). 2007results reflected a £27m loss on disposal of part of the Monument cardportfolio. 2006 results reflected a property gain of £38m. Excluding theseitems, profit before tax rose 4%. A solid net income performance was partiallyoffset by increased investment in Barclaycard US, new emerging markets and newUK partnerships. Income fell 2% (£25m) to £1,233m (2006: £1,258m). Excluding the £27m loss ondisposal of part of the Monument card portfolio in the first half of 2007,income remained flat at £1,260m, reflecting very strong growth in BarclaycardInternational, particularly Barclaycard US, partially offset by a decrease in UKCards revenue. Net interest income increased 3% (£22m) to £700m (2006: £678m). This was drivenby strong organic growth in international average extended credit card balances,up 35% to £3.1bn, average secured consumer lending balances up 40% to £4.2bn,partially offset by lower UK average extended credit card balances which fell15% to £7.0bn. Margins fell to 6.87% (2006: 7.32%) due to a change in theproduct mix with a higher weighting to secured lending. Net fee and commission income fell 3% (£18m) to £544m (2006: £562m) with growthin Barclaycard International offset by the impact of the Office of FairTrading's findings on late and overlimit fees in the UK which were implementedin August 2006. Impairment charges improved 9% (£45m) to £443m (2006: £488m) reflecting reducedflows into delinquency, lower levels of arrears and lower charge-offs in UKCards. We made changes to our methodologies as part of efforts to standardiseour impairment approach in anticipation of Basel II. The net positive impact ofthese changes in methodology was offset by an increase in impairment in thesecured loans portfolio. Operating expenses increased 16% (£71m) to £516m (2006: £445m). Excluding theproperty gain of £38m in the first half of 2006, operating expenses increased 7%(£33m) driven by continued investment in international businesses in Europe, theUS and new emerging markets and the launch of new partnerships with Thomas Cookand Argos in the UK. Barclaycard International continued to gain momentum and moved intoprofitability in the first half of 2007 delivering £26m profit before tax (2006:£8m loss before tax). New credit card products were launched in India and theUnited Arab Emirates. The Entercard joint venture, which is based inScandinavia, continued to perform ahead of plan. Barclaycard US moved intoprofit with very strong average balance growth and a number of new cardpartnerships including Aer Lingus and ATA Airlines. International Retail and Commercial Banking Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet interest income 844 809 844Net fee and commission income 598 593 628 -------- -------- --------Net trading income 18 3 3Net investment income 97 141 47 -------- -------- --------Principal transactions 115 144 50Net premiums from insurance contracts 162 177 174Other income 42 40 34 -------- -------- --------Total income 1,761 1,763 1,730Net claims and benefits on insurance contracts (115) (125) (119) -------- -------- --------Total income net of insurance claims 1,646 1,638 1,611Impairment charges (93) (99) (68) -------- -------- --------Net income 1,553 1,539 1,543 -------- -------- --------Operating expenses excluding amortisation of intangible assets (1,075) (1,064) (1,013)Amortisation of intangible assets (32) (40) (45) -------- -------- --------Operating expenses (1,107) (1,104) (1,058)Share of post-tax results of associates and joint ventures 1 22 27Profit on disposal of subsidiaries, associates and joint ventures 5 247 - -------- -------- --------Profit before tax 452 704 512 -------- -------- -------- Cost:income ratio 67% 67% 66%Cost:net income ratio 71% 72% 69% Risk Tendency £315m £220m £195mReturn on average economic capital 17% 42% 28% Economic profit £85m £324m £169m As at 30.06.07 31.12.06 30.06.06Loans and advances to customers £58.6bn £53.2bn £50.2bnCustomer accounts £24.9bn £22.1bn £22.6bnTotal assets £75.2bn £68.6bn £64.9bnRisk weighted assets £45.3bn £40.8bn £41.9bn Key Facts Number of international branches 1,838 1,653 1,587 International Retail and Commercial Banking profit before tax decreased £60m to£452m (2006: £512m). Very strong profit growth in Rand terms in InternationalRetail and Commercial Banking - Absa, was offset by depreciation in the Rand.International Retail and Commercial Banking - excluding Absa results for 2006included a £55m gain from the sale and leaseback of property in Spain and a £21mshare of post-tax results of the associate FirstCarribean International Bankwhich was sold in 2006. A significant investment was made in infrastructure and distribution, includingopening 185 new branches across Western Europe, Emerging Markets and Absa. International Retail and Commercial Banking - excluding Absa Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet interest income 334 311 293Net fee and commission income 208 181 185 -------- -------- --------Net trading income 20 5 12Net investment income 50 37 29 -------- -------- --------Principal transactions 70 42 41Net premiums from insurance contracts 45 61 50Other income 5 6 14 -------- -------- --------Total income 662 601 583Net claims and benefits on insurance contracts (60) (73) (65) -------- -------- --------Total income net of insurance claims 602 528 518Impairment charges (24) (25) (16) -------- -------- --------Net income 578 503 502 -------- -------- --------Operating expenses excluding amortisation of intangible assets (435) (441) (324)Amortisation of intangible assets (5) (5) (4) -------- -------- --------Operating expenses (440) (446) (328)Share of post-tax results of associates and joint ventures - 19 21Profit on disposal of subsidiaries, 4 247 -associates and joint ventures -------- -------- --------Profit before tax 142 323 195 -------- -------- -------- Cost:income ratio 73% 85% 63%Cost:net income ratio 76% 89% 65% Risk Tendency £105m £75m £70mReturn on average economic capital 14% 48% 22% Economic profit £31m £233m £76m As at 30.06.07 31.12.06 30.06.06Loans and advances to customers £32.4bn £29.0bn £26.8bnCustomer accounts £12.5bn £11.0bn £10.5bnTotal assets £42.4bn £38.2bn £35.6bnRisk weighted assets £23.5bn £20.1bn £21.2bn Key Facts Number of international branches 1,026 853 800Number of continental European customers 936,000 819,000 799,000Number of continental European mortgage customers 263,000 252,000 227,000Continental European mortgages - average balances (Euros) €29.1bn €25.9bn €24.9bn The profit before tax of International Retail and Commercial Banking - excludingAbsa (which comprises Western Europe and Emerging Markets) decreased 27% (£53m)to £142m (2006: £195m). Excluding a £55m gain from the sale and leaseback ofproperty and a £21m share of post-tax results of the associate FirstCaribbeanInternational Bank, both included in 2006, profit before tax increased 19%. Thisreflected both strong income growth and investment in the expansion of thedistribution network and in technology. Income increased 16% (£84m) to £602m (2006: £518m) driven by strong performancesin Western Europe and Emerging Markets. Net interest income increased 14% (£41m) to £334m (2006: £293m), reflecting verystrong balance sheet growth. Total average customer loans increased 19% to£30.9bn (2006: £26.0bn) with lending margins broadly stable. Mortgage balancegrowth in Western Europe was very strong, with average Euro balances up 17% to£29.1bn (2006: £24.9bn). Average customer deposits increased 18% to £11.7bn(2006: £9.9bn) driven by growth in Western Europe and Emerging Markets.Liability margins declined primarily as a result of margin compression inEmerging Markets. Net fee and commission income grew 12% (£23m) to £208m (2006: £185m). Thisreflected a strong performance in Spain and France, driven by higher service andinsurance commissions. Principal transactions increased £29m to £70m (2006: £41m), reflecting higherequity investment income in Spain and higher life assurance income. Impairment charges rose £8m to £24m (2006: £16m). The increase, from a lowhistorical base, reflected strong growth and lower recoveries. Operating expenses grew 34% (£112m) to £440m (2006: £328m). Excluding a £55mgain from the sale and leaseback of property in Spain in 2006, operatingexpenses increased 15% driven by the accelerated expansion of the distributionnetwork across Western Europe and Emerging Markets and investments intechnology. We opened 173 new branches. Western Europe continued to perform strongly. Profit before tax increased 17%(£18m) to £124m (2006: £106m), excluding one-off gains on asset sales of £55mand integration costs of £16m in 2006. Barclays Spain profit before tax increased 28% (£21m) to £96m (2006: £75m),adjusted for integration costs and the gains on asset sales in 2006. This wasdriven by higher service and insurance commissions, increased customer lendingand higher equity investment income. France also performed well driven by goodgrowth in the balance sheet, higher service commissions and good cost control.Income grew strongly in Italy as a result of the opening of new branches and abroadening of the product offering but this was more than offset by higherinvestment costs. Profit before tax decreased in Portugal, with strong incomegrowth more than offset by increased investment in the rapid expansion of thebusiness. Emerging Markets profit before tax increased 25% (£15m) to £74m (2006: £59m)driven by a strong rise in income as a result of very strong balance sheetgrowth across a broad range of markets. This was partially offset by increasedinvestment in the business including branch openings and the launch of retailbanking services in India. International Retail and Commercial Banking - Absa Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet interest income 510 498 551Net fee and commission income 390 412 443 -------- -------- --------Net trading income (2) (2) (9)Net investment income 47 104 18 -------- -------- --------Principal transactions 45 102 9Net premiums from insurance contracts 117 116 124Other income 37 34 20 -------- -------- --------Total income 1,099 1,162 1,147Net claims and benefits on insurance contracts (55) (52) (54) -------- -------- --------Total income net of insurance claims 1,044 1,110 1,093Impairment charges (69) (74) (52) -------- -------- --------Net income 975 1,036 1,041 -------- -------- --------Operating expenses excluding amortisation of intangible assets (640) (623) (689)Amortisation of intangible assets (27) (35) (41) -------- -------- --------Operating expenses (667) (658) (730)Share of post-tax results of associates and joint ventures 1 3 6Profit on disposal of subsidiaries, 1 - -associates and joint ventures -------- -------- --------Profit before tax 310 381 317 -------- -------- -------- Cost:income ratio 64% 59% 67%Cost:net income ratio 68% 64% 70% Risk Tendency £210m £145m £125mReturn on average economic capital 21% 32% 37% Economic profit £54m £91m £93m As at 30.06.07 31.12.06 30.06.06Loans and advances to customers £26.2bn £24.2bn £23.4bnCustomer accounts £12.4bn £11.1bn £12.1bnTotal assets £32.8bn £30.4bn £29.3bnRisk weighted assets £21.8bn £20.7bn £20.7bn Key Facts Number of branches 812 800 787Number of ATMs 7,455 7,053 6,256Number of retail customers 8.7m 8.3m 8.0mNumber of corporate customers 87,000 84,000 80,000 International Retail and Commercial Banking - Absa profit before tax decreased2% to £310m (2006: £317m). Appendix 1 on page 94 summarises the Rand results of Absa Group Limited for thesix months to 30th June 2007 as reported to the JSE Limited. Impact on Barclays results Absa Group Limited's profit before tax of R6,429m (2006: R4,879m) is translatedinto Barclays results at an average exchange rate for the six months to 30thJune 2007 of R14.11/£ (2006: R11.31/£), a 20% depreciation in the average rateof the Rand against Sterling. Consolidation adjustments reflected theamortisation of intangible assets of £27m (2006: £41m) and internal funding andother adjustments of £52m (2006: £28m). The resulting profit before tax of £377m(2006: £362m) is represented within International Retail and Commercial Banking- Absa £310m, (2006: £317m) and Barclays Capital, £67m (2006: £45m). Absa Group Limited's total assets at 30th June 2007 were R553,893m (31stDecember 2006: R495,112m), growth of 12%. This is translated into Barclaysresults at a period-end exchange rate of R14.12/£ (31st December 2006: R13.71/£). The capital investment remains hedged against currency movements. Barclays Capital Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet interest income 567 663 495Net fee and commission income 614 436 516 -------- -------- --------Net trading income 2,761 1,423 2,139Net investment income 206 296 277 -------- -------- --------Principal transactions 2,967 1,719 2,416Other income 5 12 10 -------- -------- --------Total income 4,153 2,830 3,437Impairment charges (10) 28 (70) -------- -------- --------Net income 4,143 2,858 3,367 -------- -------- --------Operating expenses excluding amortisation of intangible assets (2,453) (1,876) (2,120)Amortisation of intangible assets (30) (12) (1) -------- -------- --------Operating expenses (2,483) (1,888) (2,121) -------- -------- --------Profit before tax 1,660 970 1,246 -------- -------- -------- Cost:income ratio 60% 67% 62%Cost:net income ratio 60% 66% 63%Compensation:net income ratio 47% 48% 49% Average DVaR £39.3m £38.0m £36.2mRisk Tendency £110m £95m £125mReturn on average economic capital 54% 36% 47% Average net income generated per member of staff (1) ('000) £329 £249 £330Economic profit £969m £510m £671m As at 30.06.07 31.12.06 30.06.06Total assets £796.4bn £657.9bn £659.3bnRisk weighted assets £152.5bn £137.6bn £130.5bnCorporate lending portfolio £44.5bn £40.6bn £41.4bn Key Facts 30.06.07 30.06.06 League League table Issuance table Issuance position value position valueAll international bonds (all 1st US$187.7bn 2nd US$111.0bncurrencies)Sterling bonds 1st £10.9bn 2nd £10.9bnInternational securitisations 1st US$41.7bn 4th US$16.5bnUS investment grade corporate 5th US$2.8bn 7th US$3.2bnbonds (1) Adjusted to exclude contribution and headcount from HomEq and EquiFirst Barclays Capital delivered record results in the first half of 2007 with its twobest quarters ever. Profit before tax increased 33% (£414m) to £1,660m (2006:£1,246m). This was the result of a very strong income performance, driven bygood growth across asset classes and geographical regions underpinned by thestrength of the client franchise. Net income increased 23% (£776m) to £4,143m(2006: £3,367m). Absa Capital delivered a very strong growth in profit beforetax of 49% to £67m (2006: £45m) in the first half of 2007, despite a 20%depreciation in the Rand against Sterling. Income increased 21% (£716m) to £4,153m (2006: £3,437m) as a result of verystrong growth in commodity, credit, equity, emerging market, mortgage andcurrency asset classes. Income grew in all geographical regions. Average DVaRincreased 9% to £39.3m (2006: £36.2m). 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 21%(£623m) to £3,534m (2006: £2,911m). Net trading income increased 29% (£622m) to £2,761m (2006: £2,139m) with strongcontributions across the Rates and Credit businesses, particularly fixed income,commodities, equity derivatives, structured credit and credit derivatives. Therewas very strong growth in primary bonds, emerging markets, mortgage backedsecurities and credit trading. Net investment income decreased 26% (£71m) to£206m (2006: £277m) due to lower investment realisations primarily in privateequity and structured capital markets. Net interest income increased 15% (£72m)to £567m (2006: £495m) driven by higher contributions from money markets and thecredit portfolio. Corporate lending increased 7% to £44.5bn (31st December 2006:£40.6bn). Primary income, which comprises net fee and commission income from advisory andorigination activities, grew 19% (£98m) to £614m (2006: £516m). This reflectedhigher volumes and continued market share gains in a number of key markets. Impairment charges of £10m (2006: £70m) reflected the stable wholesale creditenvironment and recoveries in the period. The prior year included noncredit-related impairment charges on available for sale assets of £83m. Operating expenses increased 17% (£362m) to £2,483m (2006: £2,121m), largelydriven by incremental performance related costs. The cost:net income ratioimproved three percentage points to 60% (2006: 63%) and the compensation cost tonet income ratio improved to 47% (2006: 49%). Barclays Capital has maintainedits cost base flexibility with performance related pay, discretionary investmentspend and short term contractor resources representing 54% (2006: 54%) of thecost base. Amortisation of intangible assets of £30m (2006: £1m) principallyrelates to mortgage service rights. Total headcount increased 2,500 during the first half of 2007 to 15,700 (31stDecember 2006: 13,200) and included 1,400 from the acquisition of EquiFirstcompleted on 30th March 2007. Organic growth was broadly based across allregions and reflected further investments in the front office, systemsdevelopment and control functions to support continued business expansion. Barclays Global Investors Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet interest (expense)/income (2) 3 7Net fee and commission income 940 814 837 -------- -------- --------Net trading income 1 1 1Net investment income 3 2 - -------- -------- --------Principal transactions 4 3 1Other income 1 - - -------- -------- --------Total income 943 820 845 -------- -------- --------Operating expenses excluding amortisation of intangible assets (551) (467) (479)Amortisation of intangible assets (4) (3) (2) -------- -------- --------Operating expenses (555) (470) (481) -------- -------- --------Profit before tax 388 350 364 -------- -------- -------- Cost:income ratio 59% 57% 57%Average income generated per member of staff ('000) £325 £306 £360 Return on average economic capital 238% 202% 260% Economic profit £210m £181m £195m As at 30.06.07 31.12.06 30.06.06Total assets £90.4bn £80.5bn £77.3bnRisk weighted assets £1.6bn £1.4bn £1.4bn Key Facts Assets under management(£): £1,003bn £927bn £877bn -------- -------- ---------indexed £589bn £566bn £554bn-iShares £179bn £147bn £124bn-active £235bn £214bn £199bn -------- -------- --------Net new assets in period (£) £25bn £20bn £17bnAssets under management(US$): US$2,013bn US$1,814bn US$1,623bn -------- -------- ---------indexed US$1,183bn US$1,108bn US$1,024bn-iShares US$359bn US$287bn US$230bn-active US$471bn US$419bn US$369bn -------- -------- --------Net new assets in period (US$) US$50bn US$38bn US$30bnNumber of iShares products 294 191 164Number of institutional clients 3,000 2,900 2,800 Barclays Global Investors delivered good growth in profit before tax, whichincreased 7% (£24m) to £388m (2006: £364m). Very strong US Dollar income andprofit growth was partially offset by the depreciation in the US Dollar. Thegrowth was broadly based across products, distribution channels and geographies. Net fee and commission income improved 12% (£103m) to £940m (2006: £837m). Thisgrowth was primarily attributable to increased management fees, particularly inthe iShares and active businesses, and securities lending. Incentive feesincreased 2% (£2m) to £109m (2006: £107m). Higher asset values, driven by highermarket levels and good net new inflows, contributed to the growth in income. Operating expenses increased 15% (£74m) to £555m (2006: £481m) as a result ofsignificant investment in key growth initiatives and ongoing investment inproduct development and infrastructure. The cost:income ratio rose twopercentage points to 59% (2006: 57%). Headcount increased 400 to 3,100 (31st December 2006: 2,700). Headcountincreased in all geographical regions and across product groups and the supportfunctions, reflecting continued investment to support further growth. Total assets under management increased 8% (£76bn) to £1,003bn (31stDecember2006: £927bn) including net new inflows of £25bn and £12bn attributableto the acquisition of Indexchange Investment AG (Indexchange). The positivemarket move impact of £57bn was partially offset by £18bn of adverse exchangerate movements. In US$ terms assets under management increased by US$199bn toUS$2,013bn (31st December 2006: US$1,814bn), comprising US$50bn of net newassets, US$23bn attributable to acquisition of Indexchange, US$115bn offavourable market movements and US$11bn of positive exchange rate movements. The acquisition of Indexchange, a European exchange traded funds business,completed on 8th February 2007. Barclays Wealth Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet interest income 205 200 192Net fee and commission income 359 329 345 -------- -------- --------Net trading income 7 1 1Net investment income 59 130 24 -------- -------- --------Principal transactions 66 131 25Net premium from insurance contracts 100 117 93Other income 9 11 5 -------- -------- --------Total income 739 788 660Net claims and benefits from insurance contracts (104) (206) (82) -------- -------- --------Total Income net of insurance claims 635 582 578Impairment charges (2) (1) (1) -------- -------- --------Net income 633 581 577 -------- -------- --------Operating expenses excluding amortisation of intangible assets (458) (463) (446)Amortisation of intangible assets (2) (2) (2) -------- -------- --------Operating expenses (460) (465) (448) -------- -------- --------Profit before tax 173 116 129 -------- -------- -------- Cost:income ratio 72% 80% 78% Risk Tendency £10m £10m £10mReturn on average economic capital 56% 30% 51% Average net income per member of staff ('000) £94 £89 £92 Economic profit £114m £43m £87m As at 30.06.07 31.12.06 30.06.06Customer accounts £30.9bn £28.3bn £28.0bnLoans and advances to customers £7.1bn £6.2bn £5.5bnTotal assets £16.7bn £15.0bn £14.2bnRisk weighted assets £6.9bn £6.1bn £5.2bn Key Facts Total client assets £126.8bn £116.1bn £105.9bn Barclays Wealth profit before tax showed very strong growth of 34% (£44m) to£173m (2006: £129m). Performance was driven by broadly based income growth,favourable market conditions, reduced redress costs and tight cost control. Thiswas partially offset by additional volume related costs and increased investmentin people and infrastructure to support future growth. Income increased 10% (£57m) to £635m (2006: £578m). Net interest income increased 7% (£13m) to £205m (2006: £192m) reflecting growthin both customer deposits and customer lending. Average deposits grew 6% to£29.1bn (2006: £27.5bn). Average lending grew 23% to £6.5bn (2006: £5.3bn)driven by increased lending to private banking and intermediary clients. Depositmargins were stable at 1.08% whilst asset margins increased to 1.12% (2006:1.07%). Net fee and commission income grew 4% (£14m) to £359m (2006: £345m). Thisreflected growth in client assets and higher transactional income, includingincreased sales of investment products to affluent and high net worth clients. Principal transactions increased to £66m (2006: £25m) driven by a significantincrease in the value of the unit linked insurance contracts largely offset by a£22m increase in net claims and benefits on insurance contracts to £104m (2006:£82m). Operating expenses increased 3% to £460m (2006: £448m) with greater volumerelated and investment costs partially offset by efficiency gains and lowercustomer redress costs of £18m (2006: £34m). Ongoing investment costs includedincreased hiring of client facing staff and improvements to infrastructure withthe upgrade of technology and operations platforms. The cost:income ratioimproved six percentage points to 72% (2006: 78%). Total client assets, comprising customer deposits and client investments,increased 20% (£20.9bn) to £126.8bn (2006: £105.9bn) reflecting strong net newasset inflows, favourable market conditions and the acquisition of Walbrook, anindependent fiduciary services company, which completed on 18th May 2007. Head office functions and other operations Half-year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet interest income 5 72 8Net fee and commission income (194) (176) (183) -------- -------- --------Net trading income/(loss) 20 (15) 55Net investment income 1 8 (6) -------- -------- --------Principal transactions 21 (7) 49Net premiums from insurance contracts 72 104 93Other income 16 29 10 -------- -------- --------Total income (80) 22 (23)Impairment (charges)/releases (11) 35 (24) -------- -------- --------Net income (91) 57 (47) -------- -------- --------Operating expenses excluding amortisation of intangible assets (112) (153) (106)Amortisation of intangible assets (4) (6) (4) -------- -------- --------Operating expenses (116) (159) (110) -------- -------- --------Loss before tax (207) (102) (157) -------- -------- -------- Risk Tendency £5m £10m £25m As at 30.06.07 31.12.06 30.06.06Total assets £5.4bn £7.1bn £9.3bnRisk weighted assets £1.5bn £1.9bn £3.4bn Head office functions and other operations loss before tax increased £50m to£207m (2006: loss £157m). Net interest income fell £3m to £5m (2006: £8m) and included the cost of hedgingthe foreign exchange risk on the Group's equity investment in Absa, whichamounted to £42m (2006: £39m). Group segmental reporting is performed in accordance with Group accountingpolicies. This means that inter-segment transactions are recorded in eachsegment as if undertaken on an arm's length basis. Adjustments necessary toeliminate the inter-segment transactions are included in Head office functionsand other operations. The impact of such inter-segment adjustments increased £28m to £109m (2006:£81m). These adjustments related to internal fees for structured capital marketactivities of £79m (2006: £41m) and fees paid to Barclays Capital for capitalraising and risk management advice of £18m (2006: £8m), both of which reducednet fee and commission income in Head Office. The impact on the inter-segmentadjustments of the timing of the recognition of insurance commissions includedin Barclaycard and UK Retail was a reduction in Head Office income of £17m(2006: £35m). This net reduction was reflected in a decrease in net fee andcommission income of £89m (2006: £128m) and an increase in net premium income of£72m (2006: £93m). Principal transactions decreased £28m to £21m (2006: £49m). 2007 included aprofit of £2m (2006: £59m) in respect of the economic hedge of the translationexposure arising from Absa foreign currency earnings. The impairment charge fell £13m to £11m (2006: £24m). Operating expenses increased £6m to £116m (2006: £110m). RESULTS BY NATURE OF INCOME AND EXPENSE Net interest income Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mCash and balances with central banks 12 9 7Financial investments 1,444 1,405 1,406Loans and advances to banks 608 455 523Loans and advances to customers 9,054 8,407 7,883Other 919 985 725 -------- -------- --------Interest income 12,037 11,261 10,544 -------- -------- -------- Deposits from banks (1,471) (1,556) (1,263)Customer accounts (1,902) (1,232) (1,844)Debt securities in issue (2,994) (2,894) (2,388)Subordinated liabilities (398) (437) (340)Other (683) (403) (305) -------- -------- --------Interest expense (7,448) (6,522) (6,140) -------- -------- --------Net interest income 4,589 4,739 4,404 -------- -------- -------- Group net interest income increased 4% (£185m) to £4,589m (2006: £4,404m)reflecting balance sheet growth across a number of businesses. A component of the benefit of free funds included in Group net interest incomeis the structural hedge which functions to reduce the impact of the volatilityof short-term interest rate movements. The contribution of the structural hedgedecreased to £126m expense (2006: £47m income), largely due to the impact ofrelatively higher short-term interest rates and lower medium-term rates. Interest income includes £53m (2006: £48m) accrued on impaired loans. Business margins Half Year ended 30.06.07 31.12.06 30.06.06 % % %UK Retail Banking assets 1.20 1.28 1.35UK Retail Banking liabilities 2.15 2.08 2.01UK Business Banking assets 1.85 1.98 1.86UK Business Banking liabilities 1.50 1.48 1.44Barclaycard assets 6.87 6.96 7.32International Retail and Commercial Banking-ex Absa assets 1.25 1.34 1.24International Retail and Commercial Banking - ex Absa liabilities 1.82 1.99 2.12International Retail and Commercial Banking-Absa assets(1) 2.85 2.94 3.10International Retail and Commercial Banking-Absa liabilities(1) 2.94 2.41 2.23Barclays Wealth assets 1.12 1.08 1.07Barclays Wealth liabilities 1.08 1.12 1.08 Average balances Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mUK Retail Banking assets 76,747 74,057 73,128UK Retail Banking liabilities 80,213 78,120 74,876UK Business Banking assets 52,327 52,933 51,103UK Business Banking liabilities 46,492 46,007 43,671Barclaycard assets 18,761 18,427 17,408International Retail and Commercial Banking-ex Absa assets 30,903 28,341 26,046International Retail and Commercial Banking-ex Absa liabilities 11,673 11,044 9,862International Retail and Commercial Banking-Absa assets(1) 24,832 23,414 24,228International Retail and Commercial Banking-Absa liabilities(1) 11,229 11,973 13,454Barclays Wealth assets 6,458 5,816 5,270Barclays Wealth liabilities 29,140 27,964 27,523 (1) International Retail and Commercial Banking - Absa assets and liabilitiesbusiness margins, average balances and business net interest income for the halfyear ended 30th June 2006 and the half year ended 31st December 2006 have beenrestated on a consistent basis to reflect changes in methodology Business net interest income Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mUK Retail Banking assets 456 479 491UK Retail Banking liabilities 854 819 747UK Business Banking assets 480 527 471UK Business Banking liabilities 345 343 312Barclaycard assets 640 646 632International Retail and Commercial Banking - ex Absa assets 192 190 160International Retail and Commercial Banking - ex Absa liabilities 105 110 106International Retail and Commercial Banking-Absa assets(1) 351 347 373International Retail and Commercial Banking-Absa liabilities(1) 164 145 149Barclays Wealth assets 36 32 28Barclays Wealth liabilities 156 158 148 -------- -------- --------Business net interest income 3,779 3,796 3,617 -------- -------- -------- Reconciliation of business interest income to Group net interest income Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mBusiness net interest income 3,779 3,796 3,617Other:- Barclays Capital 567 663 495- Barclays Global Investors (2) 3 7- Other 245 277 285 -------- -------- --------Group net interest income 4,589 4,739 4,404 -------- -------- -------- Business net interest income is derived from the interest rate earned on averageassets or paid on average liabilities relative to the average Bank of Englandbase rate, local equivalents for international businesses or the rate managed bythe bank using derivatives. The margin is expressed as annualised businessinterest income over the relevant average balance. Asset and liability marginscannot be added together as they are relative to the average Bank of Englandbase rate, local equivalent for international businesses or the rate managed bythe bank using derivatives. The benefit of capital attributed to thesebusinesses is excluded from the calculation of business margins and business netinterest income. Average balances are calculated on daily averages for most UK banking operationsand monthly averages elsewhere. Within the reconciliation of Group net interest income, there is an amountcaptured as Other. This relates to the benefit of capital excluded from thebusiness margin calculation, Head office functions and other operations and netfunding on non-customer assets and liabilities. (1) International Retail and Commercial Banking - Absa assets and liabilitiesbusiness margins, average balances and business net interest income for the halfyear ended 30th June 2006 and the half year ended 31st December 2006 have beenrestated on a consistent basis to reflect changes in methodology UK Retail Banking assets margin decreased 15 basis points to 1.20% (2006: 1.35%)principally due to the increased flow of new mortgages at prevailing marketrates. UK Retail Banking liabilities margin increased 14 basis points to 2.15%(2006: 2.01%) due to pricing initiatives. UK Business Banking assets margin remained broadly stable at 1.85% (2006:1.86%).UK Business Banking liabilities margin increased 6 basis points to 1.50% (2006:1.44%). Barclaycard assets margin decreased 45 basis points to 6.87% (2006: 7.32%) dueto a change in the product mix with a higher proportion of secured lending. International Retail and Commercial Banking - excluding Absa assets margin of1.25% (2006: 1.24%) was broadly stable. International Retail and CommercialBanking - excluding Absa liabilities margin decreased 30 basis points to 1.82%(2006: 2.12%) primarily driven by margin compression in Emerging Markets. International Retail and Commercial Banking - Absa assets margin decreased 25basis points to 2.85% (2006: 3.10%) due to increased competition, increases ininterest rates and changes in the product mix. The liabilities margin increased71 basis points to 2.94% (2006: 2.23%) driven by a re-pricing of customerdeposits. Barclays Wealth assets margin increased 5 basis points to 1.12% (2006: 1.07%)reflecting a slight strengthening of margins across the portfolio. Theliabilities margin was stable at 1.08%. Net fee and commission income Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mFee and commission income 4,292 3,928 4,077Fee and commission expense (480) (403) (425) --------- --------- ---------Net fee and commission income 3,812 3,525 3,652 --------- --------- --------- Net fee and commission income increased 4% (£160m) to £3,812m (2006: £3,652m)with the increase spread across a number of businesses including UK RetailBanking, UK Business Banking, Barclays Capital and Barclays Global Investors. Fee and commission income rose 5% (£215m) to £4,292m (2006: £4,077m) reflectinggood growth in current account income in UK Retail Banking and strong growth inlending fees, syndication fees and transaction related income in UK BusinessBanking. Fee income in Barclays Capital increased due to higher volumes andcontinued market share gains in a number of key markets whilst Barclays GlobalInvestors fee income grew as a result of increased management fees particularlyin iShares and active businesses. Fee and commission expense increased 13% (£55m) to £480m (2006: £425m) largelyreflecting increases in Barclays Capital arising from higher volumes. Total foreign exchange income was £477m (2006: £457m) and consisted of revenuesearned from both retail and wholesale activities. Foreign exchange income earnedon customer transactions by individual businesses is reported in thoserespective business units within fee and commission income. The foreign exchangeincome earned in Barclays Capital and in Treasury is reported within principaltransactions. Principal transactions Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mRates related business 2,002 1,212 1,636Credit related business 809 201 565 -------- -------- --------Net trading income 2,811 1,413 2,201 -------- -------- -------- Cumulative gain from disposal of available for sale assets 159 187 120Dividend income 18 (3) 18Net income from financial instruments 102 361 86designated at fair valueOther investment income 117 43 150 -------- -------- --------Net investment income 396 588 374 -------- -------- --------Principal transactions 3,207 2,001 2,575 -------- -------- -------- The majority of the Group's trading income is generated in Barclays Capital. Net trading income increased 28% (£610m) to £2,811m (2006: £2,201m) due toexcellent performances in Barclays Capital Rates and Credit businessesparticularly fixed income, commodities, equity derivatives, structured creditand credit derivatives. There was very strong growth in primary bonds, emergingmarkets, mortgage backed securities and credit trading. Net investment income increased 6% (£22m) to £396m (2006: £374m). The cumulative gain from disposal of available for sale assets increased 33%(£39m) to £159m (2006: £120m) reflecting profits realised on the sale of investments partially offset by lower equity realisations primarily in private equity and structured capital markets. Fair value movements on certain assets and liabilities have been reported withinnet trading income or within net investment income depending on the nature ofthe transaction. Fair value movements on insurance assets included within netinvestment income contributed £83m (2006: £46m). Net premiums from insurance contracts Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mGross premiums from insurance contracts 465 572 536Premiums ceded to reinsurers (23) (22) (26) -------- -------- --------Net premiums from insurance contracts 442 550 510 -------- -------- -------- Net premiums from insurance contracts decreased 13% (£68m) to £442m (2006:£510m), primarily due to lower customer take up of loan protection insurance. Other income Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mIncrease/(decrease) in fair value of assets held in respect of linked liabilities to customers under investment contracts 2,810 10,377 (2,960)(Increase)/decrease in liabilities to customers under investment contracts (2,810) (10,377) 2,960Property rentals 27 27 28Loss on part disposal of Monument credit card portfolio (27) - -Other 100 126 33 -------- -------- --------Other income 100 153 61 -------- -------- -------- Certain asset management products offered to institutional clients by BarclaysGlobal Investors are recognised as investment contracts. Accordingly theinvested assets and the related liabilities to investors are held at fair valueand changes in those fair values are reported within Other income. Net claims and benefits paid on insurance contracts Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mGross claims and benefits incurred on insurance contracts 254 353 235Reinsurers' share of claims incurred (6) (11) (2) -------- -------- --------Net claims and benefits incurred on insurance contracts 248 342 233 -------- -------- -------- Impairment charges Half Year ended 30.06.07 31.12.06 30.06.06Impairment charges on loans and advances £m £m £m- New and increased impairment allowances 1,223 1,465 1,257- Releases (136) (238) (151)- Recoveries (124) (134) (125) --------- --------- ---------Impairment charges on loans and advances (see note 5) 963 1,093 981 Other credit provisions(Credits)/charges for the year in respect of provision for undrawn contractually committed facilities and guarantees provided (4) 1 (7) --------- --------- ---------Impairment charges on loans and advances and other credit provisions 959 1,094 974 Impairment charges on available for sale assets - 3 83 --------- --------- ---------Total impairment charges 959 1,097 1,057 --------- --------- --------- Total impairment charges decreased 9% (£98m) to £959m (2006: £1,057m). Impairment charges on loans and advances and other credit provisions Impairment charges on loans and advances and other credit provisions decreased2% (£15m) to £959m (2006: £974m). In retail sectors this reflected a decrease inflows into delinquency and arrears balances across UK cards and unsecured loans;and some increase in impairment following book growth in internationalportfolios. UK mortgage impairment remained negligible. In addition, thewholesale credit environment remained stable with continued low levels ofdefault. Impairment charges on loans and advances and other credit provisions as apercentage of total loans and advances fell to 0.52% (2006: 0.61%) as totalloans and advances grew by 14% to £367,711m (2006: £320,831m). Retail impairment charges on loans and advances and other credit provisions fell5% (£39m) to £800m (2006: £839m). As a result, retail impairment charges as apercentage of period end total loans and advances of £147,730m (2006: £134,534m)improved to 1.08% (2006: 1.25%). We made changes to our methodologies as part ofefforts to standardise our impairment approach in anticipation of Basel II. In the UK retail businesses, high debt levels and changing social attitudes tobankruptcy have, until recently, led to sustained growth in personal insolvency.This growth has now slowed but rising interest rates meant that householdcashflows remained under pressure. In UK cards and unsecured loans, improvementsin new customer quality and earlier customer intervention helped cut flows intodelinquency while arrears balances trended downwards since the third quarter oflast year. In UK cards, these trends continued to drive down charge-offs. UKunsecured loans showed positive delinquency flow trends, although charge-offshave not yet fallen from last year's levels. In UK Home Finance, mortgage delinquencies as a percentage of outstandingsremained stable and amounts charged off were low, with the result that there wasa small release to impairment. The impairment charge in Barclaycard UK securedlending increased sharply in the second half of 2006 reflecting very strong bookgrowth and stricter criteria for management of early cycle delinquency. Theimpairment charge in the first half of 2007 was consistent with the second halfof 2006 and Risk Tendency was broadly stable. The impairment charge in the international card portfolios increased, from a lowbase, as the balance sheet grew strongly in 2006 and the first half of 2007. Arrears in some of Absa's key retail portfolios deteriorated in 2007, driven byinterest rate increases in 2006 and 2007 and pressure on collections. Action hasbeen taken to reduce some of the higher risk customer balances. In the wholesale and corporate businesses, impairment charges on loans andadvances and other credit provisions increased 12% (£17m) to £159m (2006:£142m). Wholesale and corporate impairment charges as a percentage of period endtotal loans and advances of £219,981m (2006: £186,297m) was broadly stable at0.14% (2006: 0.15%). Impairment on available for sale assets In 2006, there was an impairment charge related to losses on assets in theavailable for sale portfolio. There has been no corresponding charge in thefirst half of 2007. Operating expenses Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mStaff costs (refer to page 52) 4,581 4,022 4,147Administrative expenses 1,893 2,064 1,916Depreciation 227 248 207Impairment loss - property and equipment - 8 6 - intangible assets 2 7 -Operating lease rentals 204 177 168Gain on property disposals (147) (194) (238)Amortisation of intangible assets 87 73 63 -------- -------- --------Operating expenses 6,847 6,405 6,269 -------- -------- -------- Operating expenses grew 9% (£578m) to £6,847m (2006: £6,269m). The increase wasdriven by growth of 10% (£434m) in staff costs to £4,581m (2006: £4,147m). Administrative expenses fell 1% (£23m) to £1,893m (2006: £1,916m) reflectingtight cost control across all businesses. Operating lease rentals increased 21% (£36m) to £204m (2006: £168m), primarilydue to increased levels of property held under operating leases. Operating expenses were reduced by gains from the sale of property of £147m(2006: £238m) as the Group continued the sale and leaseback of its freeholdportfolio which was substantially reinvested in the business. Amortisation of intangible assets increased 38% (£24m) to £87m (2006: £63m)primarily reflecting the amortisation of mortgage servicing rights relating tothe acquisition of HomEq in November 2006. The Group cost:income ratio increased one percentage point to 58% (2006: 57%).The Group cost:net income ratio was 63% (2006: 63%). Staff costs 30.06.07 31.12.06 30.06.06 £m £m £mSalaries and accrued incentive payments 3,856 3,271 3,364Social security costs 301 210 292Pension costs - defined contribution plans 71 73 55 - defined benefit plans 77 140 142Other post retirement benefits 12 15 15Other 264 313 279 -------- -------- --------Staff costs 4,581 4,022 4,147 -------- -------- -------- Staff costs increased 10% (£434m) to £4,581m (2006: £4,147m). Salaries and accrued incentive payments rose 15% (£492m) to £3,856m (2006:£3,364m), largely reflecting incremental performance related costs in BarclaysCapital associated with strong results. Defined benefit plans pension costs have decreased 46% (£65m) to £77m (2006:£142m). This has been caused by changed assumptions leading to falling servicecosts and an increase in the expected return on scheme assets. Staff numbers As at 30.06.07 31.12.06 30.06.06UK Banking 41,700 42,600 42,900 --------- -------- --------UK Retail Banking 33,900 34,500 35,000UK Business Banking 7,800 8,100 7,900 --------- -------- --------Barclaycard 8,300 8,500 8,300International Retail and Commercial Banking 50,800 47,800 46,800 --------- -------- --------International Retail and Commercial Banking-ex Absa 16,800 13,900 13,100International Retail and Commercial Banking-Absa 34,000 33,900 33,700 --------- -------- --------Barclays Capital 15,700 13,200 10,500Barclays Global Investors 3,100 2,700 2,400Barclays Wealth 6,900 6,600 6,400Head office functions and other operations 1,200 1,200 1,000 --------- -------- --------Total Group permanent and fixed term contract staff worldwide 127,700 122,600 118,300 Agency staff worldwide 15,000 9,100 8,700 --------- -------- --------Total including agency staff 142,700 131,700 127,000 --------- -------- -------- Staff numbers are shown on a full-time equivalent basis. Total Group permanentand contract staff comprised 61,700 (31st December 2006: 62,400) in the UK and66,000 (31st December 2006: 60,200) internationally. UK Banking staff numbers decreased 900 to 41,700 (31st December 2006: 42,600),primarily due to reductions in back office operations. Barclaycard staff numbers decreased 200 to 8,300 (31st December 2006: 8,500),due to the sale of part of the Monument card portfolio, partially offset by anincrease in the International cards businesses. International Retail and Commercial Banking staff numbers increased 3,000 to50,800 (31st December 2006: 47,800). International Retail and Commercial Banking- excluding Absa staff numbers increased 2,900 to 16,800 (31st December 2006:13,900) due to growth in the distribution network in Emerging Markets andWestern Europe. International Retail and Commercial Banking - Absa staff numbersincreased 100 to 34,000 (31st December 2006: 33,900), reflecting continuedgrowth in the business. Barclays Capital staff numbers increased 2,500 during 2007 to 15,700 (31stDecember 2006:13,200) including 1,400 from the acquisition of EquiFirst. Organicgrowth was broadly based across all regions and reflected further investments inthe front office, systems development and control functions to support continuedbusiness expansion. Barclays Global Investors staff numbers increased 400 to 3,100 (31st December2006: 2,700) spread across regions, product groups and support functions,reflecting continued investment to support strategic initiatives. Barclays Wealth staff numbers increased 300 to 6,900 (31st December 2006: 6,600)principally due to the acquisition of Walbrook. Head office functions and other operations staff numbers remained stable at1,200. Agency staff numbers rose 5,900 to 15,000 (31st December 2006: 9,100) due to theadditional sales agents engaged in retail banking activities across EmergingMarkets, particularly in India, to support the continued growth of internationalbusiness. Share of post-tax results of associates and joint ventures Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mProfit from associates 3 24 29(Loss)/profit from joint ventures (3) (8) 1 -------- -------- --------Share of post-tax results of associates and joint ventures - 16 30 -------- -------- -------- The share of post-tax results of associates and joint ventures decreased £30m to£nil (2006: £30m), principally due to the sale of the Group's interest inFirstCaribbean International Bank, which completed on 22nd December 2006. Profit on disposal of subsidiaries, associates and joint ventures Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mProfit on disposal of subsidiaries, associates and joint ventures 5 323 - -------- -------- -------- The profit on disposal in the first half of 2007 relates mainly to the partialdisposal of the Group's shareholding in Gabetti Property Solutions. Tax The tax charge for the period is based upon a UK corporation tax rate of 30% forthe calendar year 2007 (2006: 30%). The effective rate of tax for the first halfof 2007, based on profit before tax, was 28.2% (2006: 29.2%). The effective taxrate differs from 30% as it takes account of the different tax rates which areapplied to the profits earned outside the UK, disallowable expenditure,non-taxable gains and income and adjustments to prior year tax provisions. Theforthcoming change in the UK mainstream rate of corporation tax from 30% to 28%on 1st April 2008 has led to an additional tax charge in 2007 as a result of itseffect on the Group's net deferred tax asset. The effective tax rate for thisinterim period is marginally higher than the 2006 full year rate, principallybecause there was, in 2006, a higher level of profit on disposals ofsubsidiaries, associates and joint ventures offset by losses or exemptions. Thetax charge for the first half of the year includes £706m (2006: £640m) arisingin the UK and £452m (2006: £432m) arising overseas. Profit attributable to minority interests Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mAbsa Group Limited 129 140 122Preference shares 90 90 85Reserve capital instruments 44 45 47Upper tier 2 instruments 8 8 7Barclays Global Investors minority 22 21 26interestsOther minority interests 16 26 7 -------- -------- --------Profit attributable to minority interests 309 330 294 -------- -------- -------- Earnings per share Half Year ended 30.06.07 31.12.06 30.06.06 Profit attributable to equity holders of the parent £2,634m £2,264m £2,307mDilutive impact of convertible options (£13m) (£17m) (£17m) -------- -------- --------Profit attributable to equity holders ofthe parent including dilutive impact of convertible options £2,621m £2,247m £2,290m Basic weighted average number of shares in issue 6,356m 6,360m 6,353mNumber of potential ordinary shares(1) 178m 152m 177m -------- -------- --------Diluted weighted average number of shares 6,534m 6,512m 6,530m -------- -------- -------- p p pBasic earnings per ordinary share 41.4 35.6 36.3 Diluted earnings per ordinary share 40.1 34.5 35.1 The calculation of basic earnings per share is based on the profit attributableto equity holders of the parent and the weighted average number of sharesexcluding own shares held in employee benefit trusts, currently not vested andshares held for trading. When calculating the diluted earnings per share, the profit attributable toequity holders of the parent is adjusted for the conversion of outstandingoptions into shares within Absa Group Limited and Barclays Global Investors UKHoldings Limited. The weighted average number of ordinary shares excluding ownshares held in employee benefit trusts currently not vested and shares held fortrading, is adjusted for the effects of all dilutive potential ordinary shares,totalling 178 million (2006: 177 million). (1) Potential ordinary shares reflect the dilutive impact of share optionsoutstanding. Dividends on ordinary shares The Board has decided to pay, on 1st October 2007, an interim dividend for theyear ended 31st December 2007 of 11.5p per ordinary share for shares registeredin the books of the Company at the close of business on 17th August 2007.Shareholders who have their dividends paid direct to their bank or buildingsociety account will receive a consolidated tax voucher detailing the dividendspaid in the 2007-2008 UK tax year in mid-October 2007. The amount payable for the 2007 interim dividend based on the number of sharesoutstanding at 30th June 2007 would be £731m (half-year ended 31st December2006: £1,311m; half-year ended 30th June 2006: £666m). This amount does notinclude the effects of the share subscriptions and share buy back programmedescribed in the Recent developments section on page 74. This amount alsoexcludes £22m payable on own shares held by employee benefit trusts (half-yearended 31st December 2006: £30m; half-year ended 30th June 2006: £18m). For qualifying US and Canadian resident ADR holders, the interim dividend of11.5p per ordinary share becomes 46p per ADS (representing four shares). The ADRdepositary will mail the dividend on 1st October 2007 to ADR holders on therecord on 17th August 2007. For qualifying Japanese shareholders, the final dividend of 11.5p per ordinaryshare will be distributed in mid-October to shareholders on the record on 17thAugust 2007. Shareholders may have their dividends reinvested in Barclays PLC shares byparticipating in the Barclays Dividend Reinvestment Plan. The plan is availableto all shareholders, including members of Barclays Sharestore, provided thatthey neither live in nor are subject to the jurisdiction of any country wheretheir participation in the plan would require Barclays or The Plan Administratorto take action to comply with local government or regulatory procedures or anysimilar formalities. Any shareholder wishing to obtain details and a form tojoin the plan should contact The Plan Administrator by writing to: The PlanAdministrator to Barclays, Share Dividend Team, The Causeway, Worthing, WestSussex, BN99 6DA; or, by telephoning 0870 609 4535. The completed form should bereturned to The Plan Administrator on or before 7th September 2007 for it to beeffective in time for the payment of the interim dividend on 1st October 2007.Shareholders who are already in the plan need take no action unless they wish tochange their instructions in which case they should write to The PlanAdministrator. This information is provided by RNS The company news service from the London Stock Exchange

---

Related Shares:

Barclays